Stock Purchase Agreement - Aastrom Biosciences Inc. and Rhone-Poulenc Rorer Inc.
STOCK PURCHASE AGREEMENT
Between
AASTROM BIOSCIENCES, INC.
and
RHONE-POULENC RORER INC.
<PAGE>
STOCK PURCHASE AGREEMENT
TABLE OF CONTENTS
-----------------
Page
----
1. Definitions............................................................ 2
2. Option Periods and Option Payments..................................... 6
2.1 First Option..................................................... 6
2.2 Second Option.................................................... 6
2.3 Third Option..................................................... 6
3. Purchase and Sale of Shares............................................ 6
3.1 Purchase of Shares on Activation Date............................ 6
4. Purchase of Termination Shares......................................... 7
4.1 No Exercise of Second Option..................................... 7
4.2 No Exercise of Third Option...................................... 7
5. Purchase Price for Activation Shares................................... 7
5.1 After A Qualifying Issuance...................................... 7
5.2 Prior to A Qualifying Issuance................................... 8
5.3 Termination of Options........................................... 9
6. Closing Dates; Delivery................................................ 9
7. Conditions to the Activation Closing................................... 9
7.1 Conditions to the Obligations of the Purchaser at the Activation
Closing......................................................... 9
7.2 Conditions to the Obligations of the Company at the Activation
Closing......................................................... 10
8. Initial Public Offering Commitment..................................... 11
9. Representations and Warranties of the Company.......................... 12
9.1 Organization and Standing; Articles and Bylaws................... 12
9.2 Capitalization................................................... 12
9.3 Subsidiaries..................................................... 13
9.4 Authorization.................................................... 13
9.5 Validity of the Shares........................................... 13
9.6 Financial Statements............................................. 13
9.7 Material Contracts and Agreements................................ 14
9.8 Outstanding Indebtedness......................................... 14
9.9 Officers, Directors and Shareholders............................. 14
-i-
<PAGE>
9.10 Changes......................................................... 14
9.11 Title to Properties and Assets; Liens, etc...................... 16
9.12 Patents, Trademarks, etc........................................ 16
9.13 Compliance with Other Instruments............................... 16
9.14 Litigation, etc................................................. 17
9.15 Tax Returns and Payments........................................ 17
9.16 Employees....................................................... 17
9.17 Insurance....................................................... 18
9.18 Registration Rights............................................. 18
9.19 Governmental Consents........................................... 18
9.20 Offering........................................................ 18
9.21 Operating Rights................................................ 18
9.22 Full Disclosure................................................. 19
9.23 Manufacturing Rights............................................ 19
9.24 Proprietary Information......................................... 19
9.25 Environmental Matters........................................... 19
9.26 Employee Benefit Plan........................................... 20
9.27 Real Property Holding Company................................... 20
9.28 Activation Closing Date......................................... 20
9.29 Termination Closing............................................. 21
10. Representations and Warranties of the Purchaser....................... 21
10.1 Legal Power..................................................... 21
10.2 Due Execution................................................... 21
10.3 Investment Representations...................................... 21
10.4 Activation Closing; Termination Closing and IPO Closing......... 22
11. Covenants of the Company.............................................. 22
11.1 Use of Proceeds................................................. 22
11.2 Access to Information........................................... 22
11.3 Financial Statements and Other Reports.......................... 22
11.4 Consents........................................................ 23
11.5 Restrictive Agreement........................................... 23
11.6 Notification of Registration Under the Exchange Act............. 23
11.7 Reservation of Shares........................................... 24
11.8 Repurchase, Redemption and Other Actions........................ 24
11.9 Listing of Common Stock......................................... 24
11.10 Michigan Business Corporation Act............................... 24
11.11 Stockholders' Rights............................................ 25
11.12 Removal of Restrictive Legend................................... 25
11.13 Board Observer.................................................. 25
12. Stock Registration and Information Rights............................. 26
13. Activation Closing.................................................... 26
13.1 Opinion of the Company's Counsel............................... 26
-ii-
<PAGE>
13.2 Receipt of Purchase Price...................................... 26
13.3 Implementing Agreements........................................ 26
13.4 Delivery of Stock Certificates and Other Documents............. 26
14. Termination Closing................................................... 26
14.1 Opinion of the Company's Counsel............................... 26
14.2 Credit for Purchase Price...................................... 27
14.3 Delivery of Stock Certificates and Other Documents............. 27
15. IPO Closing 27
15.1 Opinion of the Company's Counsel............................... 27
15.2 Receipt of Purchase Price...................................... 27
15.3 Delivery of Stock Certificates and Other Documents............. 27
16. Miscellaneous......................................................... 27
16.1 Governing Law.................................................. 27
16.2 Survival....................................................... 27
16.3 Successors and Assigns......................................... 28
16.4 Entire Agreement............................................... 28
16.5 Separability................................................... 28
16.6 Amendment and Waiver........................................... 28
16.7 Delays or Omissions............................................ 28
16.8 Notices........................................................ 29
16.9 Finder's Fees.................................................. 29
16.10 Fees and Expenses.............................................. 30
16.11 Information Confidential....................................... 30
16.12 Titles and Subtitles........................................... 30
16.13 Counterparts................................................... 30
16.14 Arbitration.................................................... 30
EXHIBIT A
SCHEDULE OF EXCEPTIONS................................................ 32
EXHIBIT B
FORM OF OPINION OF COUNSEL
ACTIVATION CLOSING.................................................... 4
EXHIBIT C
FORM OF OPINION OF COUNSEL
TERMINATION CLOSING................................................... 3
EXHIBIT D
SUMMARY OF SERIES E PREFERRED STOCK................................... 3
-iii-
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is made as of September
15, 1995, by and between Aastrom Biosciences, Inc., a Michigan corporation (the
"Company"), and Rhone-Poulenc Rorer Inc., a Delaware corporation (the
"Purchaser"), with respect to the factual recitals set forth below.
Certain terms used in this Agreement are defined in Section 1 of this
Agreement.
RECITALS
--------
A. The Company and the Purchaser have entered into a Governance
Agreement dated as of September 15, 1995 (the "Governance Agreement"), setting
forth, among other things, the terms and conditions of a preliminary research
collaboration between the parties concerning the development and sale of the CPS
for Lymphoid Cell Applications.
B. As specified in the Governance Agreement, certain option payments
paid by the Purchaser to the Company in connection with the parties'
collaboration shall be applied toward the purchase by the Purchaser of shares of
the capital stock of the Company.
C. As specified in the Governance Agreement, the Purchaser has the
option to purchase $12.5 million of the capital stock of the Company, including
an obligation to purchase $9.0 million of the capital stock of the Company if it
exercises the Third Option.
D. As specified in the Governance Agreement, if the Purchaser exercises
the Third Option, the Purchaser is also obligated under certain circumstances to
purchase $5.0 million of the capital stock of the Company in the event of a
Qualifying IPO.
E. The Company has previously furnished to the Purchaser (i) a copy of
the Memorandum, (ii) a copy of the Articles, and (iii) a copy of the Bylaws
(collectively, the "Series D Documents").
F. As specified in the Governance Agreement, the Company and the
Purchaser have negotiated, drafted and executed the following additional
implementing agreements of even date herewith (hereinafter collectively called,
together with this Agreement, the "Implementing Agreements"):
1
<PAGE>
a. Governance Agreement;
b. Supply Agreement;
c. License Agreement;
d. Arbitration Agreement; and
e. Research and Development Collaboration Agreement.
1. Definitions.
-----------
"Act" means the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
"Activation Closing" means the closing for the purchase and sale of
the Activation Shares, as contemplated by Section 6.1 hereof.
"Activation Closing Date" means the date of the Activation
Closing, as contemplated by Section 6.1 hereof.
"Activation Date" means the date on which the Purchaser delivers the
Third Option Event Notice in accordance with the provisions of the Governance
Agreement.
"Activation Shares" means the shares of the Company's capital stock to
be purchased by Purchaser pursuant to Section 3.1 hereof.
"Arbitration Agreement" means the agreement of that title of even date
herewith between the Purchaser and the Company.
"Articles" means the Company's Amended and Restated Articles of
Incorporation.
"Bylaws" means the Company's Amended and Restated Bylaws.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the United States Securities and Exchange
Commission.
"Common Stock" means shares of Common Stock of the Company, no
par value per share.
"Company Benefit Plan" means any employee benefit plan, program,
arrangement and contract (including without limitation any "employee benefit
plan" as defined in Section 3(3) of ERISA) maintained or contributed to by the
Company or any ERISA Affiliates or with respect to which the Company or any
2
<PAGE>
ERISA Affiliates could incur liability under Sections 4069, 4201 or 4212(c) or
ERISA.
"Conversion Shares" means the shares of Common Stock or other
securities which are issuable upon conversion of any Preferred Stock which may
be purchased hereunder.
"CPS" has the meaning provided in the License Agreement.
"Environmental Laws" means any federal, state, local or foreign law,
regulation, agency interpretation, policy, order, decree, judgment or judicial
opinion relating to (x) the manufacture, transport, use, treatment, storage,
recycling, disposal, release or threatened release of Hazardous Substances, or
(y) the preservation, restoration or protection of natural resources or health.
"Environmental Permits" means any permit, license, approval,
identification number or other authorization involving Hazardous Substances or
required under any Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, together with the rules and regulations promulgated thereunder.
"ERISA Affiliates" means any trade or business (whether or not
incorporated) that is part of the same controlling group as, or under common
control with, the Company within the meaning of Section 414(b)(c)(m) or (o) of
the Code.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Financial Statements" means the financial statements of the
Company as specified in Section 9.6 hereof.
"First Option Payment" has the meaning provided in the Governance
Agreement.
"First Option Period" has the meaning provided in the Governance
Agreement.
"Governance Agreement" means the Governance Agreement, dated as of the
date hereof, setting forth, among other things, the terms and conditions of a
preliminary research collaboration between the parties concerning the
development and sale of the CPS for Lymphoid Cell Applications.
3
<PAGE>
"Hazardous Substance" means any matter containing substances which are
(a) listed, classified or regulated pursuant to any Environmental law, including
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. 9601 et seq.; the Resource Conservation and
-------
Recovery Act, 42 U.S.C. 6901 et seq.; the Federal Water Pollution Control Act,
-------
33 U.S.C. 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. 2601
et seq.; and the Clean Air Act, 42 U.S.C. 7401 et seq.; each as amended, (b) any
------- -------
petroleum products or by-products, asbestos containing material, polychlorinated
biphenyl, radioactive materials or radon gas, or (c) any other matter to which
exposure is prohibited, limited or regulated by any government authority or
Environmental Law.
"Implementing Agreements" has the meaning provided in Recital F.
"IPO" shall mean the first underwritten offering by the Company to the
public of Common Stock, registered under the Act.
"IPO Closing" means the closing for the purchase and sale of the
IPO Shares, as contemplated by Section 8.5 hereof.
"IPO Shares" means the shares of Common Stock having an aggregate
value of $5.0 million which may be purchased by the Purchaser pursuant to
Section 8 hereof.
"Licenses" means the operating authority, licenses, franchises,
permits, certificates, consents, rights and privileges of the Company
contemplated by Section 9.21 hereof.
"Lymphoid Cell Applications" has the meaning provided in the
Governance Agreement.
"Memorandum" means the Company's Private Placement Memorandum, dated
April 5, 1995, relating to an offering of the Company's Series D Preferred
Stock, which sets forth relevant information concerning the Company.
"Non-Coupon Preferred Stock" means any preferred stock of the Company
that carries no fixed dividend and is convertible by the holder into shares of
Common Stock.
"Preferred Stock" means shares of Series E Preferred Stock of the
Company, no par value per share, having the rights, privileges and preferences
set forth on Exhibit D to this Agreement.
4
<PAGE>
"Premium" means the premium specified in Section 8.2 of this
Agreement.
"Private Placement" means an offering and sale of the Company's
securities in a transaction not involving a Public Offering.
"Public Offering" means a public offering of the Company's securities
registered on a registration statement under the Act.
"Purchaser Observer" has the meaning provided in Section 11.13
hereof.
"Qualifying IPO" means an IPO in which the proceeds to the Company
(net of offering expenses and underwriting discounts and commissions) are at
least $10.0 million (excluding any IPO Shares purchased by the Purchaser).
"Qualifying Issuance" means a Qualifying IPO or a Qualifying
Private Placement, as the case may be.
"Qualifying Private Placement" means a Private Placement after the
date hereof but prior to the first anniversary of the Activation Date, involving
the issuance by the Company of Common Stock or shares of the Company's Non-
Coupon Preferred Stock solely for cash, and in which the gross proceeds to the
Company are not less than $5 million, at least half of which comes from new
investors. Qualifying Private Placement shall include a Private Placement that
has multiple closings for the sale of shares of the same securities at the same
price within any six-month period. For the avoidance of doubt, a transaction or
series of related transactions involving the issuance of Common Stock or shares
of the Company's Non-Coupon Preferred Stock shall not be deemed to constitute a
Qualifying Private Placement if, as part of such transaction or series of
transactions, the purchaser receives anything of value (including, without
limitation, any rights with respect to the Company's intellectual property or
the manufacturing, marketing or sale of the Company's products) other than the
Common Stock or Non-Coupon Preferred Stock being sold in such transaction(s).
"Second Option Payment" has the meaning provided in the
Governance Agreement.
"Second Option Period" has the meaning provided in the Governance
Agreement.
"Series D Documents" means the Memorandum, the Articles and the
Bylaws.
"Shares" means the shares of the Company's capital stock to be
purchased by Purchaser hereunder.
5
<PAGE>
"Termination Closing" means the closing for the purchase and sale of
the Termination Shares, as contemplated by Section 6.2 hereof.
"Termination Shares" means the shares of the Company's capital stock
to be purchased by Purchaser pursuant to Section 4.1 hereof.
"Third Option" has the meaning provided in the Governance
Agreement.
"USRPHC" means United States real property holding corporation.
"1934 Act Registration Statement" means a registration statement filed
pursuant to the requirements of Section 12 of the Exchange Act or pursuant to
any equivalent provision of any similar federal law then in effect.
2. Option Periods and Option Payments.
----------------------------------
2.1 First Option. As specified in the Governance Agreement, the
------------
Purchaser has certain rights during a First Option Period, for which the
Purchaser has paid to the Company a $1.5 million First Option Payment.
2.2 Second Option. As specified in the Governance Agreement, the
-------------
Purchaser has the option to extend the Governance Agreement for a Second Option
Period if the Purchaser pays to the Company a $2.0 million Second Option
Payment.
2.3 Third Option. As specified in the Governance Agreement, if the
------------
Purchaser pays the Second Option Payment and exercises its Third Option during
the Second Option Period, the Supply Agreement and the Research and Development
Collaboration Agreement shall become activated, and the obligations of the
parties as of and following the Activation Date under this Agreement shall
become irrevocable.
3. Purchase and Sale of Shares.
---------------------------
3.1 Purchase of Shares on Activation Date. In the event the
-------------------------------------
Purchaser exercises the Third Option, on the Activation Date, this Agreement
shall become effective in all respects and the Purchaser shall purchase from the
Company, and the Company shall issue and sell to the Purchaser, such number of
Shares (the "Activation Shares") having an aggregate value equal to $12.5
million, at a purchase price per share determined in accordance with Section 5
hereof. The purchase price for the Activation Shares shall be paid as follows:
3.1.1 On the Activation Closing Date, the Purchaser shall pay to
the Company in immediately available funds the amount of $9.0 million, and
6
<PAGE>
the Company shall credit toward the purchase of the Activation Shares, the
amounts of the First Option Payment ($1.5 million) and the Second Option Payment
($2.0 million), for an aggregate of $12.5 million.
3.1.2 On the Activation Date, if the Company has previously
closed its IPO, the Purchaser shall also purchase the IPO Shares, subject to the
provisions of Section 8 hereof.
3.2 Class of Capital Stock. The Shares to be issued and
----------------------
sold to the Purchaser pursuant to this Agreement shall be (i) Preferred Stock if
the issuance is prior to the closing of the Company's IPO, or (ii) Common Stock
if the issuance is after the closing of the Company's IPO.
3.3 Voting Rights. Once the final purchase price for the Activation
-------------
Shares is determined pursuant to Section 5 hereof, the Common Stock equivalent
of the Activation Shares can be determined, and each such Common Stock
equivalent shall have one vote. From the Activation Closing Date until the final
purchase price is determined, the Activation Shares shall have voting rights
equal to 1,500,000 shares of Common Stock. The voting rights for the Termination
Shares shall be one vote per share commencing with the Termination Closing.
4. Purchase of Termination Shares.
------------------------------
4.1 No Exercise of Second Option. If the Purchaser has not exercised
----------------------------
the Second Option within the time frames contemplated by the Governance
Agreement, then the Purchaser shall, at the Termination Closing, purchase from
the Company, and the Company shall issue and sell to the Purchaser, 88,235
Shares having an aggregate value of $1.5 million, at a purchase price per Share
of $17.00.
4.2 No Exercise of Third Option. If the Purchaser has exercised the
---------------------------
Second Option, but not the Third Option, within the time frames contemplated by
the Governance Agreement, then the Company shall, at the Termination Closing,
issue and sell to the Purchaser 205,882 Shares having an aggregate value of $3.5
million, at a purchase price per Share of $17.00. The shares purchased pursuant
to Section 4.1(a) or 4.1(b) are referred to herein as the "Termination Shares."
5. Purchase Price for Activation Shares. The purchase price per Share
------------------------------------
for the Activation Shares shall be determined as follows:
5.1 After A Qualifying Issuance. In the event that the Activation
---------------------------
Date shall occur after a Qualifying Issuance, then the purchase price per
Activation Share shall be the higher of (i) the price per share in the most
recent Qualifying Private Placement (on a common stock conversion equivalent
basis),
7
<PAGE>
plus a premium of 30% (but subject to adjustment pursuant to Section 5.2(a) or
(b)), or (ii) the average of the closing sales price per share of Common Stock
for the fifteen trading days immediately preceding the Activation Date, but not
below the purchase price per share in the Qualifying IPO, plus a premium of 30%;
In either such event, the Series E Conversion Price shall initially be the
purchase price per Activation Share. If the Qualifying Issuance under this
Section 5.1 shall have been a Qualifying Private Placement and, the Company has
a Qualifying IPO within four months after the Activation Date, the Series E
Conversion Price shall be adjusted to the purchase price per share in the
Qualifying IPO plus a premium of 30%.
5.2 Prior to A Qualifying Issuance. In the event that the Activation
------------------------------
Date shall occur prior to a Qualifying Issuance, then on the Activation Closing
Date, the Purchaser shall purchase from the Company, and the Company shall issue
and sell to the Purchaser, 1,000,000 Activation Shares, at a nominal purchase
price of $12.50 per Activation Share. The Series E Conversion Price shall
initially be $12.50, and shall be subject to adjustment as follows:
(a) If the Company has a Qualifying IPO within four months
following the Activation Date, then the Series E Conversion Price shall be the
price per share in the Qualifying IPO, plus a premium of 30%.
(b) If the Company has a Qualifying Private Placement (and does
not have a Qualifying IPO) within four months following the Activation Date,
then the Series E Conversion Price shall be the price per share in the
Qualifying Private Placement (on a common stock conversion equivalent basis),
plus a premium of 25%.
(c) If the Company has either a Qualifying IPO or a Qualifying
Private Placement more than four months, but less than twelve months, after the
Activation Date, then the Series E Conversion Price shall be the price per share
in the Qualifying IPO or Qualifying Private Placement (on a common stock
conversion equivalent basis), as the case may be, plus a declining premium, as
follows:
Month Premium
------- --------
5 23
6 21
7 19
8 17
9 15
10 13
11 11
12 10
8
<PAGE>
(d) If the Company has not had a Qualifying Issuance
prior to the first anniversary of the Activation Date, then the Series E
Conversion Price shall be $7.50.
5.3 Termination of Options. In order to clarify the
----------------------
understanding of the parties hereto, the Purchaser acknowledges that if the
Purchaser does not exercise the Third Option and purchase an aggregate of $12.5
million of Shares, the Purchaser shall nevertheless be obligated to purchase the
Termination Shares as provided in Section 4, and the purchase price per
Termination Share shall be $17.00. In such event, the Company shall credit
toward the purchase of such Termination Shares the amounts of the First Option
Payment ($1.5 million) and the Second Option Payment ($2.0 million), if
applicable.
6. Closing Dates; Delivery. The closings of the sale and purchase of
-----------------------
the Shares under this Agreement shall occur as follows:
6.1 The closing for the purchase and sale of the Activation
Shares (the "Activation Closing") shall occur on the Activation Date, or such
other date as shall be agreed upon by the parties (the "Activation Closing
Date"), by means of the parties delivering all necessary signed documents and by
the Purchaser paying the full purchase price for the Activation Shares by wire
transfer and credits of the First Option Payment and the Second Option Payment,
at the Company's offices in Ann Arbor, Michigan. At the Activation Closing, the
parties shall deliver the documents, instruments and certificates specified in
Section 13 hereof.
6.2 The closing for the purchase and sale of the Termination
Shares (the "Termination Closing") shall occur within ten days following any
termination or expiration of the Purchaser's options under the Governance
Agreement without the options being extended or exercised. At the Termination
Closing, the parties shall deliver the documents, instruments and certificates
specified in Section 14 hereof.
6.3 The closing for the purchase of the IPO Shares (the "IPO
Closing") shall occur as specified in Section 8.5 hereof.
7. Conditions to the Activation Closing.
------------------------------------
7.1 Conditions to the Obligations of the Purchaser at the
-----------------------------------------------------
Activation Closing. The obligation of the Purchaser to purchase the Activation
------------------
Shares at the Activation Closing is subject to the satisfaction on or prior to
the Activation Closing Date of the following conditions, any of which may be
waived by the Purchaser.
7.1.1 The Purchaser shall have received the opinion of
counsel contemplated by Section 13.1.
9
<PAGE>
7.1.2 The representations and warranties of the Company
contained herein in Sections 9.1, 9.4, 9.5, 9.13, 9.19 and 9.20 shall be true
and correct in all material respects at and as of the Activation Closing Date.
7.1.3 All of the covenants and agreements of the Company
contained in this Agreement and required to be performed on or prior to the
Activation Closing Date shall have been performed in a manner reasonably
satisfactory in all respects to the Purchaser.
7.1.4 No action or proceeding before any court or
governmental body shall be pending or threatened wherein an unfavorable
judgment, decree or order will prevent the carrying out of this Agreement or the
other Implementing Agreements or of any of the transactions contemplated hereby
or thereby, declare unlawful the transactions contemplated by this Agreement or
the other Implementing Agreements, or cause such transactions to be rescinded.
7.1.5 All consents required to enable the Company to observe
and comply with all of its obligations contemplated hereby shall have been
obtained and all "blue sky" filings necessary at or prior to the Activation
Closing in connection with the issuance and sale of the Activation Shares shall
have been made.
7.1.6 The Company shall have delivered the documents
described in Section 13.4.
7.1.7 All corporate, shareholder and other proceedings taken
or to be taken by the Company in connection with the transactions contemplated
hereby to be consummated at or prior to the Activation Closing, and all
documents incident thereto, shall be reasonably satisfactory in form and
substance to the Purchaser.
7.1.8 The other Implementing Agreements shall be in full
force and effect.
7.2 Conditions to the Obligations of the Company at the
---------------------------------------------------
Activation Closing. The obligation of the Company to issue and sell the
------------------
Activation Shares at the Activation Closing is subject to the satisfaction on or
prior to the Activation Closing Date of the following conditions, any of which
may be waived by the Company:
7.2.1 All of the representations and warranties of the
Purchaser contained herein shall be true and correct in all material respects at
and as of the Activation Closing Date with the same effect as if made on the
Activation Closing Date.
10
<PAGE>
7.2.2 All of the covenants and agreements of the Purchaser
contained in this Agreement and required to be performed on or prior to the
Activation Closing Date shall have been performed in a manner reasonably
satisfactory in all respects to the Company.
7.2.3 No action or proceeding before any court or
governmental body shall be pending or threatened wherein an unfavorable
judgment, decree or order will or could prevent the carrying out of this
Agreement or the other Implementing Agreements or of any of the transactions
contemplated hereby, declare unlawful the transactions contemplated by this
Agreement or the other Implementing Agreements, or cause such transactions to be
rescinded.
7.2.4 All consents required to enable the Purchaser to
observe and comply with all of its obligations contemplated hereby shall have
been obtained.
7.2.5 The other Implementing Agreements shall be in full
force and effect.
8. Initial Public Offering Commitment.
----------------------------------
8.1 In the event that the Company closes a Qualifying IPO prior to
the Activation Date, the Purchaser shall have the option, but shall not be
obligated, to participate in the Qualifying IPO and purchase an additional
number of Shares having an aggregate value of $5.0 million, at a purchase price
per Share equal to the price per share of Common Stock in the Qualifying IPO.
The Purchaser may also elect to delay purchasing the IPO Shares until the
Activation Date.
8.2 If the Purchaser has elected to delay its participation in the
Qualifying IPO until the Activation Date, then on the Activation Date, the
Purchaser shall purchase the IPO Shares at a purchase price per Share equal to
the higher of (i) the price per share of Common Stock in the Qualifying IPO,
plus the Premium, if applicable, or (ii) the average of the closing sales price
per share of Common Stock for the fifteen trading days immediately preceding the
Activation Date, plus the Premium, if applicable. The Premium shall be
calculated by adding 5% (on a non-compounded basis) to the purchase price for
each full month after November 9, 1996, until the purchase price is paid, up to
a maximum Premium of 20%.
8.3 If the Purchaser does not exercise the Third Option, the
Purchaser shall have no obligation to purchase the IPO Shares.
8.4 If the Purchaser exercises the Third Option, and the Company
subsequently has a Qualifying IPO, then the Purchaser shall be obligated to
purchase the IPO Shares (unless the Purchaser has previously purchased IPO
11
<PAGE>
Shares pursuant to Section 8.1 above), at the time specified in Section 8.5
below, at a purchase price per Share equal to the price per share of Common
Stock in the Qualifying IPO; provided, however, that the Purchaser shall have no
obligation to purchase the IPO Shares if the Supply Agreement shall have been
terminated more than two years prior to the Qualifying IPO.
8.5 The IPO Closing shall occur as follows:
(a) If the Qualifying IPO occurs before the Activation Date, and
the Purchaser elects to purchase the IPO Shares pursuant to Section 8.1 hereof,
then the purchase and IPO Closing shall occur simultaneously with the closing of
the Qualifying IPO.
(b) If the Qualifying IPO occurs before the Activation Date, and
the Purchaser did not elect for an early purchase at the time of the IPO
pursuant to Section 8.1, then the purchase and IPO Closing shall occur on the
Activation Date, simultaneous with the Activation Closing.
(c) If the Qualifying IPO occurs after the Activation Date, then
the purchase and IPO Closing shall occur simultaneous with the Company closing
its Qualifying IPO.
9. Representations and Warranties of the Company.
---------------------------------------------
The Company hereby represents and warrants to the Purchaser as of the
date hereof, the following, subject to the exceptions set forth on the Schedule
of Exceptions attached hereto as Exhibit A, or, as provided in particular
representations and warranties below, subject to the Memorandum. At the
Activation Closing, the Company shall make the representations and warranties
contained in Sections 9.1, 9.4, 9.5, 9.13, 9.19 and 9.20.
9.1 Organization and Standing; Articles and Bylaws. The Company
----------------------------------------------
is a corporation duly organized, validly existing, and in good standing under
the laws of the State of Michigan, and has all requisite corporate power and
authority to own and operate its properties and assets and to carry on its
business as presently conducted and to enter into and perform this Agreement and
the other Implementing Agreements. The nature of the Company's activities and
its properties (both owned and leased) do not make it necessary for the Company
to qualify to do business in any other jurisdiction, except where the failure to
so qualify would not have a material adverse effect upon the business and
operations of the Company.
9.2 Capitalization. As of the date of this Agreement, the
--------------
authorized capital stock of the Company is as described in Schedule 9.2 of
Exhibit A to this Agreement and consists of (a) 17,000,000 shares of Common
Stock, and (b) 8,540,000 shares of preferred stock. All issued and outstanding
12
<PAGE>
shares of the Company's capital stock have been duly authorized and validly
issued and are fully paid and nonassessable. Except as set forth in the
Schedule of Exceptions, there are no outstanding rights of first refusal,
preemptive rights or other rights, options, warrants, conversion rights, or
other agreements either directly or indirectly providing for the purchase or
acquisition from the Company of any shares of its capital stock. All of the
outstanding shares of capital stock of the Company have been duly and validly
issued in compliance with federal and state securities laws.
9.3 Subsidiaries. The Company has no subsidiaries. The Company
------------
does not presently own or control, directly or indirectly, any equity interest
in any corporation, association or business entity. The Company is not,
directly or indirectly, a participant in any joint venture or partnership.
9.4 Authorization. All corporate action on the part of the
-------------
Company, its officers, directors and shareholders necessary for the
authorization, execution and delivery of this Agreement, and the performance of
the Company's obligations under this Agreement, has been taken. At or prior to
the Activation Closing, or the Termination Closing, as applicable, all corporate
action on the part of the Company, its officers, directors and shareholders
necessary for the authorization, issuance, sale and delivery of the Shares (and
the Conversion Shares) will have been taken. This Agreement, when executed and
delivered by the Company and the Purchaser, shall constitute the valid and
legally binding obligation of the Company, enforceable in accordance with its
terms, subject to laws of general application relating to bankruptcy, insolvency
and the relief of debtors.
9.5 Validity of the Shares. The sale of the Shares (including any
----------------------
Conversion Shares) is not and will not be subject to any preemptive rights or
rights of first refusal that have not been waived. When issued, sold and
delivered in compliance with the provisions of this Agreement, the Shares will
be validly issued, fully paid and nonassessable, and will be free of any liens,
encumbrances or, except as set forth in the immediately following sentence,
restrictions. The Shares may be subject to restrictions on transfer under state
and/or federal securities laws as set forth herein or as otherwise required by
such laws at the time a transfer is proposed. The voting rights, designations,
preferences, limitations and special rights of the Shares (including the
Conversion Shares), when issued, shall be as fully set forth in the Articles and
Exhibit D attached hereto. The Company has reserved a sufficient number of
shares of its Common Stock (as hereinafter defined) for issuance upon conversion
of any Preferred Stock issued and sold hereunder and such shares of Common
Stock, when issued in accordance with the terms of such Preferred Stock, will be
duly authorized, validly issued, fully paid, non-assessable and free and clear
of all encumbrances, liens or restrictions, except for restrictions on transfer
imposed by applicable securities laws.
9.6 Financial Statements. The Company has delivered to the Purchaser
--------------------
(a) its audited balance sheet as at June 30, 1995, together with audited
13
<PAGE>
statements of income, shareholders' equity, and cash flows for the fiscal year
then ended, and (b) its unaudited balance sheet as of July 31, 1995 and its
unaudited income statement for the one (1) month then ended (collectively, the
"Financial Statements"). The Financial Statements, together with the notes
thereto, are complete and correct in all material respects, have been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods indicated, except as disclosed therein,
and present fairly the financial condition and position of the Company at the
dates shown and the results of operations of the Company for the periods therein
specified; provided, however, that the unaudited financial statements are
subject to normal year-end adjustments, which are not expected to be material,
and do not contain footnotes required under generally accepted accounting
principles.
9.7 Material Contracts and Agreements. As used herein, the term
---------------------------------
"material" shall mean an obligation which will cause the Company to incur
expenses greater than, or which has a value greater than, $50,000. Except as
set forth in the Memorandum and the Schedule of Exceptions, the Company does not
have any material contract, agreement, lease, or other commitment, written or
oral, absolute or contingent. All material contracts, agreements, leases and
other commitments to which the Company is a party are valid, binding, and in
full force and effect in all material respects and, to the best of the Company's
knowledge, without any material breach by any party thereto.
9.8 Outstanding Indebtedness. The Company does not have any
------------------------
indebtedness for borrowed money, or other liabilities (fixed or contingent),
which the Company has directly or indirectly created, incurred, assumed or
guaranteed, or with respect to which the Company has otherwise become directly
or indirectly liable, that is not disclosed in the Financial Statements, the
Memorandum, or the Exhibits attached to this Agreement, other than indebtedness
incurred in the ordinary course of business since July 31, 1995 which in the
aggregate does not exceed $50,000.
9.9 Officers, Directors and Shareholders. Set forth in the
------------------------------------
Memorandum is a list of officers, directors and major shareholders of the
Company as of the date of this Agreement, which list is full, complete and
correct. The Company has also delivered to the Purchaser a complete list of the
Company's shareholders as of the date hereof.
9.10 Changes. Except as set forth in the Schedule of Exceptions
-------
or the Memorandum, since July 31, 1995 until the date of this Agreement, to the
best of the Company's knowledge there has not been:
(a) Any change in the assets, liabilities, financial condition,
or operations of the Company from that reflected in the Financial Statements,
other than changes in the ordinary course of business, none of which
14
<PAGE>
individually or in the aggregate has had a material adverse effect on such
assets, liabilities, financial condition or operations of the Company;
(b) Any change, except in the ordinary course of business, in the
contingent obligations of the Company by way of guaranty, endorsement,
indemnity, warranty or otherwise;
(c) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties or business of the
Company;
(d) Any waiver or compromise by the Company of a valuable right or of
a material debt owed to it;
(e) Any direct or indirect loans made by the Company to any employee,
officer, director or shareholder of the Company, other than travel advances made
in the ordinary course of business;
(f) Any increase in the compensation of any employee, officer or
director of the Company, other than for ordinary course of business annual
compensation review adjustments;
(g) Any declaration or payment of any dividend or other distribution
of the assets of the Company;
(h) Any material labor organization activity;
(i) Any material debt, obligation or liability incurred, assumed or
guaranteed by the Company, except current liabilities incurred in the ordinary
course of business;
(j) Any change in the outstanding securities of the Company, other
than the issuance of Common Stock upon exercise of outstanding stock options;
(k) Any capital expenditure or commitment by the Company in excess of
$50,000 individually or $200,000 in the aggregate;
(l) Any change in any method of accounting or accounting practice or
policy used by the Company, other than such changes required by GAAP;
(m) Any failure by the Company to pay creditors aggregate amounts in
excess of $100,000 owed to such creditors when due;
15
<PAGE>
(n) Any disclosure of any secret or confidential intellectual property
(except by way of issuance of any patent) or any lapse or abandonment of any
intellectual property (or any registration or grant thereof or any application
relating thereto) to which, or under which, the Company has any right, title,
interest or license;
(o) Any agreement by or on behalf of the Company, whether in writing
or otherwise, to take any of the actions specified in this Section 9.10;
(p) To the best of the Company's knowledge, any other event or
condition (or events or conditions) of any character which, either individually
or cumulatively, has materially and adversely affected the business, affairs,
prospects, conditions, operations, properties or assets of the Company.
9.11 Title to Properties and Assets; Liens, etc.. The Company has
-------------------------------------------
good and marketable title to its properties and assets, including the properties
and assets reflected in the Financial Statements, and good title to all its
leasehold estates, in each case subject to no mortgage, pledge, lien, lease,
encumbrance or charge, other than (a) as reflected in the Financial Statements
or in the notes thereto, (b) liens resulting from taxes which have not yet
become delinquent, or (c) minor liens, encumbrances or defects of title which do
not, individually or in the aggregate, materially detract from the value of the
property subject thereto or materially impair the operations of the Company.
With respect to property it leases, to the best of the Company's knowledge, the
Company is in compliance with such leases in all material respects.
9.12 Patents, Trademarks, etc.. The Company owns and possesses or
-------------------------
is licensed under all patents, patent applications, licenses, trademarks,
service marks, trade names, inventions, processes, formulae, trade secrets,
franchises, copyrights and other proprietary rights necessary for the operation
of its business as now conducted and as proposed to be conducted, with no known
infringement of or conflict with the rights of others. To the best of the
Company's knowledge, such ownership, possession or license is exclusive and not
subject to termination without the Company's consent. The Company is not aware
of any third party that is infringing or violating any of its patents, licenses,
trademarks, service marks, trade names, inventions, processes, formulae, trade
secrets, franchises, copyrights or other proprietary rights.
9.13 Compliance with Other Instruments. The Company is not in violation of
---------------------------------
any term of its Articles or Bylaws or, to the best of the Company's knowledge,
any material mortgage, indenture, contract, agreement, instrument, judgment,
decree, order, statute, rule or regulation applicable to the Company, except for
violations which, in the aggregate, are not material. The execution, delivery
and performance of and compliance with this Agreement and the other Implementing
Agreements, and the issuance and sale of the Shares pursuant
16
<PAGE>
hereto, will not with or without the giving of notice or the passage of time, or
both, result in any such violation, or be in conflict with or constitute a
default under any such term, result in the creation of any mortgage, pledge,
lien, encumbrance or charge upon any of the properties or assets of the Company
or cause the Company to lose the benefit of any right or privilege it presently
enjoys.
9.14 Litigation, etc.. There are no actions, suits, proceedings,
----------------
orders, claims or investigations before any federal, state, municipal, foreign
or other governmental department, commission, board, bureau, agency or
instrumentality pending or, to the best of the Company's knowledge, threatened
against or affecting the Company or its assets or business (or any basis
therefor known to the Company), which question the validity of this Agreement or
the other Implementing Agreements or any action taken or to be taken in
connection with this Agreement or the other Implementing Agreements or which,
either individually or in the aggregate, might result in a material adverse
change in the business, prospects, conditions, affairs or operations of the
Company or in any of its properties or assets, or in any material impairment of
the right or ability of the Company to carry on its business as now conducted or
as proposed to be conducted, or in any material liability on the part of the
Company. The foregoing includes, without limitation, actions pending or
threatened (or any basis therefor known to the Company) involving the prior
employment of any of the Company's employees or former employees (other than as
described in the Schedule of Exceptions), their use in connection with the
Company's business of any information or techniques allegedly proprietary to any
of their former employers, or their obligations under any agreements with prior
employers.
9.15 Tax Returns and Payments. The Company has accurately
------------------------
prepared and timely filed all tax returns (federal, state and local) required to
be filed by it. All taxes shown to be due and payable on said returns, any
assessments, fees or charges and all other taxes due and payable by the Company
on or before the date hereof, have been paid or will be paid prior to the time
they become delinquent. No deficiency assessment or proposed adjustment of the
Company's federal, state or local taxes is pending and the Company has no
knowledge of any proposed liability for any tax to be imposed upon its
properties or assets for which there is not an adequate reserve reflected in the
Financial Statements.
9.16 Employees. To the best of the Company's knowledge, no
---------
employee of the Company 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
conflict with such employee's obligation to use his or her best efforts to
promote the interests of the Company or that would conflict with the Company's
business as conducted or as proposed to be conducted. Except as set forth in
the Schedule of Exceptions, to the best of the Company's knowledge, no employee
of the Company is in violation of any term of any employment contract,
proprietary information and inventions agreement, non-competition agreement or
any other
17
<PAGE>
contract or agreement relating to the relationship of any such employee with the
Company or any previous employer. The Company has no collective bargaining
agreements with any of its employees and, to the best of the Company's
knowledge, there is no labor union organizing activity pending or threatened
with respect to the Company. Except as set forth on the Schedule of Exceptions
or the Memorandum, there is no pension, health, profit sharing, bonus, stock
purchase, stock option, hospitalization, insurance, severance or any other
employee benefit or welfare benefit plan with respect to any officer or employee
of the Company.
9.17 Insurance. The Company maintains insurance coverage of the
---------
types and in the amounts which the Company reasonably believes is adequate for
its business as of the date of this Agreement.
9.18 Registration Rights. No person has any right to cause the
-------------------
Company to effect registration under the Act of any shares of Common Stock or
other securities of the Company, other than pursuant to the Amended and Restated
Investors' Rights Agreement.
9.19 Governmental Consents. All consents, approvals, orders or
---------------------
authorizations of, or registrations, qualifications, designations, declarations
or filings with, any governmental authority, required on the part of the Company
in connection with the valid execution and delivery of this Agreement or the
other Implementing Agreements, the offer, sale or issuance of the Shares, or the
consummation of any other transaction contemplated by this Agreement, have been
obtained, or will be obtained prior to the applicable closing, excepting only
for routine blue sky law notices to be filed with certain state and federal
securities commissions after the applicable closing, which notices or filings
will be filed on a timely basis.
9.20 Offering. Assuming the accuracy of the representations and
--------
warranties of the Purchaser contained in Section 10 hereof, the offer, issuance
and sale of the Shares (including any Conversion Shares) are and will be exempt
from the registration and prospectus delivery requirements of the Act and are
exempt from registration and qualification under the registration, permit or
qualification requirements of all applicable state securities laws.
9.21 Operating Rights. The Company has all operating authority,
----------------
licenses, franchises, permits, certificates, consents, rights and privileges
(collectively "Licenses") as are necessary or appropriate to the operation of
its business as now conducted and as proposed to be conducted, except where the
failure to have such License would not have a material adverse effect on its
business as now conducted and as proposed to be conducted. Such Licenses are in
full force and effect, no violations have been or are expected to have been
recorded in respect of any such Licenses, and no proceeding is pending or, to
the knowledge of the Company, threatened that could result in the revocation or
18
<PAGE>
limitation of any of such Licenses. The Company has conducted its business so
as to comply in all material respects with all such Licenses.
9.22 Full Disclosure. Neither this Agreement, the representations
---------------
and warranties by the Company contained herein, the Exhibits hereto, the
Financial Statements, the Memorandum, nor any other written statement or
certificate delivered or to be furnished to the Purchaser (or the Purchaser's
counsel) in connection with this Agreement, when read together, contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained herein or therein not misleading.
9.23 Manufacturing Rights. Excepting only as specified in the
--------------------
Memorandum or the Schedule of Exceptions, the Company has not granted rights or
licenses to manufacture, assemble or sell its products to any person,
corporation, partnership or other entity, is not bound by any agreement that
affects the Company's exclusive right to manufacture, assemble or sell its
products, and has not licensed or sold any of its technology or proprietary
information to any person, corporation, partnership or other entity.
9.24 Proprietary Information.
-----------------------
(a) The Company has taken all reasonable security measures to
protect the secrecy, confidentiality and value of all trade secrets, know-how,
inventions, designs, processes and technical data required to conduct its
business.
(b) Each officer, employee and consultant of the Company has
signed (and each future officer, employee and consultant will be required to
sign) a proprietary information agreement in the Company's standard form, each
of which agreements is in full force and effect as of the date hereof. Except as
set forth in the Schedule of Exceptions, to the best of the Company's knowledge,
none of the Company's current or former officers, employees or consultants is or
will be in violation thereof, and the Company will use its best efforts to
prevent any such violation.
9.25 Environmental Matters. Except as would not have a material
---------------------
adverse effect on the business, operations, properties, assets, financial
condition or prospects of the Company, to the best of the Company's knowledge,
the Company (a) is not violating and has not in the past violated any
Environmental Laws or Environmental Permits, (b) is not exposed to any claims of
liability for any off-site disposal or contamination, (c) has not received any
claim or threatened claim relating to any Environmental Law, Environmental
Permit or otherwise relating to any Hazardous Substance, and (d) is not aware of
any circumstances likely to result in claims, liability, investigation,
monitoring or remediation under any Environmental Law. With respect to the
Company's period of ownership, lease or
19
<PAGE>
use of any property, to the best of the Company's knowledge, there has not been
any contamination, release or threat of release of any Hazardous Substance at
any currently or formerly owned, leased or used real property that would have a
material adverse effect on the business, operations, properties, assets,
financial condition or prospects of the Company.
9.26 Employee Benefit Plan.
---------------------
(a) To the best of the Company's knowledge, with respect to each
Company Benefit Plan, no event has occurred, other than claims for benefits, and
there exists no condition or set of circumstances in connection with which (a)
the Company or any of its ERISA Affiliates could be subject to any liability
under the terms of such Company Benefit Plans, ERISA, the Code or any other
applicable law or regulation which would, individually or in the aggregate, have
a material adverse effect on the business, operations, properties, assets,
financial condition or prospects of the Company. Except as set forth in the
Schedule of Exceptions, none of the Company Benefit Plans (a) promises or
provides retiree medical or life insurance benefits to any person, or (b) is
subject to Title IV or ERISA, and neither the Company nor any of its ERISA
Affiliates has incurred, or reasonably expects to incur, any direct or indirect
liability under or by operation of Title IV of ERISA.
9.27 Real Property Holding Company. The Company acknowledges that
-----------------------------
as a result of the investment contemplated hereunder, it may have a foreign
interest-holder within the meaning of Treasury Regulation ("Reg.") (P) 1.897-
2(h)(1)(i). The Company represents and warrants that it is not a United States
real property holding corporation ("USRPHC") within the meaning of Internal
Revenue Code Section 897(c)(2) and the regulations thereunder, and agrees to use
reasonable efforts to avoid becoming a USRPHC. The Company agrees to make
determinations as to its status as a USRPHC, and will file statements concerning
those determinations with the Internal Revenue Service, in the manner and at the
times required under Reg. (P) 1.897-2(h), or any supplementary or successor
provision thereto. Within 30 days of a request from the Purchaser, the Company
will inform the Purchaser, in the manner set forth in Reg. (P) 1.897-2(h)(1)(iv)
or any supplementary or successor provision thereto, whether the Purchaser's
interest in the Company constitutes a United States real property interest
(within the meaning of Internal Revenue Code Section 897(c)(1) and the
regulations thereunder) and whether the Company has provided to the Internal
Revenue Service all required notices as to its USRPHC status.
9.28 Activation Closing Date. On the Activation Closing Date, the
-----------------------
Company shall deliver to the Purchaser a revised Schedule of Exceptions to the
representations and warranties contained herein. The Company and the Purchaser
acknowledge that material changes may occur between the date hereof and the
Activation Closing Date and that the Purchaser's obligation to purchase the
20
<PAGE>
Activation Shares is subject only to the continuing accuracy of the
representations and warranties contained in Sections 9.1, 9.4, 9.5, 9.13, 9.19
and 9.20, hereof.
9.29 Termination Closing. On the Termination Closing Date, the
-------------------
Company shall remake the representations and warranties contained in Sections
9.4, 9.5, 9.13, 9.19 and 9.20.
10. Representations and Warranties of the Purchaser.
-----------------------------------------------
The Purchaser hereby represents and warrants to the Company as
follows:
10.1 Legal Power. It has the requisite legal power to enter into
-----------
this Agreement, to purchase the Shares hereunder and to carry out and perform
its obligations under the terms of this Agreement.
10.2 Due Execution. This Agreement has been duly authorized,
-------------
executed and delivered by the Purchaser and, upon due execution and delivery by
the Company, this Agreement will be a valid and legally binding agreement of the
Purchaser, enforceable in accordance with its terms, subject to laws of general
application relating to bankruptcy, insolvency and the relief of debtors.
10.3 Investment Representations.
--------------------------
(a) The Purchaser will be acquiring the Shares for its own
account, not as nominee or agent, for investment and not with a view to, or for
resale in connection with, any distribution or public offering thereof within
the meaning of the Act.
(b) The Purchaser understands that (i) the Shares (other than
the IPO Shares) have not been registered under the Act by reason of a specific
exemption therefrom, that they must be held by it indefinitely, and that it
must, therefore, bear the economic risk of such investment indefinitely, unless
a subsequent disposition thereof is registered under the Act or is exempt from
such registration; (ii) each certificate representing the Shares (other than the
IPO Shares) will be endorsed with the following legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE
TRANSFERRED UNLESS (A) COVERED BY AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) THE COMPANY HAS
BEEN FURNISHED WITH AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY TO
THE EFFECT THAT
21
<PAGE>
NO REGISTRATION IS LEGALLY REQUIRED FOR SUCH TRANSFER."
and (iii) the Company will instruct any transfer agent not to register the
transfer of any of the Shares (other than the IPO Shares) unless the conditions
specified in the foregoing legend are satisfied.
(c) The Purchaser has been furnished with such materials and has
been given access to such information relating to the Company as the Purchaser
has requested, and it has been afforded the opportunity to ask questions
regarding the Company and the Shares, all as it has found necessary to make an
informed investment decision.
(d) By reason of its business or financial experience, it has
the capacity to protect its own interests in connection with this transaction.
(e) The Purchaser is a corporation, having assets in excess of
$5,000,000, it was not formed for the purpose of acquiring the Shares, and it is
an "accredited investor" as defined in Rule 501 promulgated under the Act.
10.4 Activation Closing; Termination Closing and IPO Closing. At
-------------------------------------------------------
and as of the dates of the Activation Closing and the Termination Closing, the
Purchaser shall reaffirm the continuing accuracy of the representations and
warranties of Sections 10.1 and 10.3.
11. Covenants of the Company. From and after the Activation Closing (or
------------------------
in the case of the covenants contained in Sections 11.6, 11.7, 11.8 and 11.12,
the Termination Closing), the Company covenants and agrees with the Purchaser as
follows:
11.1 Use of Proceeds. The proceeds of the sale of the Shares have
---------------
been and will be used for working capital and general corporate purposes.
11.2 Access to Information. Up until the date of the Company's
---------------------
IPO, the Company shall, and shall cause its officers, directors, employees,
auditors and other agents to, provide the Purchaser such financial, operating
and other data and information with respect to the business and properties of
the Company as the Purchaser shall reasonably request from time to time to
monitor the investment made pursuant hereto and to exercise its rights
hereunder.
11.3 Financial Statements and Other Reports.
--------------------------------------
11.3.1 Up until the date of the Company's IPO, the Company will
furnish to the Purchaser, as soon as practicable, and in any event
22
<PAGE>
within 90 days after the end of each fiscal year of the Company, an annual
report of the Company, including a balance sheet as of the end of such fiscal
year and statements of operations, shareholders' equity and cash flows for such
fiscal year, together with the related notes thereto, setting forth in each case
in comparative form corresponding figures for the preceding fiscal year, all of
which will present fairly the financial position of the Company and the results
of its operations and changes in its financial position as of the time and for
the period then ended. The financial statements shall be accompanied by an
unqualified report of independent public accountants of recognized national
standing to the effect that such financial statements have been prepared in
accordance with generally accepted accounting principles applied on a basis
consistent with prior years (except as otherwise specified in such report), and
present fairly the financial position of the Company and the results of its
operations and changes in its financial position as of the time and for the
period then ended. The Company will conduct its business such that such report
of the independent public accounts will not contain any qualifications as to the
scope of the audit, the continuance of the Company, or with respect to the
Company's compliance with generally accepted accounting principles, except for
change in methods of accounting in which such accountants concur.
11.3.2 Up until the date of the Company's IPO, the Company will
furnish to Purchaser as soon as practicable, and in any event within 45 days
after the end or each fiscal quarter of the Company, a report of the Company,
consisting of an unaudited balance sheet as of the end of such quarter, and
unaudited statements of operations, shareholders' equity and cash flows for such
quarter, and for the fiscal year-to-day, setting forth in each case in
comparative form the corresponding figures for the preceding year. All such
reports shall be certified by the Treasurer of the Company to present fairly the
financial position of the Company and the results of its operations and changes
in its financial position as of the time and for the period then ended and to
have been prepared in accordance GAAP, subject to normal year-end adjustments,
which shall not be material in nature or amount.
11.4 Consents. On or before the Activation Closing, the Company
--------
shall obtain all consents and shareholder approvals needed to enable it to
perform all of its obligations under this Agreement and the other Implementing
Agreements and the transactions contemplated hereby and thereby.
11.5 Restrictive Agreement. Subsequent to the Activation Closing
---------------------
or the Termination Closing, the Company will not be a party to any agreement or
instrument which by its terms would restrict the Company's performance of its
obligations pursuant to this Agreement or the Shares (including any redemption
or conversion thereof) or the other Implementing Agreements.
11.6 Notification of Registration Under the Exchange Act. The
---------------------------------------------------
Company will give the holder of record of the Shares prompt written notice of
the effectiveness of any registration statement filed pursuant to the
requirements of
23
<PAGE>
Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") or pursuant to any equivalent provision of any similar federal law then in
force (a "1934 Act Registration Statement") relating to the Common Stock, and
the number of shares of such class of equity securities outstanding at the time
such registration statement becomes effective. If the Company has filed a 1934
Act Registration Statement or a registration statement on any form other than
Form S-8 (or any successor form serving the same general purpose) pursuant to
the requirements of the Act, the Company further covenants that it will file all
reports required to be filed by it under the Act or the Exchange Act and the
rules and regulations thereunder or, if the Company is not required to file such
reports, it will, upon the request of the holder of record of the Shares, make
publicly available such information as will enable it to sell the Shares without
a registration statement, and will take such further action as such holder may
request, all to the extent required from time to time to enable such holder to
sell the Shares, without registration within the limitations of the exemptions
provided by (i) Rule 144 and Rule 144A adopted by the Commission under the Act,
as such rules may be amended from time to time, or (ii) any similar rule or
regulation hereafter adopted by the Commission.
11.7 Reservation of Shares. The Company shall at all times
---------------------
reserve and keep available, free from preemptive rights, out of its authorized
and unissued Common Stock the number of shares of Common Stock issuable upon
conversion of the Preferred Shares.
11.8 Repurchase, Redemption and Other Actions. The Company will
----------------------------------------
give the Purchaser at least thirty calendar days notice of any action, whether
by repurchase or redemption of its securities or otherwise, which would cause
the percentage of outstanding voting securities of the Company owned by the
Purchaser to exceed 19.9% of the outstanding voting securities of the Company,
on a fully diluted, as converted basis.
11.9 Listing of Common Stock. From and after the closing of the
-----------------------
Company's IPO, the Company shall use its reasonable best efforts to cause the
Common Stock to be listed for trading at all times on either the Nasdaq National
Stock Market or the American Stock Exchange or the New York Stock Exchange.
11.10 Michigan Business Corporation Act. The Company will not
---------------------------------
take any action to amend the Bylaws or Articles so as to make Chapter 7B of the
MBCA, or any successor provision thereto, applicable to any acquisition by
Purchaser of shares of Common Stock or other securities of the Company. In the
event that the Articles are amended so as to make Chapter 7B of the MBCA, or any
successor provision thereto, applicable to any acquisition by the Purchaser of,
the Shares (including any Conversion Shares) or any other securities of the
Company, the Company shall take such actions as shall be necessary and permitted
by the MBCA so that (a) the securities that the Purchaser is entitled to acquire
will, upon such issuance, and (b) the Shares (including any Conversion
24
<PAGE>
Shares) will, in accordance with their terms, be duly accorded full voting
rights. The Company will use its reasonable best efforts, including the
solicitation of votes by proxy, to obtain such votes of stockholders of the
Company as shall be necessary to accord the Purchaser with such full voting
rights.
11.11 Stockholders' Rights. The Company shall not adopt a
--------------------
stockholder rights plan, enter into any agreement, arrangement or understanding
or grant any warrants, options, rights or other privileges which, upon
acquisition by the Purchaser of the Shares (including any Conversion Shares) or
pursuant to Section 11.8 hereof, would result in the Purchaser, in its capacity
as a holder of such securities, being subject to different rights and
obligations as all other holders of Common Stock or voting securities of the
Company, as a result of such acquisition.
11.12 Removal of Restrictive Legend. The Company shall remove the
-----------------------------
legend set forth in Section 10.3 from any stock certificate issued to the
Purchaser by delivery of substitute certificate(s) without such legend if the
Purchaser shall have delivered to the Company an opinion of counsel in form and
substance reasonably satisfactory to the Company to the effect that such legend
is not required for purposes of compliance with the Act.
11.13 Board Observer. Subject to the limitation provided below,
--------------
from and after the Activation Closing Date, (i) the Purchaser shall be entitled
to have present, in a non-voting observer capacity at all meetings of the Board
of Directors of the Company (the "Board"), one person designated by the
Purchaser and reasonably acceptable to the Company (the "Purchaser Observer"),
and (ii) the Company (a) shall deliver notice of all meetings of the Board to
the Purchaser Observer simultaneously with, and in the same form as, notice to
the directors of the Company, and (b) shall deliver to the Purchaser copies of
all written materials furnished to the Board simultaneously with the delivery of
such written materials to the Board. The Purchaser Observer shall enter into a
confidentiality agreement reasonably acceptable to the Company. The Purchaser
Observer shall withdraw from any portion of a Board meeting at which time there
is a discussion of matters that present a conflict of interest to the Purchaser.
The Company may withhold from delivery to the Purchaser Observer written
materials concerning matters which present a conflict of interest to the
Purchaser.
12. Stock Registration and Information Rights.
-----------------------------------------
By its execution and delivery of this Agreement, the Purchaser shall
have the stock registration rights as have been granted by the Company pursuant
to Sections 2.4 through 2.15 of that certain Amended and Restated Investors'
Rights Agreement dated April 7, 1992 by and among the Company and certain
investors and shareholders of the Company, a copy of which has been delivered to
the Purchaser.
25
<PAGE>
13. Activation Closing. At the Activation Closing, the following shall
------------------
occur:
13.1 Opinion of the Company's Counsel. The Company shall deliver
--------------------------------
to the Purchaser an opinion of counsel to the Company (which counsel shall be
reasonably acceptable to Purchaser), substantially in the form attached hereto
as Exhibit B, addressed to the Purchaser and dated the date of the Activation
Closing. In rendering the opinion called for under this Section 13.1, counsel
may rely as to factual matters on certificates of public officials, officers of
the Company, and officers of the Purchaser.
13.2 Receipt of Purchase Price. At the Activation Closing, the
-------------------------
Purchaser shall deliver to the Company, by wire transfer, funds in the amount of
$9.0 million, in payment for the Activation Shares, and the Company shall credit
toward the purchase of the Activation Shares, the amounts of the First Option
Payment and the Second Option Payment. The parties acknowledge that if the
Purchaser elects not to exercise the Third Option, the Purchaser shall receive
credits for the First Option Payment and the Second Option Payment, if
applicable, toward the purchase of the Termination Shares having an aggregate
value of $1.5 million or $3.5 million, as the case may be.
13.3 Implementing Agreements. The Purchaser and the Company shall
-----------------------
sign and deliver to each other copies of the other Implementing Agreements.
13.4 Delivery of Stock Certificates and Other Documents. The
--------------------------------------------------
Company shall deliver to Purchaser (i) a stock certificate representing the
Activation Shares, and (ii) a copy of the Articles, certified by the
Corporations and Securities Bureau of the Department of Commerce of the State of
Michigan, (iii) a copy of the Bylaws, certified by the Secretary of the Company,
and (iv) evidence reasonably satisfactory to the Purchaser of the adoption by
the Board of actions duly approving this Agreement and the other Implementing
Agreements and the transactions contemplated hereby and thereby.
14. Termination Closing. The Termination Closing shall not be
-------------------
subject to any conditions other than as set forth in this Section 14, and the
Company shall have no obligation to make any representations or warranties as of
the date of, and in connection with, the Termination Closing, except as set
forth in Section 9.29. At the Termination Closing, the following shall occur:
14.1 Opinion of the Company's Counsel. The Company shall deliver
--------------------------------
to the Purchaser an opinion of counsel to the Company (which counsel shall be
reasonably acceptable to the Company), substantially in the form attached hereto
as Exhibit C, which opinion shall be addressed to the Purchaser and dated the
date of the Termination Closing. In rendering the opinion called for under this
26
<PAGE>
Section 14.1, counsel may rely as to factual matters on certificates of public
officials, officers of the Company, and officers of the Purchaser.
14.2 Credit for Purchase Price. At the Termination Closing, the
-------------------------
Company shall credit in full payment of the purchase price for the Termination
Shares, the amounts of the First Option Payment and the Second Option Payment.
14.3 Delivery of Stock Certificates and Other Documents. The
--------------------------------------------------
Company shall deliver to Purchaser (i) a stock certificate representing the
Termination Shares, and (ii) a copy of the Articles, certified by the
Corporations and Securities Bureau of the Department of Commerce of the State of
Michigan, (iii) a copy of the Bylaws, certified by the Secretary of the Company,
and (iv) evidence reasonably satisfactory to the Purchaser of the adoption by
the Board of actions duly approving this Agreement and the transactions
contemplated hereby.
15. IPO Closing. At the IPO Closing, the following shall occur:
-----------
15.1 Opinion of the Company's Counsel. The Company shall deliver
--------------------------------
to the Purchaser a copy of the opinion of counsel delivered to the underwriters
in the IPO and upon which the Purchasers shall be entitled to rely.
15.2 Receipt of Purchase Price. At the IPO Closing, the Purchaser
-------------------------
shall deliver to the Company, by wire transfer, funds in the amount of $5.0
million, in payment for the IPO Shares.
15.3 Delivery of Stock Certificates and Other Documents. The
--------------------------------------------------
Company shall deliver to Purchaser (i) a stock certificate representing the IPO
Shares, and (ii) a copy of the Articles, certified by the Corporations and
Securities Bureau of the Department of Commerce of the State of Michigan, (iii)
a copy of the Bylaws, certified by the Secretary of the Company, and (iv)
evidence reasonably satisfactory to the Purchaser of the adoption by the Board
of actions duly approving the issuance and sale to the Purchaser of the IPO
Shares.
16. Miscellaneous.
-------------
16.1 Governing Law. This Agreement shall be governed by and
-------------
construed under the laws of the State of Michigan as applied to agreements among
Michigan residents, made and to be performed entirely within the State of
Michigan.
16.2 Survival. The representations, warranties, covenants and
--------
agreements made herein shall survive any investigation made by the Purchaser and
the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other instrument delivered by or
on behalf of the Company pursuant hereto or in connection with the transactions
contemplated
27
<PAGE>
hereby shall be deemed to be representations and warranties by the Company
hereunder as of the date of such certificate or instrument.
16.3 Successors and Assigns. Except as otherwise expressly
----------------------
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto.
16.4 Entire Agreement. This Agreement, the Exhibits hereto, the
----------------
Memorandum, the other Implementing Agreements, and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement among
the parties with regard to the subjects hereof and no party shall be liable or
bound to any other party in any manner by any representations, warranties,
covenants or agreements except as specifically set forth herein or therein.
Nothing in this Agreement, express or implied, is intended to confer upon any
party, other than the parties hereto and their respective successors and
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided herein.
16.5 Separability. In case any provision of this Agreement shall
------------
be invalid, illegal or unenforceable, it shall, to the extent practicable, be
modified so as to make it valid, legal and enforceable and to retain as nearly
as practicable the intent of the parties, and the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
16.6 Amendment and Waiver. 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, either retroactively or prospectively,
and either for a specified period of time or indefinitely), with the written
consent of the Company and the Purchaser. Any amendment or waiver effected in
accordance with this Section 16.6 shall be binding upon each holder of any
securities purchased under this Agreement at the time outstanding (including
securities into which such securities have been converted), each future holder
of all such securities, and the Company. Upon the effectuation of each such
amendment or waiver, the Company shall promptly give written notice thereof to
the record holders of the Shares (including the Conversion Shares) who have not
previously consented thereto in writing.
16.7 Delays or Omissions. No delay or omission to exercise any
-------------------
right, power or remedy accruing to the Company or the Purchaser upon any breach,
default or noncompliance of the Purchaser or the Company under this Agreement
shall impair any such right, power or remedy, nor shall it be construed to be a
waiver of any such breach, default or noncompliance, or any acquiescence
therein, or of any similar breach, default or noncompliance thereafter
occurring. It is further agreed that any waiver, permit, consent or approval of
any kind or character on the Purchaser's part of any breach, default or
noncompliance under
28
<PAGE>
this Agreement, or any waiver on the Company's or the Purchaser's part of any
provisions or conditions of this Agreement must be in writing and shall be
effective only to the extent specifically set forth in such writing, and that
all remedies, either under this Agreement, the Series D Documents, by law, or
otherwise afforded to the Company and the Purchaser, shall be cumulative and not
alternative.
16.8 Notices. All notices and other communications required or
-------
permitted hereunder shall be in writing, shall specifically refer to this
Agreement, and shall be sent by (i) hand delivery, (ii) registered mail, return
receipt requested, (iii) overnight delivery services, or (iv) telefacsimile
transmission, and shall be sent or delivered to the respective addresses and
telefacsimile numbers set forth below, unless subsequently changed by written
notice to the other party:
If to the
Company, to: AASTROM Biosciences, Inc.
P.O. Box 376
Ann Arbor, MI 48106
Attention: President
Fax: (313) 930-5546
With a copy to: T. Knox Bell, Esq.
Gray Cary Ware & Freidenrich
401 B Street, Suite 1700
San Diego, CA 92101
Fax: (619) 236-1048
If to the
Purchaser, to: RPR GENCELL
Cell and Gene Therapy Division
Rhone-Poulenc Rorer Inc.
500 Arcola Road
P.O. Box 1200
Collegeville, PA 19426-0107
Attention: President and General Counsel
Fax: (610) 454-8984 and 454-3808
16.9 Finder's Fees.
-------------
(a) The Company (i) represents and warrants that it has retained no
finder or broker in connection with the transactions contemplated by this
Agreement, and (ii) hereby agrees to indemnify and to hold the Purchaser
harmless of and from any liability for any commission or compensation in the
nature of a finder's fee to any broker or other person or firm (and the costs
and expenses of defending against such liability or asserted liability) for
which the Company or any of its employees or representatives is responsible.
29
<PAGE>
(b) The Purchaser (i) represents and warrants that it has
retained no finder or broker in connection with the transactions contemplated by
this Agreement, and (ii) hereby agrees to indemnify and to hold the Company
harmless of and from any liability for any commission or compensation in the
nature of a finder's fee to any broker or other person or firm (and the costs
and expenses of defending against such liability or asserted liability) for
which the Purchaser or any of its employees or representatives are responsible.
16.10 Fees and Expenses. Each party shall bear all of its own
-----------------
fees, costs and expenses relating to the negotiation and preparation of this
Agreement and the consummation of the transactions contemplated hereby. If
legal action is brought by the Company or by the Purchaser to enforce or
interpret this Agreement, the prevailing party shall be entitled to recover its
attorneys' fees and legal costs in connection therewith.
16.11 Information Confidential. The Purchaser acknowledges and
------------------------
agrees that information received by it pursuant hereto and to be received by it
in connection with matters contemplated under the Implementing Agreements,
constitute confidential information to the extent identified as confidential by
the Company, which is and will be furnished by the Company to the Purchaser
solely for the Purchaser's use to evaluate Purchaser's investment in the Company
and as permitted by the Implementing Agreements, unless otherwise expressly
agreed to in writing by the Company. Provisions of the Research and Development
Collaboration Agreement and the License Agreement contain limitations on the use
and dissemination of any such confidential information, and the terms and
conditions of such provisions are hereby incorporated by reference, as though
expressly set forth herein. The Purchaser hereby agrees to refrain from using
or disseminating any such confidential information for any purpose other than as
may be permitted by the provisions of this Agreement and the other Implementing
Agreements. Notwithstanding the foregoing, information shall not be deemed
confidential if it (i) is or becomes generally available to the public, (ii) was
known to the Purchaser prior to when it was received from the Company, or (iii)
is subsequently disclosed to the Purchaser in good faith by a third party who
the Company believes has a right to make such disclosure.
16.12 Titles and Subtitles. The titles of the paragraphs and
--------------------
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
16.13 Counterparts. This Agreement may be executed in counterparts,
------------
including by facsimile, each of which shall be deemed an original, but all of
which together shall constitute one instrument.
16.14 Arbitration. Any controversy or claim arising out of or
-----------
relating to this Agreement, or the breach thereof, shall be settled by binding
arbitration in accordance with the Arbitration Agreement. If the parties cannot
30
<PAGE>
timely execute the Arbitration Agreement, the dcispute shall be resolved in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association ("AAA").
IN WITNESS WHEREOF, this Agreement is hereby executed as of the date set
forth on page 1 of this Agreement.
The Company: The Purchaser:
Aastrom BIOSCIENCES, INC. RHONE-POULENC RORER INC.
Domino's Farms, Lobby L 500 Arcola Road
24 Frank Lloyd Wright Drive Collegeville, PA 19426-0107
Ann Arbor, MI 48106
By: /s/ R. DOUGLAS ARMSTRONG By: /s/ THIERRY SOURSAC
------------------------------------ -------------------------------
Title: President and CEO Title: Senior Vice President
----------------------------
Print Name: R. Douglas Armstrong, Ph.D. Print Name: Theirry Soursac
31
<PAGE>
EXHIBIT A
SCHEDULE OF EXCEPTIONS
<PAGE>
EXHIBIT A
SCHEDULE OF EXCEPTIONS
Exceptions as of September 15, 1995
The following are exceptions to the representations and warranties of
the Company set forth in Section 9 of the Stock Purchase Agreement (the
"Agreement") dated as of September 15, 1995, with reference to the paragraph
designations of the Agreement. The reference to specific paragraphs should not
be construed as limiting the noted exceptions to that particular paragraph. Any
exception noted below is deemed disclosed for purposes of all relevant
paragraphs whether or not cross-referenced. Capitalized terms used herein shall
have the meanings ascribed to them in the Agreement and the Memorandum, unless
defined otherwise herein.
Section 9.2 Capitalization.
--------------
The Company's authorized and issued capital stock and stock
options are summarized on Schedule 9.2 attached hereto.
Section 9.7 Material Contracts.
------------------
The Company entered into an equipment lease financing
agreement with Key Corp. for up to $240,000.
Section 9.8 Outstanding Indebtedness.
------------------------
None, other than as noted in preceding paragraph.
Section 9.9 Officers, Directors and Shareholders.
------------------------------------
Effective as of September 15, 1995, the Company's V.P. of
Development Research, Bernard Palsson, is resigning, and Dr.
Palsson will continue as a part-time consultant with the
Company through December 1995. The Company is recruiting
for a replacement for Dr. Palsson.
1
<PAGE>
Section 9.10 Changes Since July 31, 1995.
---------------------------
None.
Section 9.14 Litigation.
----------
The Company has written letters to a former employee,
Richard M. Schwartz, Ph.D. and Dr. Schwartz's new employer,
SyStemix, (i) reminding them of Dr. Schwartz's duty to
maintain strict confidentiality as to the Company's trade
secrets; and (ii) asking if there has been any breach of
this confidentiality obligation; and (iii) commenting that a
new invention by Systemix's appears to be derived from the
Company's trade secrets. Systemix and Dr. Schwartz have
denied any use of the Company's trade secrets. The Company
has reserved its rights in this matter, but does not
presently contemplate pursuing this potential claim in the
near future.
2
<PAGE>
SCHEDULE 9.2
Capitalization
====================================================================
Security Authorized Liq. Pref. Issued
--------------------------------------------------------------------
Preferred Stock
--------------------------------------------------------------------
Series A 2,500,000 1.00 2,500,000
--------------------------------------------------------------------
Series B 3,030,000 2.00 3,030,000
-------------------------------------------------------------------
Series C * 10,000 1,000.00 10,000
-------------------------------------------------------------------
Series D 3,000,000 4.00 2,576,001
-------------------------------------------------------------------
Common Stock 17,000,000 0.00 2,609,861
--------------------------------------------------------------------
Options for Common Stock 0.00 539,500
====================================================================
* Series C shares are convertible into 2,500,000 common shares
Outstanding Preferred Share (common stock equivalents : 10,530,001
Outstanding Common Shares: 2,609,861
Outstanding Options: 539,500
----------
Fully Diluted Common Stock Equivalents: 13,679,362
<PAGE>
EXHIBIT B
FORM OF OPINION OF COUNSEL
ACTIVATION CLOSING
<PAGE>
FORM OF OPINION TO BE DELIVERED
BY COUNSEL TO AASTROM BIOSCIENCES, INC.
1. The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Michigan and has all necessary
corporate power to own, operate or lease the properties and assets now owned,
operated or leased by it, and to carry on the business of the Company as it has
been and as it is currently conducted. The Company is not qualified to do
business as a foreign corporation in any jurisdiction, and the Company has
represented to us that it has no assets or employees in any state other than
Michigan.
2. The Company has all requisite corporate power to sell the Shares,
and to carry out and perform its other obligations under the terms of the
Agreement and the other Implementing Agreements. The Agreement and the other
Implementing Agreements have been duly authorized, executed and delivered, and
each is a valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms.
3. The authorized capital stock of the Company consists of _________
shares of common stock and ____________ shares of preferred stock (of which
_______ shares have been designated as Series A Preferred Stock, ________ shares
have been designated as Series B Preferred Stock, ________ shares have been
designated as Series C Preferred Stock, ________ shares have been designated as
Series D Preferred Stock and ________ shares have been designated as Series E
Preferred Stock. The Company (i) has issued the shares of Common Stock and
shares of its preferred stock, and (ii) has granted the stock options and
warrants and (iii) has reserved for issuance the Common Stock and shares of its
preferred stock, all as represented by the Company in the Schedule attached
hereto. All previously issued and outstanding shares have been duly authorized
and validly issued, and are fully paid and nonassessable. To the best of our
knowledge, there are no outstanding rights, options, warrants, conversion rights
or agreements for the purchase or acquisition from the Company of any shares of
its capital stock, other than as referenced above.
4. The Shares, when issued, sold and delivered in compliance with the
provisions of the Agreement, will be duly authorized, validly issued, fully
paid, and nonassessable, and will be free of any liens or encumbrances, except
that the Shares are subject to restrictions on transfer under state and/or
federal securities laws. The issuance of the Shares is not subject to any
preemptive rights or, to the best of our knowledge, rights of first refusal
which have not been waived. The shares of Common Stock issuable upon conversion
of the Preferred Shares (i) have been duly and validly reserved, (ii) are not
subject to any preemptive rights or, to the best of our knowledge, rights of
first refusal, and (iii) upon conversion of the Preferred Shares in accordance
with the Articles and cancellation of the Preferred Shares, will be duly
authorized, validly issued, fully paid, and nonassessable.
1
<PAGE>
5. Neither the performance of the Company's obligations under the
Agreement or the other Implementing Agreements, nor the issuance of the
Preferred Shares, nor the issuance of the Common Stock issuable upon conversion
of the Preferred Shares, will violate any term of the Articles or Bylaws; and
such transactions will not, in any material respect, violate or conflict with or
constitute a default under the provisions of any Material Contract.
6. Except as disclosed in the Memorandum or the Schedule of
Exceptions, to the best of our knowledge, no action, suit, proceeding or
investigation is pending or threatened against the Company or its properties or
that questions the validity of the Agreement or any action to be taken in
connection therewith.
7. All consents, approvals and authorizations of and filings with any
federal or state governmental authority required on the part of the Company, if
any, in connection with the consummation of the transactions contemplated by the
Agreement have been obtained or made, except for the filings which the Company
is making after the [Termination] [Activation] Closing as specified under the
Securities Act of 1933, as amended (the "Securities Act") and any state
securities laws.
8. Subject to the accuracy of the Purchaser's representations and
warranties set forth in Section 10 of the Agreement, the offer and sale of the
Shares in conformity with the terms of the Agreement are exempt from the
registration requirements of Section 5 of the Securities Act, as amended and in
compliance with applicable state securities laws.
[The forgoing opinion may be delivered at the Termination Closing and/or
Activation Closing by one or more law firms on behalf of AASTROM Biosciences,
Inc.]
2
<PAGE>
EXHIBIT C
FORM OF OPINION OF COUNSEL
TERMINATION CLOSING
<PAGE>
FORM OF OPINION TO BE DELIVERED
BY COUNSEL TO AASTROM BIOSCIENCES, INC.
1. The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Michigan and has all necessary
corporate power to own, operate or lease the properties and assets now owned,
operated or leased by it, and to carry on the business of the Company as it has
been and as it is currently conducted. The Company is not qualified to do
business as a foreign corporation in any jurisdiction, and the Company has
represented to us that it has no assets or employees in any state other than
Michigan.
2. The Company has all requisite corporate power to sell the Shares,
and to carry out and perform its other obligations under the terms of the
Agreement and the other Implementing Agreements. The Agreement and the other
Implementing Agreements have been duly authorized, executed and delivered, and
each is a valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms.
3. The authorized capital stock of the Company consists of _________
shares of common stock and ____________ shares of preferred stock (of which
_______ shares have been designated as Series A Preferred Stock, ________ shares
have been designated as Series B Preferred Stock, ________ shares have been
designated as Series C Preferred Stock, ________ shares have been designated as
Series D Preferred Stock and ________ shares have been designated as Series E
Preferred Stock. The Company (i) has issued the shares of Common Stock and
shares of its preferred stock, and (ii) has granted the stock options and
warrants and (iii) has reserved for issuance the Common Stock and shares of its
preferred stock, all as represented by the Company in the Schedule attached
hereto. All previously issued and outstanding shares have been duly authorized
and validly issued, and are fully paid and nonassessable. To the best of our
knowledge, there are no outstanding rights, options, warrants, conversion rights
or agreements for the purchase or acquisition from the Company of any shares of
its capital stock, other than as referenced above.
4. The Shares, when issued, sold and delivered in compliance with the
provisions of the Agreement, will be duly authorized, validly issued, fully
paid, and nonassessable, and will be free of any liens or encumbrances, except
that the Shares are subject to restrictions on transfer under state and/or
federal securities laws. The issuance of the Shares is not subject to any
preemptive rights or, to the best of our knowledge, rights of first refusal
which have not been waived. The shares of Common Stock issuable upon conversion
of the Preferred Shares (i) have been duly and validly reserved, (ii) are not
subject to any preemptive rights or, to the best of our knowledge, rights of
first refusal, and (iii) upon conversion of the Preferred Shares in accordance
with the Articles and cancellation of the Preferred Shares, will be duly
authorized, validly issued, fully paid, and nonassessable.
1
<PAGE>
5. Neither the performance of the Company's obligations under the
Agreement or the other Implementing Agreements, nor the issuance of the
Preferred Shares, nor the issuance of the Common Stock issuable upon conversion
of the Preferred Shares, will violate any term of the Articles or Bylaws; and
such transactions will not, in any material respect, violate or conflict with or
constitute a default under the provisions of any Material Contract.
6. Except as disclosed in the Memorandum or the Schedule of
Exceptions, to the best of our knowledge, no action, suit, proceeding or
investigation is pending or threatened against the Company or its properties or
that questions the validity of the Agreement or any action to be taken in
connection therewith.
7. All consents, approvals and authorizations of and filings with any
federal or state governmental authority required on the part of the Company, if
any, in connection with the consummation of the transactions contemplated by the
Agreement have been obtained or made, except for the filings which the Company
is making after the [Termination] [Activation] Closing as specified under the
Securities Act of 1933, as amended (the "Securities Act") and any state
securities laws.
8. Subject to the accuracy of the Purchaser's representations and
warranties set forth in Section 10 of the Agreement, the offer and sale of the
Shares in conformity with the terms of the Agreement are exempt from the
registration requirements of Section 5 of the Securities Act, as amended and in
compliance with applicable state securities laws.
[The forgoing opinion may be delivered at the Termination Closing and/or
Activation Closing by one or more law firms on behalf of AASTROM Biosciences,
Inc.]
2
<PAGE>
EXHIBIT D
SUMMARY OF SERIES E PREFERRED STOCK
<PAGE>
SUMMARY OF
SERIES E PREFERRED STOCK OF
AASTROM BIOSCIENCES, INC.
I. TERMS OF PREFERRED STOCK
------------------------
The terms of the Series E Preferred Stock will be substantially the same as
the terms of the Series D Preferred, except as noted herein. The Series A, B,
C, D Preferred Stock together with the Series E Preferred Stock, when treated
jointly are referred to herein as the "Preferred." The following are the
principal terms of the Series E Preferred Stock:
A. Rights, Preferences, 1. Dividend Provisions. A holder of
Privileges and -------------------
Restrictions of Series Series E Preferred Stock will be entitled to
E Preferred Stock: receive, pari passu, with holders of Series B, C
and D Preferred Stock dividends at the rate of 8%
per annum on the liquidation preference when and
as declared by the Board, if funds are legally
available. The Series E Preferred Stock, together
with the Series B, C and D Preferred Stock, will
be entitled to receive dividends in preference to
any dividend on Series A Preferred Stock. If
dividends are declared on the Common Stock, the
holders of Preferred shall be entitled to receive
concurrently a dividend of an equal amount per
share. Dividends on the Series E Preferred Stock
will be noncumulative. No dividends have been
paid on the Preferred, and no dividends are likely
to be paid in the next few years.
2. Liquidation Preference. In the event
----------------------
of any liquidation, dissolution or winding up of the
Company, a holder of Series E Preferred Stock
will be entitled to receive, on a parity with holders
of the Series B, C and D Preferred Stock and in
preference to the holders of shares of Series A
Preferred Stock and Common Stock, an amount
equal to the respective original purchase prices,
plus any declared but unpaid dividends on the
Series E Preferred Stock.
1
<PAGE>
3. Voluntary Conversion. A holder of
--------------------
Series E Preferred Stock will have the right
to convert the Series E Preferred Stock, at
the option of the holder, at any time, into
shares of Common Stock. The total number of
shares of Common Stock into which Series E
Preferred Stock may be converted will be
determined by dividing the original purchase
price by the conversion price. The initial
conversion price will be the original
purchase price, resulting in a one-for-one
conversion, unless and until there is a
change in the conversion price .
4. Automatic Conversion. Series E
--------------------
Preferred Stock will be converted
automatically into Common Stock, at the then
applicable conversion price, immediately upon
the closing of a firm commitment underwritten
public offering of shares of the Common Stock
of the Company at a public offering price per
share (prior to underwritings, commissions
and offering expenses) equal to or exceeding
$6.00 per share in an offering resulting in
gross proceeds to the Company which exceed
$10,000,000.
5. Voting Rights. A holder of Series E
-------------
Preferred Stock will have the right to that
number of votes equal to the number of shares
of Common Stock issuable upon conversion of
its Series E Preferred Stock at the then
applicable conversion price. Until the number
of shares of Common Stock issuable upon
conversion of the Series E Preferred Stock
has been definitively established pursuant to
Section 5 of the Stock Purchase Agreement,
each share of Series E Preferred Stock shall
be deemed to have the number of votes equal
to 1.5 shares of Common Stock. The Preferred
shall vote with the Common Stock on all
matters except as specifically provided
herein or as otherwise required by law.
2
<PAGE>
6. Protective Provisions. Changes to
---------------------
the rights, preferences or privileges of a
series of Preferred Stock must be approved by
the holders of at least 66-2/3% of the
affected series of Preferred. Consent of the
holders of at least 66-2/3% of each series of
Preferred Stock is required to approve any
amendment to the Company's articles of
incorporation.
B. Registration Rights: 1. Demand Right. Beginning one year
------------
after the Company's initial public offering,
holders of at least 50% of the Preferred (or
Common Stock issued upon conversion of the
Preferred or a combination of such Common and
Preferred) may request registration by the
Company of Common Stock covering at least 20%
of their registrable securities, or a lesser
percentage if the aggregate offering price
would exceed $2,000,000. Prior to the
Company's initial public offering, such
holders may request such registration if the
aggregate offering price would exceed
$5,000,000. The Company shall not be
obligated to effect registration under this
demand right provision more than once.
2. Piggy-Back Registration. At any time
-----------------------
after the Company's initial public offering,
holders of Preferred shall be entitled to
"piggy-back" registration rights at the time
that the Company has a further registration;
subject to the rights, however, of the
Company and its underwriters to reduce the
number of shares proposed to be registered in
view of market conditions.
3. S-3 Rights. Holders of Preferred
----------
shall be entitled to an unlimited number of
demand registrations on Form S-3 (if
available to the Company) so long as each of
such registered offerings is in excess of
$500,000; provided, however, that the Company
shall only be required to file one Form S-3
Registration Statement on demand every twelve
(12) months.
3
<PAGE>
4. Expenses. The Company shall bear
--------
all registration expenses (including the fees
of one counsel for the selling shareholders,
but excluding underwriting discounts and
commissions) of one demand registration and
two piggy-back registrations.
5. Assignability of Rights. The
-----------------------
registration rights may be assigned to an
assignee who agrees in writing to be bound by
the terms and conditions of the Amended and
Restated Investors' Rights Agreement and who
(a) after such transfer owns at least 100,000
shares of Preferred or Common Stock issued
upon conversion thereof, (b) is an option
holder, (c) is a holder of registrable
securities of the Company or a family member
of the transferor, or (d) is a trust for the
benefit of an option holder or a family
member, in a private transaction in which
such transferee will own not less than 20,000
shares of Preferred or Common Stock issued
upon conversion thereof.
6. Termination of Registration Rights.
----------------------------------
Registration rights shall terminate as to any
particular shares of Preferred Stock when
such shares may be lawfully sold by the
holder pursuant to Rule 144 under the
Securities Act of 1933.
7. Other Provisions. The registration
----------------
rights provisions of the Amended and Restated
Investors' Rights Agreement contains other
customary provisions with respect to
registration rights, including cross-
indemnification, the Company's ability to
delay the filing of demand registrations for
a period of at least 150 days, the period of
time in which the Registration Statement
shall be kept effective, underwriting
arrangements and the like.
II. ADDITIONAL INFORMATION
-----------------------
A. Right of First Refusal: None.
B. Redemption Rights: None.
4