<PAGE>
As filed with the Securities and Exchange Commission on February 7, 2000
Registration Statement No. 333-93881
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
to
FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
-------------------
ORAPHARMA, INC.
(Exact name of Registrant as specified in its charter)
Delaware 2834 22-3473777
(State or other (Primary Standard Industrial (IRS Employer
jurisdiction of Classification Code No.) Identification Number)
incorporation or
organization)
732 Louis Drive
Warminster, PA 18974
215/956-2200
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
-------------------
MICHAEL D. KISHBAUCH
President and Chief Executive Officer
OraPharma, Inc.
732 Louis Drive
Warminster, PA 18974
215/956-2200
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
-------------------
Copies to:
David R. King, Esq. Luci Staller Altman, Esq.
Morgan, Lewis & Bockius LLP Matthew F. Herman, Esq.
1701 Market Street Rishi A. Varma, Esq.
Philadelphia, PA 19103 Brobeck, Phleger & Harrison LLP
215/963-5000 1633 Broadway, 47th Floor
New York, NY 10019
212/581-1600
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
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<CAPTION>
Proposed
Title of each Class of Maximum Aggregate Amount of the
Securities to be Registered Offering Price(1) Registration Fee
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<S> <C> <C>
Common Stock, $0.001 par share.............. $78,200,000 $20,645(2)
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</TABLE>
(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act of 1933, as amended.
(2) $14,877 was previously paid.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, as amended or until this
Registration Statement shall become effective on such date as the Commission,
acting pursuant to such Section 8(a), may determine.
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<PAGE>
EXPLANATORY NOTE
This registration statement contains two forms of prospectus front cover pages
and two underwriting sections: (a) one to be used in connection with an offering
in the United states and Canada and (b) one to be used in connection with a
concurrent offering outside of the United States and Canada. The U.S. prospectus
and the international prospectus are otherwise identical in all respects. The
international versions of the front cover page and the underwriting section are
included immediately before Part II of this registration statement.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The Information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell securities, and we are not soliciting offers to buy these +
+securities, in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED FEBRUARY 7, 2000
[LOGO OF ORAPHARMA, INC.]
4,000,000 Shares
Common Stock
OraPharma is offering 4,000,000 shares of its common stock. This is our
initial public offering. We have applied to have our common stock approved for
quotation on the Nasdaq National Market under the symbol "OPHM." We anticipate
that the initial public offering price will be between $15.00 and $17.00 per
share.
--------------
Investing in our common stock involves a high degree of risk.
See "Risk Factors" beginning on page 5.
--------------
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Public Offering Price.......................................... $ $
Underwriting Discounts and Commissions......................... $ $
Proceeds to OraPharma.......................................... $ $
</TABLE>
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
OraPharma has granted the underwriters a 30-day option to purchase up to an
additional 600,000 shares of common stock to cover over-allotments. FleetBoston
Robertson Stephens Inc. expects to deliver the shares to purchasers on ,
2000.
--------------
Robertson Stephens
U.S. Bancorp Piper Jaffray
Gerard Klauer Mattison & Co., Inc.
The date of this Prospectus is , 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY................................................................... 1
RISK FACTORS.............................................................. 5
FORWARD-LOOKING STATEMENTS................................................ 13
USE OF PROCEEDS........................................................... 14
DIVIDEND POLICY........................................................... 14
CAPITALIZATION............................................................ 15
DILUTION.................................................................. 16
SELECTED FINANCIAL DATA................................................... 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.............................................................. 18
BUSINESS.................................................................. 23
MANAGEMENT................................................................ 38
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................ 49
PRINCIPAL STOCKHOLDERS.................................................... 52
DESCRIPTION OF CAPITAL STOCK.............................................. 55
SHARES ELIGIBLE FOR FUTURE SALE........................................... 59
UNDERWRITING.............................................................. 60
LEGAL MATTERS............................................................. 62
EXPERTS................................................................... 62
ADDITIONAL ORAPHARMA INFORMATION.......................................... 62
INDEX TO FINANCIAL STATEMENTS............................................. F-1
</TABLE>
i
<PAGE>
SUMMARY
This summary highlights information contained elsewhere in this
prospectus. We have included this information in the summary because we believe
this information is highly important in making a decision to invest in our
common stock. You should read this summary together with the more detailed
information regarding our company and the common stock being sold in this
offering appearing elsewhere in this prospectus, including our financial
statements and related notes, for a more complete understanding of our business
and the offering.
OraPharma
Introduction
OraPharma is developing pharmaceutical products for the treatment of oral
diseases and disorders. We completed two Phase 3 clinical trials in October
1999, involving a total of 747 patients, for our first product candidate,
Minocycline Periodontal Therapeutic System. MPTS is designed to treat adult
periodontitis, a chronic infection caused by plaque buildup on teeth and the
leading cause of adult tooth loss. Based on our clinical trial results, we
expect to file a New Drug Application, or NDA, with the Food and Drug
Administration, or FDA, in the first half of 2000. MPTS is intended to be used
together with the current standard of care, scaling and root planing, which is
a mechanical procedure involving the removal of bacteria-containing plaque. Our
other research and development programs are directed at further establishing a
presence in oral care pharmaceuticals and expanding the use of our drug
formulation technology, which we refer to as our core technology.
Periodontitis has no known cure and is thought to be linked to other
serious systemic health problems such as cardiovascular disease, diabetes and
low infant birth weight. According to published reports citing the American
Dental Association, approximately 50 million Americans have periodontal disease
and only 7.5 million Americans are currently receiving treatment. According to
industry sources, more than $6.0 billion is spent annually on products and
services to treat this condition. Pharmaceuticals for the treatment of
periodontitis comprise a rapidly emerging segment of the overall oral health
care market. In addition, we believe a broader market opportunity exists for
the treatment of other oral health care diseases and disorders with large,
unmet medical needs. Examples include oral mucositis, a condition that is a
consequence of cancer therapy and involves the formation of painful ulcers in
the mouth and esophagus, and various oral conditions requiring regeneration of
bone and tissue.
Our first product candidate, MPTS, uses our core technology--a patented
system developed to both allow precise drug placement at the desired site and
enable drug-release over several days or weeks--and a specially designed
dispenser to place the antibiotic minocycline at the site of periodontal
infection. We licensed MPTS and our core technology from American Cyanamid,
which is now a part of American Home Products, or AHP. We have developed MPTS
to enhance the effect of the standard treatment for periodontitis, scaling and
root planing. We believe MPTS offers significant advantages over existing
pharmaceutical treatments, particularly speed and convenience of
administration. In addition, our approach to deliver the drug precisely at the
infection site results in high drug concentration for an extended time period,
with, we believe, reduced risk of drug resistance. Finally, because MPTS is
administered chair-side by oral care professionals, patient compliance is
ensured.
In the U.S., we intend to create a sales and marketing force of 50 to 75
persons and to begin hiring and training activities in late 2000. Assuming we
obtain FDA approval, we will target approximately 3,700 periodontists, and
approximately 25,000 general dentists whom we believe frequently perform
scaling and root planing procedures. In international markets, we intend to
enter into strategic relationships to market and sell MPTS rather than
establish our own sales force.
1
<PAGE>
We licensed patents and related methods in December 1998 for two
additional product programs that are currently in preclinical studies.
Preclinical studies are safety investigations that are conducted prior to drug
testing in humans. The first, initially developed at Brigham and Women's
Hospital, is for the treatment of oral mucositis. This is a condition that
occurs in more than 40% of patients receiving standard chemotherapy and
virtually all patients who receive head and neck radiation therapy, according
to an article published in January 1995, Principles and Practice of Oncology.
The second, initially developed at Children's Hospital of Boston, is for the
regeneration of bone and soft-tissue to aid in the support of dental implants
and dentures. We also formed collaborations with both organizations to support
ongoing development of these technologies. In addition, we have begun two
research programs with the University of North Carolina--Chapel Hill, that are
directed at treating traumatic tooth injury and developing a treatment approach
for periodontitis. Both programs are at an early development stage where we are
screening possible compounds for potential use as a drug therapy.
We aim to become a leader in oral care pharmaceuticals, including agents
that target both dental and non-dental pathologies of the oral cavity. Our
business strategy is based on leveraging our scientific and medical staff's
expertise in drug development, drug delivery and management of clinical trials;
building our own sales and marketing team for the commercialization of MPTS and
other oral healthcare product candidates in the U.S.; and forming strategic
relationships to complete early stages of research and conduct manufacturing
and distribution activities.
Additional Information
We were formed in August 1996. Our principal executive offices are
located at 732 Louis Drive, Warminster, Pennsylvania 18974, and our telephone
number is 215-956-2200.
We have applied for a federally registered trademark for "OraPharma."
This prospectus also includes trademarks and tradenames of other parties.
2
<PAGE>
The Offering
<TABLE>
<S> <C>
Common stock offered by OraPharma....... 4,000,000 shares
Common stock to be outstanding after
this offering......................... 12,596,735 shares
Use of proceeds......................... For further development of, filing of
an NDA for, and commercialization of
MPTS; payments under licensing,
sponsored research and consulting
agreements; general corporate and
working capital purposes; ongoing
research and development; and
obtaining new product candidates or
technology.
Proposed Nasdaq National Market symbol.. OPHM
</TABLE>
The number of shares outstanding after this offering excludes, as of
December 31, 1999:
. 1,250,000 shares of common stock available for issuance under our 1999
Equity Compensation Plan;
. 586,472 shares of common stock issuable upon exercise of outstanding
stock options under our 1996 Stock Option Plan at a weighted average
exercise price of $0.35 per share;
. warrants to purchase 31,249 shares of series A preferred stock, which
will either be exercised prior to the completion of this offering or
become exercisable for 31,249 shares of common stock upon the
completion of this offering at an exercise price of $2.00 per share;
. warrants to purchase 27,500 shares of common stock at an exercise price
of $3.64 per share;
. warrants to purchase 110,617 shares of common stock at an exercise
price of $12.92 per share issued in connection with the sale of series
D preferred stock; and
. warrants to purchase 41,152 shares of common stock at an exercise price
of $4.86 per share.
--------------------
Generally, the information in this prospectus, unless otherwise noted:
. assumes that the over-allotment option is not exercised;
. reflects the automatic conversion, on a one-for-one basis, of all
outstanding shares of series A, B, C and D preferred stock into an
aggregate of 7,557,100 shares of common stock at the closing of this
offering; and
. reflects a one-for-two reverse stock split that was completed on
February 3, 2000.
3
<PAGE>
Summary Financial Data
The following table presents summary financial information for OraPharma.
The pro forma balance sheet data gives effect to the conversion of all of our
outstanding shares of preferred stock. The pro forma as adjusted balance sheet
data reflects the sale by OraPharma of 4,000,000 shares of common stock in the
offering at an assumed offering price of $16.00 per share. The summary
financial data for the period from inception (August 1, 1996) through December
31, 1996, the years ended December 31, 1997, 1998 and 1999, and the period from
inception through December 31, 1999 are derived from the audited financial
statements. You should read this data together with the financial statements
and related notes included in this prospectus.
<TABLE>
<CAPTION>
Period from Period from
Inception Inception
(August 1, (August 1,
1996) Year Ended 1996)
Through December 31, Through
December 31, -------------------------------------- December 31,
1996 1997 1998 1999 1999
------------ ----------- ----------- ------------ ------------ ---
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Operating expenses:
Research and
development.......... $ 26,294 $ 1,706,393 $ 7,324,975 $ 9,664,841 $ 18,722,503
General and
administrative....... 408,295 939,469 1,590,375 2,119,264 5,057,403
--------- ----------- ----------- ------------ ------------
Operating loss........ (434,589) (2,645,862) (8,915,350) (11,784,105) (23,779,906)
Net interest income
(expense)............. (641) 504,123 424,488 636,957 1,564,927
--------- ----------- ----------- ------------ ------------
Net loss................ (435,230) (2,141,739) (8,490,862) (11,147,148) (22,214,979)
Non-cash preferred stock
charge................ -- -- -- 1,729,651 1,729,651
--------- ----------- ----------- ------------ ------------
Net loss to common
stockholders.......... $(435,230) $(2,141,739) $(8,490,862) $(12,876,799) $(23,944,630)
========= =========== =========== ============ ============
Basic and diluted net
loss per share........ $ (5.05) $ (13.28) $ (16.61)
=========== =========== ============
Shares used in computing
net loss per share.... 424,054 639,339 775,116
=========== =========== ============
Pro forma basic and
diluted net loss per
share................. $ (1.65)
============
Shares used in computing
pro forma basic and
diluted net loss per
share................. 7,792,759
============
</TABLE>
<TABLE>
<CAPTION>
December 31, 1999
----------------------------------------
Pro Forma
Actual Pro Forma As Adjusted
------------ ------------ ------------
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents........... $ 13,073,803 $ 13,073,803 $ 71,893,803
Total assets........................ 14,711,739 14,711,739 73,531,739
Long-term debt...................... 288,043 288,043 288,043
Redeemable convertible preferred
stock............................. 33,730,563 -- --
Deficit accumulated during the
development stage................. (22,214,979) (22,214,979) (22,214,979)
Total stockholders' equity
(deficit)......................... (21,373,033) 12,357,530 71,177,530
</TABLE>
4
<PAGE>
RISK FACTORS
You should carefully consider the following risk factors, together with
all of the other information contained in this prospectus before purchasing our
common stock. If any of the following risks actually occur, our business,
financial condition and operating results could be seriously harmed, the
trading price of our common stock could decline and you may lose all or part of
your investment.
Risks Related to Our Business
If the clinical trials of our product candidates fail, we will not be able to
market our product candidates.
To receive the regulatory approvals necessary for the sale of our product
candidates, we must demonstrate through human clinical trials that each product
candidate is safe and effective. The clinical trial process is complex,
uncertain and expensive. We incur substantial expense for, and devote
significant time to, clinical trials, yet we cannot be certain that the trials
will ever result in the commercial sale of a product candidate. Positive
results from preclinical studies and early clinical trials do not ensure
positive results in clinical trials designed to permit application for
regulatory approval. We may suffer significant setbacks in clinical trials,
even after earlier clinical trials show promising results. Any of our product
candidates may produce undesirable side effects in humans that could cause us
or regulatory authorities to interrupt, delay or halt clinical trials of a
product candidate. We, the FDA or foreign regulatory authorities may suspend or
terminate clinical trials at any time if we or they believe the trial
participants face unacceptable health risks. Clinical trials may fail to
demonstrate that our product candidates are safe or effective.
If we obtain FDA approval for MPTS, we anticipate that our revenue and
operating results for the forseeable future will be dependent on our ability to
market this product candidate.
We completed Phase 3 clinical trials for MPTS in October 1999 and expect
to file an NDA with the FDA in the first half of 2000. Other than MPTS, all of
our product candidates are at an early stage of product development. The
successful commercialization of our other product candidates will require
significant further research, development, testing, regulatory approvals and
investment. We may never successfully commercialize any of our product
candidates.
If we are unable to achieve product development milestones under our license
agreement with American Home Products, or if that agreement terminates, our
rights to commercialize MPTS and our core technology will be impaired.
We license MPTS and our core technology on an exclusive basis for
applications in the oral cavity from AHP. AHP has the right to convert our
exclusive license to commercialize MPTS to a non-exclusive license if we fail
to file an NDA for MPTS by August 2001, or if we fail to commercialize MPTS by
August 2003. AHP also has the right to convert our exclusive license to other
oral products to a non-exclusive license if we fail to commercialize at least
one other oral cavity or non-oral cavity product by August 2007. In addition,
AHP has the right to terminate the license agreement for other reasons,
including if we materially breach our payment or other obligations under our
license agreement. If AHP converts our license to a non-exclusive license, AHP
would be free to license MPTS and the core technology to any third parties,
including our competitors. If our license agreement with AHP terminates, we
would be forced to cease our efforts to commercialize MPTS and other oral
cavity products utilizing our core technology.
We have incurred substantial losses since we were formed, and we expect to
continue to incur such losses for the foreseeable future. These losses could
increase significantly as we continue our product development efforts.
We have incurred substantial losses since our inception and we may never
be profitable. As of December 31, 1999, we had a cumulative net loss of
approximately $22.2 million. These losses have resulted principally from costs
incurred in our research and development programs, including clinical trials,
and from our general and administrative costs. We have not derived revenues
from product sales or royalty revenue, and we do not expect to achieve revenue
from product sales or royalties until we receive regulatory approval and
5
<PAGE>
begin commercialization of our product candidates. We expect to incur
additional operating losses in the future and these losses could increase
significantly as we expand our development and clinical trial efforts. Our
operations may never be profitable even if any of our product candidates are
approved and commercialized.
We depend on sole-source suppliers for raw materials and components for MPTS
and may not be able to obtain an alternate supply on a timely or acceptable
basis.
We currently rely on sole-source suppliers to provide each of the four
separate raw materials and components for MPTS:
. the polymer component, which is an inactive ingredient used in the
drug formulation;
. minocycline, the active drug ingredient;
. the plastic dispenser; and
. the stainless steel dispenser handle.
We have not entered into any agreements that provide us assurance of
continued supply of these components. Because we have not yet commercialized
any products, we have obtained only the limited supply of these materials and
components necessary to conduct clinical trials. We may not be able to obtain a
sufficient supply of these raw materials and components from each supplier at
competitive prices, if at all, necessary for the commercialization of MPTS. We
may not be able to find alternative suppliers in a timely manner that would
provide these materials and components at acceptable prices or in adequate
quantities. Any delay or disruption in the supply of these materials, including
those resulting from natural disasters, could slow or stop commercialization of
MPTS. Before replacing any of these suppliers or engaging second-source
suppliers, we would need to satisfy various regulatory requirements.
We depend on two sole-source contract manufacturers for the production and
packaging of MPTS, and have not entered into long-term agreements with either
manufacturer.
We have no experience in manufacturing and we currently lack the
resources or capability to manufacture any of our product candidates on a
clinical or commercial scale. As a result, we are dependent on third parties
for the manufacture, testing, filling and packaging of our product candidates.
In the case of MPTS, we are solely dependent on one company for the manufacture
and testing of MPTS. Additionally, we are solely dependent on another company
for filling and packaging the dispensers. We may not be able to enter into
agreements on acceptable terms for the commercial-scale manufacturing or
filling and packaging of MPTS. If we are unable to do so, our commercialization
of MPTS will be delayed or halted, as we would be required to satisfy various
regulatory requirements before engaging either a substitute or a second-source
manufacturer or packager. In addition, each manufacturer and manufacturing
facility of any component or aspect of MPTS must be inspected and meet
extensive FDA regulatory requirements, and these manufacturers may not meet
these requirements.
We have no sales or marketing experience, and if we are unable to effectively
develop adequate sales and marketing capabilities, we may be unsuccessful in
commercializing our product candidates.
We intend to market and sell our product candidates in the U.S. through a
direct sales and marketing force. In order to do this, we will have to develop
a sales and marketing force with technical expertise and establish a supporting
distribution capability. Developing a sales and marketing force is expensive
and time-consuming and could delay any product launch. Furthermore, while we
currently expect to create a direct sales and marketing force of 50 to 75
people, the actual number of representatives needed by us to reach our target
market may be significantly more or less than our current expectations.
If we are unable to establish our sales and marketing capability, we will
need to enter into sales and marketing agreements with third parties to market
MPTS in the U.S. We plan to enter into these types of arrangements for sales
outside the U.S. If we are unable to establish successful sales and marketing
relationships, we may fail to realize our full sales potential.
6
<PAGE>
In addition, because we intend to hire and train our sales and marketing
force before we have received FDA approval of our NDA for MPTS, if we fail to
obtain FDA approval on a timely basis, our financial condition will be harmed.
Even if we obtain FDA approval of our product candidates, they might not be
accepted by oral health care providers or patients.
The commercial success of our product candidates will depend upon their
acceptance by oral health care providers and patients as clinically useful,
cost-effective and safe products. Even if our product candidates obtain
regulatory approval, they may not achieve market acceptance of any
significance.
Marketplace acceptance of any of our product candidates that are approved by
the FDA will depend on competition in the pharmaceutical industry, which is
intense.
The extent to which any of our product candidates achieve market
acceptance will depend on competitive factors, many of which are beyond our
control. Competition in the pharmaceutical industries, and the market for oral
care pharmaceuticals in particular, is intense. Competition has been
accentuated by the rapid pace of technology development. FDA-approved products
currently exist that will compete with most of the product candidates we are
developing. We are also aware of companies that are developing products that
may compete in the same markets as our product candidates. Many of these
current and potential competitors have substantially greater research and
development capabilities and financial, scientific, manufacturing, marketing
and sales resources than we possess. These competitors may succeed in
developing products earlier and obtaining regulatory approvals from the FDA
more rapidly than us. These competitors may also develop products that are
superior to those we are developing and render our product candidates or
technologies obsolete or non-competitive.
Adequate reimbursement from government health administration authorities,
private health insurers and other organizations are necessary for us to market
and sell our product candidates that are approved by the FDA.
Reimbursement for oral care by third-party payors is traditionally
significantly more limited than reimbursement for other fields of medical care.
This is particularly an issue for products administered by oral care
professionals. We believe that approximately one-half of all dental services
are currently paid for directly by patients and not by third-party payors.
Reimbursement for oral care may never reach levels equivalent to reimbursement
for other fields of medical care. Furthermore, third-party payors are
increasingly challenging the price of health-care products and services and
have been slow to offer reimbursement for newly approved health care products.
Our products candidates, if commercialized, may not be considered cost-
effective or be covered by adequate reimbursement.
If we or the parties from which we license our technology fail to secure or
enforce the patents and other intellectual property rights underlying MPTS, our
core technology or our other product candidates, we may be unable to compete
effectively.
The pharmaceutical industry places considerable importance on obtaining
patent and trade secret protection for new technologies, products and
processes. Our success depends on our ability and the ability of our third-
party licensors to:
. obtain and maintain patent protection for MPTS, our other product
candidates, and our core technology;
. preserve our trade secrets; and
. operate without infringing on the intellectual property rights of
third parties.
Patents may not ultimately be issued from any pending or future patent
applications. In addition, any issued patents may not be sufficient to protect
our product candidates or technologies. Our issued patents may be held to be
invalid if challenged. Third parties may also develop similar technology which
circumvents our or our licensors' patents. If we or our third-party licensors
do not obtain and maintain appropriate patent protection, we may face increased
competition in the United States and in foreign countries.
7
<PAGE>
Our third-party licensors are primarily responsible for prosecuting and
maintaining all patents and patent applications covering MPTS, our core
technology, and our other product candidates. If these third parties do not
diligently prosecute and maintain the patents and patent applications upon
which we rely, our ability to exclude others from competing with us may suffer.
Patent applications in the United States are maintained in secrecy until
a patent issues. As a result, others may have filed patent applications for
products or technology covered by any pending patent applications we are
relying upon. There may be third-party patents, patent applications and other
intellectual property relevant to our product candidates and technologies which
are not known to us and that block or compete with our product candidates or
technologies. Litigation may be necessary to enforce any patents issued to us
or to determine the scope and validity of the intellectual property rights of
third parties. The defense and prosecution of patent and other intellectual
property claims is both costly and time consuming, even if the eventual outcome
is favorable to us.
We may face significant expense and liability if our technologies, product
candidates, methods or processes are found to infringe the intellectual
property rights of others, or if we allege others infringe our intellectual
property rights.
If our technologies, product candidates, methods or processes infringe
the intellectual property rights of other parties, we could incur substantial
costs and we may have to:
. obtain licenses from the owners of such intellectual property rights;
. redesign our product candidates or processes to avoid infringement;
. stop using the subject matter claimed in the patents held by others;
. pay damages; or
. defend litigation or administrative proceedings which may be costly
whether we win or lose.
We are aware of an issued patent that relates to use of some antibiotics,
including minocycline, to treat periodontal and other diseases, and which has
been exclusively licensed to a competitor. It is possible that a claim could be
asserted that the use of our MPTS product infringes this issued patent. We do
not believe that we infringe any valid and enforceable claims of the patent,
and we have received an opinion of patent counsel that the relevant claims of
the patent should be invalidated if asserted in litigation. If this patent is
found to contain claims infringed by the use of our MPTS product and such
claims are ultimately found to be valid and enforceable, we may not be able to
obtain a license from the competitor at a reasonable cost, if at all, or
develop or obtain alternative technology. In addition, if a third-party makes a
claim for infringement, we may have to defend ourselves in court and this could
result in substantial cost and diversion of management's resources, and our
defense may not be successful.
Our success also depends upon the skills, knowledge and experience of our
scientific and technical personnel. The confidentiality agreements required of
our employees may not provide adequate protection for our trade secrets, know-
how or other proprietary information or prevent any unauthorized use or
disclosure or the lawful development by others. If any of our trade secrets or
know-how become disclosed, our business may suffer. In addition, many of our
scientific and management personnel were previously employed by other
biotechnology and pharmaceutical companies, where they were conducting research
in areas similar to those that we now pursue. As a result, we could be subject
to allegations of trade-secret violations and other claims relating to the
intellectual property rights of these companies.
8
<PAGE>
We may not be able to retain our key personnel or hire the sales and marketing,
clinical trials management and regulatory affairs personnel necessary for our
business.
We are highly dependent on our key management and scientific personnel.
The employment of any of our key personnel could cease at any time. Competition
for qualified employees among companies in the pharmaceutical industry is
intense. Our future success depends upon our ability to attract, retain and
motivate highly-skilled employees. In order to successfully commercialize our
product candidates, we may be required to substantially expand our personnel,
particularly in the areas of sales and marketing, clinical trials management
and regulatory affairs.
We may be subject to product liability claims if our product candidates injure
people, and we have only limited product liability insurance.
Our business exposes us to potential product liability risks, which are
inherent in the testing, manufacturing, marketing and sale of pharmaceutical
products and candidates. We may not be able to avoid product liability claims.
Product liability insurance for the pharmaceutical industry is generally
expensive, if available at all. Our current product liability insurance
coverage may not be adequate. If we are unable to obtain or maintain sufficient
insurance coverage on reasonable terms or to otherwise protect against
potential product liability claims, we may be unable to commercialize our
product candidates. A successful product liability claim brought against us in
excess of our insurance coverage, if any, may cause us to incur substantial
liabilities.
We are likely to need additional financing, but our access to capital funding
is uncertain.
Our current and anticipated development projects require substantial
capital. We are likely to need substantial additional funds to conduct our
research activities, technical studies, clinical trials and other activities
relating to the successful commercialization of our product candidates.
However, our access to capital funding is uncertain. If adequate funds are
unavailable, we may be required to:
. delay, reduce the scope of, or eliminate one or more of our research
or development programs;
. license rights to technologies, product candidates or products on
terms that are less favorable to us than might otherwise be available;
or
. obtain funds through arrangements that may require us to relinquish
rights to product candidates or products that we would otherwise seek
to develop or commercialize ourselves.
If we raise additional funds by issuing equity securities, our existing
stockholders will own a smaller percentage of OraPharma, and new investors may
pay less on average for their securities than, and could have rights superior
to, existing stockholders.
We face uncertainty with year 2000 compliance.
The year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of our
computer programs or hardware that have date-sensitive software or embedded
chips may recognize a date using "00" as the year 1900 rather than the year
2000. This may result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to receive supplies from our vendors or to operate our accounting and other
internal systems. If our software vendors are unable to address the year 2000
compliance of their products, or should our suppliers' operations be disrupted
by the year 2000 issue, then our ability to commercialize and develop our
product candidates may be materially adversely affected.
9
<PAGE>
Risks Related to Governmental Approvals
We do not have, and may never obtain, the regulatory approvals we need to
market our product candidates.
We have not applied for or received regulatory approval in the United
States or any foreign jurisdiction for the commercial sale of any of our
product candidates. We have completed Phase 3 trials for MPTS and are
conducting preclinical studies or research and development for our other
product candidates. We have not submitted an NDA for any of our product
candidates or, if any of our product candidates are determined to be medical
devices, a Premarket Approval Application or Premarket Notification to the FDA
or any equivalent application to any other foreign regulatory authorities for
any of our product candidates. To date, none of our product candidates has been
determined to be safe or effective.
The process of obtaining FDA and other required regulatory approvals,
including foreign approvals, often takes many years and can vary substantially
based upon the type, complexity and novelty of the product candidates involved.
Furthermore, this approval process is extremely expensive and uncertain. We
have only limited experience in filing and pursuing applications necessary to
gain regulatory approvals. We cannot guarantee that any of our product
candidates, including MPTS, will be found to be safe and effective by the FDA
and approved for marketing.
Our MPTS clinical trials might not be deemed acceptable by the FDA.
We have completed two Phase 3 clinical trials with MPTS for the treatment
of adult periodontitis in conjunction with scaling and root planing, and intend
to submit in the first half of 2000 an NDA to the FDA based on the results of
these trials and the earlier Phase 1 and 2 trials. Although we believe the two
trials conducted by us with MPTS yielded successful results, the FDA may, after
completing its own analysis, either determine that such trials should have been
conducted or analyzed differently, and thus reach a different conclusion from
that reached by us, or request that further trials or analysis be conducted.
Any such additional trials would likely be time-consuming and expensive.
If our manufacturers do not obtain or maintain current Good Manufacturing
Practices, we may not be able to commercialize MPTS or any other product
candidate.
Following extensive review of an NDA, the FDA may grant marketing
approval, reject the application or require additional testing or information.
Sales of a new drug may commence following FDA approval of an NDA and
satisfactory completion of a pre-approval inspection of each manufacturing
facility, including a review of pertinent production records. Drug
manufacturing facilities are subject to a plant inspection before the FDA will
issue approval to market a new drug product, and all of the suppliers and
contract manufacturers that we intend to use must adhere to the current Good
Manufacturing Practice regulations, or cGMPs, prescribed by the FDA. Detailed
manufacturing information is also required to be submitted for review and
approval by the FDA as part of the NDA. Among other things, we must submit data
indicating that the drug product can be consistently manufactured by our
supplier at the same quality standard, that the drug product is stable over
time, that the level of chemical impurities in the drug product is below
specified levels, and that the delivery device developed by us for MPTS works
as intended in a consistent manner. Our manufacturers may not be able to obtain
or maintain cGMPs as prescribed by the FDA.
After any FDA approval of our MPTS or future NDAs, we will still have to comply
with extensive regulations.
Continued compliance with all FDA requirements and the conditions in an
approved NDA, including those concerning product specifications, manufacturing
process, validation, labeling, promotional material, record-keeping and
reporting, is required for all approved drug products. Failure to comply with
these
10
<PAGE>
requirements could result in warning letters, product recall, criminal action
or other FDA-initiated actions, which could delay further marketing until the
products are brought into compliance. Product approvals may also be withdrawn
if problems concerning safety, efficacy or quality of the product occur
following approval. In addition, if there are any modifications to the drug,
including any changes in indication, manufacturing process, labeling, delivery
devices or manufacturing facility, an NDA supplement may be required to be
submitted to the FDA. The FDA may also require post-marketing testing and
surveillance to monitor the effects of approved products or place conditions on
any approvals that could restrict the commercial applications of such products.
Approval of any NDA will also require us and the FDA to agree upon a
package insert that will, among other things, identify possible side effects
and specify contraindications. These restrictions could limit our ability to
market MPTS or any other products.
Any future clinical trials could take longer to complete than we expect.
Although for planning purposes we forecast the commencement and
completion of clinical trials, the actual timing of these events can vary
dramatically due to factors such as delays, scheduling conflicts with
participating clinicians and clinical institutions and the rate of patient
accruals. We cannot assure you that clinical trials involving our product
candidates will commence or be completed as forecasted, or that they will be
conducted successfully. Failure to commence or complete, or delays in, any of
our future clinical trials could have a material adverse effect on our business
and could cause our stock price to decrease.
In some circumstances we rely on strategic relationships with academic
institutions or clinical research organizations to conduct, supervise or
monitor some or all aspects of preclinical and clinical trials involving our
product candidates. We will have less control over the timing and other aspects
of these clinical trials than if we conducted them entirely on our own.
Risks Related to the Offering
The market price of our common stock after this offering may be higher or lower
than the price you pay.
Prior to this offering, there has been no public market for our common
stock. If you purchase shares of our common stock in this offering, you will
not pay a price that was established in a competitive market. Rather, you will
pay a price that we negotiated with the representatives of the underwriters.
After this offering, an active trading market in our stock might not develop or
continue.
Our stock price may be highly volatile.
The market price of our common stock may fluctuate significantly in
response to many factors, some of which are beyond our control, including the
following:
. results of preclinical studies and clinical trials conducted by us or
on our behalf, or by our competitors;
. announcements of technological innovations or new commercial products
by us, third parties with respect to strategic relationships
maintained with us or our competitors;
. regulatory developments in both the United States and foreign
countries;
. changes in reimbursement policies;
. developments or disputes concerning patents or other proprietary
rights;
. fluctuations in our operating results;
. changes in financial estimates or recommendations by security
analysts;
11
<PAGE>
. public concern as to the safety and efficacy of products developed by
us, our collaborators or our competitors;
. lack of adequate trading liquidity as a public company; or
. general market conditions.
In addition, the market price for securities of early-stage drug
companies have been particularly volatile. In the past, following periods of
volatility in the market price of a particular company's securities, securities
class action litigation has often been brought against the company. We may
become involved in this type of litigation in the future. Litigation of this
type is often extremely expensive and diverts management's attention and
resources.
You will incur immediate and substantial dilution of the stock value of your
shares.
The assumed offering price of our common stock is substantially higher
than the net tangible pro forma book value per share of our outstanding common
stock. As a result, investors purchasing common stock in this offering will
incur immediate and substantial dilution in the net tangible book value of
their common stock of $10.36 per share based on the assumed offering price of
$16.00 per share. In the past, we issued options and warrants to acquire
capital stock at prices significantly below the assumed offering price. There
will be further dilution to investors when any of these outstanding options and
warrants are exercised.
Future sales of our common stock could cause the market price of our common
stock to decline.
The market price of our common stock could decline due to sales of a
large number of shares in the market after this offering or the perception that
such sales could occur, including sales or distributions of shares by our large
stockholders. These sales could also make it more difficult for us to sell
equity securities in the future at a time and price that we deem appropriate to
raise funds through future offerings of common stock. For example, 6,596,396 of
the shares beneficially owned by our six largest stockholders will be available
for sale after the completion of the offering. The remaining 663,712 shares
beneficially owned by these stockholders will become available for sale in
December 2000. These stockholders have agreed under written "lock-up"
agreements not to sell any shares for 180 days after the date of this
prospectus.
Our certificate of incorporation and Delaware law contain provisions that could
discourage a takeover.
Our certificate of incorporation provides for the division of our board
of directors into three classes and provides our board of directors the power
to issue up to five million shares of preferred stock without stockholder
approval. This preferred stock could have voting rights that could be superior
to that of our common stock, and our board of directors has the power to
determine these voting rights. Our certificate of incorporation also requires
supermajority approval of the removal of any member of our board of directors
and prevents our stockholders from acting by written consent. In addition,
Section 203 of the Delaware General Corporation Law contains provisions which
impose restrictions on stockholder action to acquire control of OraPharma. The
effect of these provisions of our certificate of incorporation and Delaware law
would likely discourage third parties from seeking to obtain control of
OraPharma.
The interests of our controlling stockholders may conflict with our interests
and the interests of our other stockholders.
Upon the completion of this offering, our six largest stockholders will
own approximately 7,260,108 shares or 58.3% of our outstanding common stock.
The interests of our controlling stockholders could conflict with the interests
of our other stockholders. For example, if our controlling stockholders chose
to act together, they may be able to exert considerable influence over us,
including in the election of directors and the approval of actions submitted to
our stockholders. In addition, without the consent of these stockholders, we
may be prevented from entering into transactions that could be beneficial to us
such as acquisition proposals from third parties. Also, the provisions of
Section 203 of the Delaware General Corporation Law would not be applicable to
them.
12
<PAGE>
The net proceeds from the offering may be allocated in ways with which you and
other stockholders may not agree.
Management will have significant flexibility in applying the net proceeds
of this offering and could use these proceeds for purposes other than those
contemplated at the time of the offering.
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements under the captions
"Summary," "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business" and elsewhere. These forward-
looking statements include statements about the following:
. establishing a sales and marketing force, including related hiring and
training activities;
. our intentions regarding international collaborations;
. anticipated operating losses and capital expenditures;
. the anticipated filing date of our NDA for MPTS;
. anticipated regulatory filing dates and clinical trial initiation
dates for our other product candidates;
. our intention of making milestone payments in cash under our licensing
agreements;
. our product development efforts;
. the status of our regulatory process for MPTS and other product
candidates; and
. our intention to rely on third parties for manufacturing.
When used in this prospectus, the words "believe," "anticipate,"
"estimate," "expect," "seek," "intend," "may" and similar expressions are
generally intended to identify "forward-looking statements." Our forward-
looking statements involve known and unknown risks, uncertainties and other
factors which may cause our actual results, performance or achievements, or
industry results, to be materially different from any future results,
performance or achievements expressed or implied by these forward-looking
statements. These factors are discussed in more detail elsewhere in this
prospectus, including under the captions "Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business." Because of these uncertainties, you should not
place undue reliance on our forward-looking statements. In addition, the safe
harbor for forward-looking statements contained in the Securities Litigation
Reform Act of 1995 is not available for our forward-looking statements
contained in this prospectus. We do not intend to update any of these factors
or to publicly announce the result of any revisions to any of our forward-
looking statements contained herein, whether as a result of new information,
future events or otherwise.
13
<PAGE>
USE OF PROCEEDS
The net proceeds to OraPharma from the sale of the 4,000,000 shares of
common stock from this offering are estimated to be approximately $58.8
million, or $67.7 million if the underwriters' over-allotment option is
exercised in full. This is based upon an assumed offering price of $16.00 per
share after deducting underwriting discounts and commissions and estimated
offering expenses.
We expect to use these proceeds for the following purposes:
. approximately $30.0 million for the further development of, filing of
an NDA for, and commercialization of MPTS, including sales, marketing
and manufacturing scale-up related expenses, and expenditures for
inventories and capital equipment;
. approximately $4.3 million of payments under current licensing,
sponsored research and consulting agreements through 2001;
. general corporate and working capital purposes;
. ongoing research and development activities, including preclinical
studies and potential clinical trials; and
. obtaining licenses for new product candidates or technology.
In addition, a portion of the net proceeds may be used to acquire other
companies. We are not currently engaged in any negotiations to acquire any
other company.
The amounts and timing of our actual expenditures for each purpose may
vary significantly depending upon numerous factors, including:
. the size, scope and progress of our product candidate development
efforts;
. regulatory approvals;
. competition;
. marketing and sales activities;
. the market acceptance of any products we introduce;
. future revenue growth; and
. the amount of cash, if any, we generate from operations.
As a result, we will retain broad discretion in the allocation of the net
proceeds of this offering. Pending uses described above, we intend to invest
the net proceeds of this offering in short-term, investment-grade, interest-
bearing securities.
DIVIDEND POLICY
We have never paid cash dividends on our common stock. We do not
anticipate paying any cash dividends in the foreseeable future as we currently
intend to retain any future earnings to fund the continued development and
growth of our business. In addition, our existing credit facility prohibits the
payment of dividends.
14
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999:
. on an actual basis derived from our audited financial statements;
. on a pro forma basis to give effect to the automatic conversion of all
outstanding shares of preferred stock into an aggregate of 7,557,100
shares of common stock upon the completion of the offering; and
. on a pro forma as adjusted basis to give effect to the sale of
4,000,000 shares of common stock offered in the offering at an assumed
offering price of $16.00 per share, after deducting underwriting
discounts and commissions and estimated offering expenses.
<TABLE>
<CAPTION>
As of December 31, 1999
------------------------------------------
Pro Forma
Actual Pro Forma As Adjusted
------------ ------------ --------------
(in thousands, except share amounts)
<S> <C> <C> <C>
Long-term debt, less current
portion........................... $ 288 $ 288 $ 288
------------ ----------- ------------
Redeemable Convertible Preferred
Stock, $.001 par value:
Series A, 400,000 shares
authorized, issued and
outstanding actual, none issued
and outstanding pro forma and
pro forma as adjusted........... 800 -- --
Series B, 3,311,828 shares
authorized, issued and
outstanding actual, none issued
and outstanding pro forma and
pro forma as adjusted........... 12,023 -- --
Series C, 3,292,177 shares
authorized, issued and
outstanding actual, none issued
and outstanding pro forma and
pro forma as adjusted........... 15,949 -- --
Series D, 553,095 shares
authorized, issued and
outstanding actual, none issued
and outstanding pro forma and
pro forma as adjusted........... 4,959 -- --
------------ ----------- ------------
Total redeemable convertible
preferred stock.............. 33,731 -- --
------------ ----------- ------------
Stockholders' Equity (Deficit):
Preferred stock, $.001 par value,
5,000,000 shares authorized,
none issued and outstanding..... -- -- --
Common stock, $.001 par value,
50,000,000 shares authorized,
1,039,635 issued and
outstanding actual, 8,596,735
issued and outstanding pro
forma, 12,596,735 issued and
outstanding pro forma as
adjusted........................ 1 9 13
Additional paid-in capital........ 1,190 34,913 93,729
Deferred compensation............. (349) (349) (349)
Deficit accumulated during the
development stage............... (22,215) (22,215) (22,215)
------------ ----------- ------------
Total stockholders' equity
(deficit).................... (21,373) 12,358 71,178
------------ ----------- ------------
Total capitalization........... $ 12,646 $ 12,646 $ 71,466
============ =========== ============
</TABLE>
- --------
The number of shares of common stock to be outstanding after this
offering is based on the number of shares outstanding as of December 31, 1999
and does not include:
. 1,250,000 shares of common stock underlying stock options available
for future grants under our 1999 Equity Corporation Plan, none of
which have been granted;
. 586,472 shares of common stock issuable upon the exercise of
outstanding options under our 1996 Option Plan at a weighted average
exercise price of $0.35 per share; and
. 210,518 shares of common stock issuable upon the exercise of
outstanding warrants at a weighted average exercise price of $8.51 per
share.
15
<PAGE>
DILUTION
As of December 31, 1999, our pro forma net tangible book value was
$12,163,447, or $1.41 per share. Pro forma net tangible book value per share is
determined by dividing pro forma net tangible book value (total tangible assets
less total liabilities) by the pro forma number of shares of common stock after
giving effect to the automatic conversion of all outstanding shares of
preferred stock into an aggregate of 7,557,100 shares of common stock, which
will occur upon the closing of the offering.
Without taking into effect any changes in pro forma net tangible book
value after December 31, 1999, and to give effect to the sale of the common
stock offered hereby at an assumed offering price of $16.00 per share and the
application of the net proceeds of the offering, the pro forma as adjusted net
tangible book value would have been $70,983,447, or $5.64 per share. This
represents an immediate increase in pro forma net tangible book value of $4.23
per share to existing stockholders and dilution in pro forma as adjusted net
tangible book value of $10.36 per share to new investors who purchase shares in
the offering. The following table illustrates this dilution:
<TABLE>
<S> <C> <C>
Assumed offering price per share................................ $16.00
Pro forma net tangible book value per share before the
offering.................................................... $1.41
Increase per share attributable to new investors.............. 4.23
-----
Pro forma as adjusted net tangible book value per share after
the offering.................................................. 5.64
------
Dilution in net tangible book value per share to new investors.. $10.36
======
</TABLE>
If the underwriters' over-allotment option were exercised in full, the
pro forma as adjusted net tangible book value per share after the offering
would be $6.06 per share, the increase in net tangible book value per share to
existing stockholders would be $4.65 per share and the dilution in net tangible
book value to new investors would be $9.94 per share.
The following table summarizes, on a pro forma as adjusted basis as of
December 31, 1999, the differences between the total consideration paid and the
average price per share paid by the existing stockholders and the new investors
with respect to the number of shares of common stock purchased from us based on
an assumed offering price of $16.00 per share:
<TABLE>
<CAPTION>
Shares Total Consideration Average
------------------ ------------------- Price
Number Percent Amount Percent Per Share
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders...... 8,596,735 68.2% $33,858,749 34.6% $ 3.94
New investors.............. 4,000,000 31.8 64,000,000 65.4 $16.00
---------- ----- ----------- -----
Total.................... 12,596,735 100.0% $97,858,749 100.0%
========== ===== =========== =====
</TABLE>
These tables do not assume exercise of stock options and warrants
outstanding at December 31, 1999 and include 156,606 shares subject to
repurchase by us.
At December 31, 1999, there were 586,472 shares of common stock issuable
upon exercise of outstanding stock options at a weighted average exercise price
of $0.35 per share and 210,518 shares of common stock issuable upon exercise of
outstanding warrants at a weighted average exercise price of $8.51 per share.
16
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data of OraPharma should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" on page 18 and the financial statements and related
notes beginning on page F-3. The selected financial data for the period from
inception (August 1, 1996) through December 31, 1996, the years ended December
31, 1997, 1998 and 1999 and the period from inception through December 31, 1999
are derived from the audited financial statements.
<TABLE>
<CAPTION>
Period from Period from
Inception Inception
(August 1, (August 1,
1996) Year Ended 1996)
Through December 31, Through
December 31, ------------------------------------- December 31,
1996 1997 1998 1999 1999
------------ ----------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Operating expenses:
Research and
development.......... $ 26,294 $ 1,706,393 $7,324,975 $ 9,664,841 $ 18,722,503
General and
administrative....... 408,295 939,469 1,590,375 2,119,264 5,057,403
--------- ----------- ---------- ------------ ------------
Operating loss........ (434,589) (2,645,862) (8,915,350) (11,784,105) (23,779,906)
Net interest income
(expense)............. (641) 504,123 424,488 636,957 1,564,927
--------- ----------- ---------- ------------ ------------
Net loss................ (435,230) (2,141,739) (8,490,862) (11,147,148) (22,214,979)
Non-cash preferred stock
charge................ -- -- -- 1,729,651 1,729,651
--------- ----------- ---------- ------------ ------------
Net loss to common
stockholders.......... $(435,230) $(2,141,739) $8,490,862) $(12,876,799) $(23,944,630)
========= =========== ========== ============ ============
Basic and diluted net
loss per share........ $ (5.05) $ (13.28) $ (16.61)
=========== ========== ============
Shares used in computing
basic and diluted net
loss per share........ 424,054 639,339 775,116
=========== ========== ============
Pro forma basic and
diluted net loss per
share................. $ (1.65)
============
Shares used in computing
pro forma basic and
diluted net loss per
share................. 7,792,759
============
</TABLE>
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------
1996 1997 1998 1999
--------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash
equivalents............. $ 37,704 $10,136,747 $ 19,236,084 $ 13,073,803
Total assets.............. 61,479 10,859,584 20,480,402 14,711,739
Long-term debt............ -- -- 480,978 288,043
Redeemable convertible
preferred stock......... -- 12,822,769 28,771,713 33,730,563
Deficit accumulated during
the development stage... (435,230) (2,576,969) (11,067,831) (22,214,979)
Total stockholders'
deficit................. (359,071) (2,446,806) (10,879,151) (21,373,033)
</TABLE>
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Background
We have devoted substantially all of our resources since we began
operations in August 1996 to research and development of pharmaceutical product
candidates for oral healthcare. We are a development stage pharmaceutical
company and have not generated any revenues from product sales. We have not
been profitable and since our inception we have incurred a cumulative net loss
of approximately $22.2 million through December 31, 1999. These losses have
resulted principally from costs incurred in research and development
activities, including Phase 3 clinical trials for our lead product candidate
MPTS, and general and administrative expenses. We expect to incur additional
operating losses until such time as we generate sufficient revenue to offset
expenses. Research and development costs relating to product candidates will
continue to increase. Manufacturing, sales and marketing costs will increase as
we prepare for the commercialization of MPTS.
We completed Phase 3 clinical trials in October 1999 for MPTS, our first
product candidate. We expect to file an NDA for MPTS with the FDA during the
first half of 2000. Most of our revenue for the foreseeable future will depend
on our ability to receive regulatory approvals for, and successfully market,
MPTS. Assuming we obtain FDA approval, we intend to deploy a sales and
marketing force of 50 to 75 persons in the U.S. and expect to begin hiring and
training activities in late 2000. In international markets, we intend to rely
on strategic relationships to market and sell MPTS rather than establish our
own sales force.
Equity Financings
We have financed our operations primarily from the net proceeds generated
from the issuance of convertible preferred stock. As of December 31, 1999, we
have received total net proceeds of approximately $33.7 million from the
following sales of preferred stock:
. 400,000 shares of series A preferred stock were sold in February 1997
raising total net proceeds of approximately $800,000;
. 3,311,828 shares of series B preferred stock were sold in March 1997
raising total net proceeds of approximately $12.0 million;
. 3,292,177 shares of series C preferred stock were sold in December
1998 raising total net proceeds of approximately $15.9 million; and
. 553,095 shares of series D preferred stock were sold in December 1999
raising total net proceeds of approximately $5.0 million.
Milestone Payments, Royalties and License Fees
We paid AHP $250,000 and issued them 110,000 shares of our common stock
at the time we entered into our license agreement. Our license agreement with
AHP requires us to make payments to AHP as two milestones are achieved, and to
pay AHP royalties on sales of MPTS and other products that are covered by the
AHP patents or developed using the AHP technology. The first milestone payment
of $500,000 will be paid to AHP if and when the FDA accepts submission of our
NDA for MPTS for the treatment of periodontitis. A second milestone payment of
$2.5 million is due to AHP if and when we receive FDA approval of MPTS for
periodontitis. Instead of paying this second milestone in cash, we may issue
AHP warrants to purchase our common stock. In addition, if our cash reserves
are below $5.0 million at the time the first payment is due, we may instead
make this payment by issuing AHP a combination of a promissory note and a
warrant to purchase our common stock. We intend to make both of these milestone
payments in cash.
18
<PAGE>
We are also required to pay royalties on sales of MPTS to Gary R.
Jernberg, DDS, a holder of three U.S. patents, and to Technical Development and
Investments, Est., relating to technology previously licensed by AHP to this
third party. Royalties payable to these third parties can be fully credited
against up to 50% of the royalties payable under our agreement with AHP. In
addition, we are required to pay Dr. Jernberg a milestone payment of $50,000 if
and when the FDA accepts submission of our NDA for MPTS. A second milestone
payment of $100,000 is due to Dr. Jernberg if and when we receive FDA approval
of MPTS for the treatment of periodontitis.
We paid Mucosal Therapeutics LLC $200,000 and issued Mucosal Therapeutics
a warrant to purchase 27,500 shares of our common stock in December 1998. In
December 1999, we completed our first milestone and paid Mucosal Therapeutics
$100,000 and issued them a warrant to purchase 41,152 shares of our common
stock. We have recorded the $100,000 payment and the $346,108 fair value of the
warrant, as research and development expense. We are required to make payments
totalling $2.0 million to Mucosal Therapeutics, in the form of cash and
warrants to purchase our common stock, as preclinical and clinical milestones
are achieved, and upon FDA approval of a pharmaceutical product for the
treatment of oral mucositis. The license agreement further obligates us to pay
Mucosal Therapeutics royalties on sales of pharmaceutical products covered by
or involving use of this technology.
We have also entered into a research and consulting agreement with
Biomodels LLC, an affiliate of Mucosal Therapeutics, to perform preclinical
studies on our behalf and to provide us with research and general consulting
services regarding our development of the oral mucositis technology. At
December 31, 1999, the remaining payments due to this third party are expected
to total $720,000 through 2002.
We issued 82,500 shares of common stock to Children's Medical Center
Corporation in December 1998. We are also required to make milestone payments
totalling $1.0 million to CMCC, payable in the form of cash or shares of our
common stock, upon submission of our first NDA relating to a bone regeneration
product candidate and upon approval of our first NDA. We are also obligated to
pay CMCC royalties on sales of products covered by the CMCC patents or which
are specified bone and soft-tissue regeneration products. We have also entered
into a sponsored research agreement with Children's Hospital, a non-profit
affiliate of CMCC, to conduct research in the area of bone and soft-tissue
regeneration and perform related preclinical studies. At December 31, 1999, the
remaining payments due under the sponsored-research agreement are expected to
total $695,000 through 2002.
Results of Operations
Years Ended December 31, 1999 and 1998.
Research and Development Expenses. Research and development expenses
increased to approximately $9.7 million for the year ended December 31, 1999
compared to approximately $7.3 million in the same period in 1998, an increase
of 31.9%. This increase of approximately $2.3 million was primarily due to
costs associated with Phase 3 clinical trials of MPTS, and to a lesser extent,
expansion of efforts to develop new product candidates.
General and Administrative Expenses. General and administrative expenses
increased to approximately $2.1 million for the year ended December 31, 1999
compared to approximately $1.6 million in the same period in 1998, an increase
of 33.3%. This increase of $529,000 is primarily due to higher personnel costs,
together with higher facility costs and reflects the cost of preliminary
marketing efforts for MPTS and the pursuit of corporate collaborations.
Net Interest Income (Expense). Interest income for the year ended
December 31, 1999 and 1998 was $689,000 and $463,000, respectively. The
increase of $226,000 is attributable to higher levels of cash and cash
equivalents available for investment in 1999 from the proceeds of the sale of
our series C and series D preferred stock. Interest expense for the same
periods was $52,000 and $38,000 and represents interest incurred on an
equipment financing facility.
Net Loss. The net loss was approximately $11.1 million for the year ended
December 31, 1999 compared to approximately $8.5 million in the same period in
1998, an increase of 30.4%. This increase of
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approximately $2.6 million reflects increases in research and development and
general and administrative expenses, offset by the increase in interest income.
Net loss to common stockholders
Included in the net loss to common stockholders is a non-cash preferred
stock charge of approximately $1.7 million. See Note 8 to Notes to Financial
Statements.
Years Ended December 31, 1998 and 1997.
Research and Development Expenses. Research and development expenses
increased to approximately $7.3 million for the year ended December 31, 1998
compared to approximately $1.7 million in the same period in 1997, an increase
of 329.3%. This increase of approximately $5.6 million was primarily due to the
cost of materials for and the initiation of Phase 3 clinical trials of MPTS. We
also initiated development efforts on other new product candidates in 1998.
General and Administrative Expenses. General and administrative expenses
increased to approximately $1.6 million for the year ended December 31, 1998
compared to $939,000 in the same period in 1997, an increase of 69.3%. This
increase of $651,000 is primarily due to higher personnel costs, together with
higher facility costs, management and technical recruiting expenses and
reflects the cost of preliminary marketing efforts for MPTS and the pursuit of
corporate collaborations.
Net Interest Income (Expense). Interest income was approximately the same
for the years ended December 31, 1998 and 1997 at $463,000 and $506,000,
respectively. Interest expense for the same periods was $38,000 and $1,000, and
in 1998 represents interest incurred on an equipment financing facility.
Net Loss. The net loss was approximately $8.5 million for the year ended
December 31, 1998 compared to approximately $2.1 million in the same period of
1997, an increase of 296.4%. The increase of approximately $6.4 million
reflects costs associated with the initiation of Phase 3 clinical trials of
MPTS together with higher personnel related costs.
Liquidity and Capital Resources
As of December 31, 1999, we had cash and cash equivalents of
approximately $13.1 million, a decrease of approximately $6.2 million from
December 31, 1998. On December 23, 1999, we issued 553,095 shares of series D
preferred stock, raising total net proceeds of approximately $5.0 million.
During the years ended December 31, 1999, 1998 and 1997, net cash used in
operating activities was approximately $10.9 million, $6.8 million and $1.9
million, respectively. This net use of cash was to fund our net losses for the
periods, adjusted for non-cash expenses and changes in operating assets and
liabilities.
Net cash used in investing activities for the years ended December 31,
1999, 1998 and 1997 was $237,000, $700,000 and $711,000, respectively,
primarily the result of the acquisition of laboratory equipment, leasehold
improvements and furniture and fixtures and office equipment. During the year
ended December 31, 1997, $250,000 was used for the acquisition of intangible
assets related to the licensing of the MPTS technology.
We anticipate that our capital expenditures will be approximately $2.5
million in 2000, although we have no firm commitments to spend this amount.
Approximately $1.8 million of this amount represents laboratory and production
equipment. The balance is represented by planned expenditures for computer
equipment and furniture.
Net cash proceeds from financing activities for the years ended December
31, 1999, 1998 and 1997 was approximately $5.0 million, $16.6 million and $12.7
million, respectively. The net cash proceeds from financing activities during
the years ended December 31, 1999, 1998 and 1997 were primarily from the
issuance of preferred stock.
In June 1999, we increased our credit facility with a bank from $750,000
to approximately $1.8 million. The facility may be used to finance purchases of
equipment, software and leasehold improvements through June 30, 2000. As of
December 31, 1999, there was $481,000 outstanding under this facility, and $1.0
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million available for future borrowings. Outstanding borrowings bear interest
at the bank's prime rate plus 1%. Future borrowings will bear interest at the
bank's prime rate plus 0.75%.
We lease our corporate and research and development facilities under an
operating lease expiring on September 30, 2003. We may extend this lease for
two additional five-year periods at rental rates equal to the then fair rental
value as determined by our landlord. We have also entered into operating lease
agreements for various office equipment. The terms of these lease agreements
range from 18 to 60 months. Current total minimum annual payments under these
leases are $189,538, $191,422, $187,233 and $143,018 in 2000, 2001, 2002 and
2003, respectively.
We expect that our operating expenses and capital expenditures will
increase in future periods as a result of the manufacturing scale-up and in
anticipation of the commercialization of MPTS. The initiation of commercial
manufacturing will require the purchase of production equipment and the hiring
of additional staff to coordinate raw material suppliers and manage contract
manufacturing services at multiple locations. Sales and marketing activities
will require the hiring and training of a sales and marketing staff of 50 to 75
persons in late 2000 and early 2001. Research and development expenditures,
including clinical trials, are expected to continue at high levels as we
continue to develop new product candidates. We also intend to hire additional
research and development, clinical testing and administrative staff. Our cash
requirements will depend on numerous factors, including the progress of our
research and development programs, the time required to file and process
regulatory approval applications, the development of commercial manufacturing
capability, the ability to obtain additional licensing arrangements, and the
demand for our product candidates, if and when approved by the FDA or other
regulatory authorities.
We believe that our current cash position, available borrowings under our
credit facility and the proceeds of this offering will be sufficient to fund
our operations and capital expenditures through at least the year 2001.
Income Taxes
As of December 31, 1999, we had approximately $20.5 million of net
operating loss carryforwards and $670,000 of research and development credit
carryforwards for federal income tax purposes. These carryforwards expire on
various dates beginning in 2011. These amounts reflect different treatment of
expenses for tax reporting than are used for financial reporting. As of
December 31, 1999, we had capitalized approximately $1.2 million of research
and development expenses for federal income tax purposes. U.S. tax law contains
provisions that may limit our ability to utilize net operating loss and tax
credit carryforwards in any year or if there has been an ownership change. Any
such future ownership change may limit the utilization of net operating loss
and tax credit carryforwards. Based on the valuation of the Company and
applicable Internal Revenue Code regulations, we believe the offering will not
have a material effect on our ability to use those carryforwards.
Year 2000 Compliance
We have identified year 2000 risks in the two major categories of
internal business operations software and software used by external suppliers.
A review of our non-information technology systems did not identify any
material risks.
With respect to our internal business operations software, most of our
computers and software programs have been recently acquired. We have relied on
the efforts of computer and software vendors to make their latest hardware and
software releases year 2000-compliant. As a result, we do not expect to incur
any compliance cost. We have contacted vendors to confirm the status of the
software that is used in our computers and have verified that each computer is
using the software version that the vendor represents is year 2000-compliant.
In addition, we have utilized consultants and year 2000 test software to
evaluate compliance.
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We believe that because we are in an early stage of development and will
have no revenue from product sales for the forseeable future, any short-term
disruption relating to year 2000 will have little impact on our operations. We
have asked our suppliers about their year 2000 programs and they have advised
us that they are year 2000-compliant. We have also built appropriate
contingencies into our manufacturing scale-up schedules in the event that
certain key suppliers are not year 2000-compliant. These contingencies provide
for equipment and material to be on hand or scheduled for delivery earlier than
would otherwise be required so that any delay caused by a short-term supplier
disruption can be managed. We do not anticipate incurring any significant costs
resulting from these contingencies.
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BUSINESS
Introduction
OraPharma is developing pharmaceutical products for the treatment of oral
diseases and disorders. We completed two Phase 3 clinical trials in October
1999 for our first product candidate, MPTS, which is designed to treat adult
periodontitis when used together with scaling and root planing. We expect to
file an NDA with the FDA in the first half of 2000 for this indication. Our
other research and development programs are directed at further establishing a
presence in oral care pharmaceuticals and expanding the use of our core
technology.
Oral Care Pharmaceuticals Market
We have targeted our oral care pharmaceutical development program to
include dental and other oral conditions. The Health Care Financing
Administration projects that dental services will become an industry of
approximately $60 billion in the year 2000, growing from $13 billion in 1980.
Other oral conditions, including soft-tissue and non-dental diseases, further
expand the market. Oral care pharmaceuticals comprise what we believe is a
rapidly emerging segment of this overall market.
There are a number of important factors driving the emergence of oral
care pharmaceuticals, including:
. Increased demand for oral health services. The number of oral exams in
the U.S. has nearly doubled from 131 million in 1979 to 256 million in
1997 according to the American Dental Association, or ADA. We believe
this increase in patient visits was driven by factors such as aging
demographics, heightened awareness about the benefits of good oral
hygiene, increased desire for new services, including cosmetic
services, and improved reimbursement. We believe that oral care
pharmaceuticals are likely to benefit from the rapid growth of the
overall oral health industry.
. Opportunities for locally-delivered oral care pharmaceuticals. Many
pharmaceutical compounds already exist to treat the rising number of
oral conditions that oral care professionals must address. However,
many of these drugs are in the form of pills, injections, creams or
ointments that are not optimal for delivery in the oral cavity. As
these compounds are reformulated, we believe the demand for oral care
pharmaceuticals will increase.
. Changing treatment approaches. Dentists and other oral care
professionals are treating an aging patient base with increasingly
complicated medical histories. This complexity is forcing oral care
professionals to move beyond late-stage mechanical interventions and
become better informed about physiological causes and medical
treatments for oral conditions. Further, this emphasis on
understanding disease processes is extending to oral conditions beyond
tooth decay and periodontal disease, such as oral cancer diagnosis,
treatment of pre-cancerous lesions, xerostomia (severe "dry mouth
conditions") and oral mucositis.
. Oral conditions complicating treatment of other diseases. Oral
diseases such as xerostomia and oral mucositis are serious
complications for cancer patients receiving chemotherapy and head and
neck radiation therapy. As more potent chemotherapeutic agents have
emerged, these conditions are increasingly limiting tolerable doses,
and, ultimately, a patient's response to treatment. We believe oral
care pharmaceuticals may be able to help treat or prevent some of
these conditions.
. Suspected links between oral health and systemic health. Many
researchers are actively studying relationships between oral health
and medical problems elsewhere in the human body. For example, recent
studies suggest that patients with periodontal disease are at higher
risk for cardiovascular disease and diabetes. These same studies
suggest that periodontitis may contribute to low infant birth weight.
In addition, the National Institutes of Health have made oral health
an area of focus for 2000.
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. Increased focus on time-efficient treatments. While the demand for
oral care services is increasing, the supply of professionals has not
kept pace. An important implication of this growing supply and demand
imbalance is the growing need to minimize patient time in offices,
which places a premium on more time-efficient chair-side treatments.
An increasing number of pharmaceuticals, such as MPTS, are being
developed to offer oral care professionals faster solutions for
treating patients.
Business Strategy
We believe that oral care medicine is a rapidly emerging field and
presents an opportunity for us to become a leader in the development and
marketing of pharmaceutical products for the treatment of oral diseases and
disorders. Key elements of our business strategy to achieve this objective
include:
Focusing initially on approval and commercialization of MPTS.
Developing a direct sales and marketing organization for select
markets. We intend to develop our own domestic sales and marketing group for
the commercialization of our future product candidates. We believe we can
effectively sell our initial product candidates within the United States by
targeting a concentrated group of oral care specialists. Outside of the United
States, and for product candidates targeted at markets with larger practitioner
populations, we intend to pursue strategic relationships to market and sell our
product candidates.
Identifying and capitalizing on promising product candidate
categories. We select pharmaceutical product categories that we believe can
improve treatment through enhanced therapeutic and economic benefits, and
improved convenience to patients, professionals and payors. As an outgrowth of
this approach, we focus primarily on product candidates and formulations that
are administered chair-side. The chair-side approach allows the professional to
retain control of the patient's treatment, thereby avoiding concerns about
compliance, in contrast to pharmacy-dispensed drugs.
Focusing on product candidates with known pharmaceutical and clinical
activity and low technical risk. We emphasize product candidates that treat
serious diseases or conditions of the oral cavity where the compound is well
characterized and the biological and pharmaceutical role of the drug substance
is well understood. For example, minocycline, the active ingredient in MPTS, is
an FDA-approved drug for the systemic treatment of acne. To reduce the high
cost and risks associated with conducting basic research on new chemical
entities, we evaluate readily available compounds that can be reformulated for
application in the oral cavity and generally have a known safety and efficacy
profile. We believe this approach will result in quicker drug development.
Leveraging our core technology. Our initial focus is to identify product
opportunities and product candidates directed at oral care that can leverage
our core technology. Our core technology is compatible with a wide variety of
drug types, from simple compounds to proteins. We believe that our core
technology has broad application both inside and outside the oral cavity.
Leveraging product development expertise. We believe that we can leverage
our significant formulation development and clinical trial management expertise
by in-licensing or acquiring new product candidates and technologies, which we
will develop to further establish a presence in oral care pharmaceuticals, and,
possibly, to expand into non-oral health applications, primarily for out-
licensing.
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Product Candidates Summary
The following chart contains information regarding our product
candidates.
<TABLE>
<CAPTION>
Product
Therapeutic Indication Candidate Development Status Licensors/Research Institutions
- ---------------------- --------- ------------------- -------------------------------
<S> <C> <C> <C>
Periodontitis/Pocket- MPTS Phase 3 clinical American Home Products
depth Reduction trials complete
Oral Mucositis OC-1012 Preclinical Brigham and Women's
Hospital/of Mucosal
Therapeutics
Bone Regeneration OC-1016 Preclinical Children's Hospital of
Boston
Traumatic Tooth Injury MPTS Label extension University of North
Preclinical Carolina--Chapel Hill
Periodontitis/Anti- -- Preclinical University of North
inflammatory Carolina--Chapel Hill
</TABLE>
MPTS for the Treatment of Periodontitis
Periodontitis and Market
Periodontitis, a condition caused by plaque build-up on teeth, is
characterized by the progressive, chronic infection and inflammation of the
gums and surrounding tissue. In its mildest form, the disease is termed
gingivitis, which is accompanied by swollen, bleeding gums. When gingivitis is
not controlled, the disease often progresses to periodontitis. This chronic
infection and inflammation causes destruction of a tooth's supporting
structures, primarily bone and periodontal ligament, and results in the
formation of spaces between the gums and teeth, or periodontal pockets.
An average case of periodontitis affects three to four teeth, according
to The Journal of Periodontology. Our estimates suggest that the average
periodontal patient has 12 periodontal pockets. These periodontal pockets
provide a site for the accumulation of disease-causing bacteria. With
increasing depth of the pocket, bacterial plaque becomes less accessible to
typical oral hygiene practices, such as brushing and flossing, and routine
dental procedures, such as checkups and cleanings. Beyond a depth of 4mm,
brushing and bacterial mouth rinses, which may be effective in treating
gingivitis, cannot reach the base of the pocket and the bacteria that cause the
disease. A pocket depth of 5mm to 7mm constitutes moderate periodontitis and a
pocket depth of greater than 7mm constitutes severe periodontitis. The
destructive process will continue at the base of the pocket in spite of the
continuing use of effective oral hygiene unless treated by an oral care
professional. If left untreated, periodontitis will continue to progress and
eventually lead to tooth and bone loss.
The following illustration depicts, on the left side, an infected gum
with a periodontal pocket, and, on the right side, a healthy gum.
[Illustration of tooth surrounded by an infected gum with an identified
periodontal pocket on the left side, and a healthy gum on the right side.]
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Periodontitis has no known cure and is the most common cause of adult
tooth loss. According to published reports citing the ADA, approximately 50
million Americans have periodontal disease and only 7.5 million Americans are
currently receiving treatment. Along with this widespread prevalence, the ADA
estimated that in 1990, oral care professionals completed approximately 14
million treatment procedures for periodontitis. According to industry sources,
the U.S. population spends more than $6.0 billion per year on products and
services to treat periodontitis.
Effective treatment is possible only through periodic professional
intervention. The most common treatment is a mechanical procedure, scaling and
root planing, used to remove accumulated plaque above and below the gumline,
and may require the oral care professional to anesthetize the gums. A patient's
typical course of treatment involves two scaling and root planing procedures
annually. For more serious cases, treatment may include various forms of gum
surgery. These procedures are painful, may increase gum recession and root
sensitivity and may compromise aesthetics. These treatments are seldom curative
because the bacteria typically return and the infection recurs. In an attempt
to stabilize the disease progression, oral care professionals generally place
patients on maintenance programs that involve frequent follow-up for evaluation
and ongoing scaling and root planing.
Systemic antibiotics have occasionally been used in conjunction with
scaling and root planing to treat periodontitis. However, concerns over side
effects and drug resistance have prompted the search for alternatives. Several
therapeutics have been approved by the FDA for the treatment of periodontitis.
The following three therapeutics were introduced in the U.S. in 1998:
. Atridox, a biodegradable gel that delivers the antibiotic doxycycline
into periodontal pockets. Atridox is a product consisting of a powder
and a gel which must be refrigerated and then mixed immediately prior
to use. Mixing involves manually pumping the powder and gel 100 times
between two interconnected syringes. After mixing, the practitioner
draws the product into one syringe, removes the other syringe and
replaces it with an application tip. The product is then injected into
the periodontal pockets. The practitioner is then instructed to cover
those pockets filled with Atridox with either a periodontal dressing
or a dental adhesive. FDA-approved labeling also specifies that the
patient should not brush any treated areas for seven days.
. PerioChip, a sustained-release biodegradable collagen chip containing
chlorhexidine, an anti-microbial, which is released over seven to 10
days. A chip is inserted into each periodontal pocket by the
practitioner. FDA-approved labeling limits each treatment to eight
chips, and the product must be refrigerated before use. FDA labeling
also indicates that mild to moderate sensitivity is normal during the
first week after placement, and patients are advised to promptly
notify the practitioner if a chip dislodges.
. Periostat, a 20 mg systemic doxycycline capsule taken orally twice
daily for up to nine months. The dosage is not intended to be
sufficient for an antibiotic effect, but is intended to suppress
collagenase, an enzyme that causes tissue destruction. The product is
a prescription drug, not a chair-side treatment.
PerioChip and Periostat are similarly indicated for use in conjunction
with scaling and root planing, the standard of treatment adopted by oral care
professionals. Atridox is indicated as a stand-alone treatment for
periodontitis.
Core Technology and Treatment Approach
MPTS uses our core technology and consists of a drug product candidate
that is prepackaged in a specially designed dispenser tip. The drug substance
is specially formulated into microspheres, which we refer to as MPTS
microspheres. Microspheres are small particles consisting of the active drug
ingredient, minocycline, that is distributed in an inactive polymer. When MPTS
is administered, the polymer begins to slowly dissolve thereby releasing
minocycline at a sustained rate for at least 14 days. As the polymer dissolves,
it is bioresorbed, that is, it chemically breaks down into components that are
excreted from the body.
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The polymer, PGLA, or poly (glycolide-co-dl-lactide), has three functions: to
control the rate of drug release, to provide adhesion in the periodontal pocket
and to stabilize the active drug. Polymers of this type have a long history of
use in medical devices such as sutures and in other drug-delivery systems.
We chose minocycline as the active ingredient because:
. its antibiotic profile places it among the most effective agents
against the pathogens associated with periodontitis; and
. it promotes gum reattachment through alteration of tooth root surface
chemistry.
The following illustrates the preparation of MPTS for administration to
the patient:
Illustration of dispenser and product candidate in trays
Illustration of tip being loaded into handle
Illustration of tip on handle, in hand ready for administration
The MPTS microspheres are in a dry powder form, and are packaged in a
small disposable tip that attaches to the specially designed dispenser. To
administer MPTS, the oral care professional removes the disposable tip from its
package and simply connects the tip to the dispenser, and then dispenses the
microspheres directly into the periodontal pocket. Each tip contains a metered
dose for one periodontal pocket and can be administered in only a few seconds.
Exposure to moisture in the periodontal pocket causes the microspheres to
adhere to the pocket, and then begin to break down, thereby releasing the
active ingredient at a sustained rate. This sustained release has been designed
to maintain drug levels sufficient to kill bacteria for at least 14 days.
Because the microspheres totally disintegrate, a return visit will not be
required to remove MPTS. Further, our clinical trial experience suggests that
MPTS' adhesion characteristics ensure retention without the need for a
periodontal dressing or adhesive. We designed our MPTS treatment in part to
eliminate the restricted dosage, refrigeration, mixing, dental dressing and/or
nonchair-side limitations of the other recently introduced treatments.
MPTS is designed to be administered immediately following scaling and
root planing, and application of MPTS should be repeated periodically for as
long as a periodontal pocket of at least 5mm exists. MPTS enables drug
placement directly into the periodontal pocket. This local administration of
MPTS has been designed to permit delivery of an antibiotic to affected tissues
with minimal systemic exposure. This administration also generates
significantly higher local drug concentrations than could be safely obtained
with systemic administration. Finally, its administration by oral care
professionals eliminates the concern about patient compliance, a common problem
with pharmacy-dispensed and orally-administered drugs.
In summary, we believe that MPTS' advantages include:
. high drug concentration at the infection site with reduced risk of
drug resistance;
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. simple preparation without the need for mixing;
. rapid and easy administration;
. precise dosage control;
. improved patient compliance, comfort or convenience;
. simplified storage that avoids the need for refrigeration;
. bioresorbability, eliminating the need for a follow-up visit to remove
the product; and
. elimination of the need for adhesives and dressings.
Clinical Trials
Phases 1 and 2
MPTS' clinical trial history includes two Phase 1 trials and four Phase 2
multi-center trials, involving a total of 293 patients. These trials were
conducted by American Cyanamid prior to its merger with AHP, and prior to the
subsequent licensing of the technology to OraPharma. The Phase 1 trials
suggested that the product candidate was well tolerated, with minocycline
concentration levels sufficient to kill bacteria maintained in treated sites
for at least 14 days, with no local or systemic adverse events. Phase 2 trials
were conducted at four U.S. university centers and a benefit in periodontal
pocket-depth reduction was demonstrated in the patient population with no
adverse events. We used these Phase 2 trials as a basis to design the Phase 3
trials.
Phase 3
In November 1997, the FDA accepted transfer of the AHP IND to OraPharma,
and in August 1998, we commenced our Phase 3 clinical program to study MPTS
used as an adjunct to scaling and root planing (S/RP) for the treatment of
adult periodontitis. We completed enrollment of 747 patients on schedule in
January 1999, and the last patient visit was in October 1999, at 18 university
centers in the U.S. The design comprised two well controlled safety and
efficacy trials that compared three arms: S/RP alone, S/RP plus MPTS, and S/RP
plus vehicle (non-drug polymer acting as placebo). In these trials, the results
evaluators were blinded as to which of the three arms the patient fell into in
order to preserve trial integrity. We conducted an additional open-label safety
study in 174 patients at four U.S. university centers and one private practice.
Finally, we added a two-center pharmacokinetic study of 18 patients to measure
MPTS in blood serum and saliva in order to observe the drug release profile,
and to assess the development of minocycline resistance. In November 1999, we
announced initial results from these trials:
. The primary endpoint was a reduction in mean pocket depth from
baseline, with the patient as the unit of analysis. Combined data from
the two pivotal studies of 747 patients showed significant pocket-
depth reduction in comparing MPTS plus S/RP to both S/RP alone and
S/RP plus vehicle. These results were statistically significant at the
99.9% level, or what is commonly referred to as p(less than or
=)0.001. This means that, applying standard statistical methods, the
chance that these results could have occurred by chance is less than
or equal to 1 in 1,000. Each study independently generated
statistically significant results.
. A key secondary endpoint was subgroup population analysis for reduced
mean pocket depth across all subgroups. These results were
statistically significant at the 99% level, or p(less than or =)0.01,
in the subgroups relating to smoking, age greater than 50 and prior
history of cardiovascular disease.
. An additional key secondary endpoint was responder analysis. This
analysis demonstrated that the S/RP plus MPTS group achieved a higher
percentage of pockets with greater than 2 mm reduction than did the
other groups.
. Additional analysis also revealed that pockets with increased severity
of disease (i.e., deeper pockets) respond to MPTS treatment with
increasing pocket depth reduction.
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. There appeared to be no safety issues related to the treatment of MPTS
among the 939 patients dosed in these studies. Thirteen patients
withdrew from the studies due to adverse events; however, we believe
that these events were not related to MPTS.
. Trace amounts of minocycline were detectable in serum during the first
18 hours, and in saliva during the first 14 days after administration,
providing evidence that MPTS is a slow-release formulation. We found
no changes in gastrointestinal microorganisms, providing no evidence
of antibiotic resistance.
Over the next few months, we expect to complete analysis of the clinical
data. We are at the same time preparing the NDA for submission to the FDA. The
NDA consists of five main sections:
. a summary of our trials from an efficacy standpoint;
. an overall safety summary;
. an annotated package insert;
. a complete final chemistry, manufacturing and controls description;
and
. a summary of our preclinical and toxicology studies.
We intend to make this submission in the first half of 2000.
Manufacturing and Materials Supply
We do not currently have any internal manufacturing capabilities. We rely
on two sole-source manufacturers for the production and packaging of MPTS and
on four sole-source suppliers for other required materials and components. If
we were to change any of our contract manufacturers or material suppliers, we
and they would need to satisfy regulatory requirements.
Contract Manufacturers
Applied Analytical Industries, Inc., or AAI, Wilmington, NC, manufactures
and performs the required testing of MPTS microspheres. We designed and own the
MPTS production equipment used by AAI. We are currently negotiating, but have
not finalized any long-term agreement with this manufacturer.
Packaging Coordinators, Inc., or PCI, Philadelphia, PA, a Cardinal Health
Company, fills the dispensers with the microspheres manufactured by AAI, and
provides all packaging services. We developed and own the equipment used by PCI
to fill the microspheres. We are currently negotiating, but have not finalized
any long-term agreement with this manufacturer.
Raw Material Suppliers
The polymer used in MPTS is custom-made for us according to procedures
and specifications supplied by us. We believe that alternative supply sources
are available, and that we could stockpile sufficient polymer to cover demand
until an alternate supplier is found, if needed. We are currently negotiating,
but have not finalized any long-term agreement with this supplier.
We purchase the active ingredient, minocycline, from an FDA-inspected
supplier. We are aware of other sources of minocycline, and we believe we could
rapidly arrange for another supplier, if necessary.
An injection molder manufactures the dispensers used to administer MPTS.
We own the molds, and expect that production could be easily transferred to
another qualified molder, if required.
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The stainless steel dispenser handle to which the MPTS dispenser is
attached for administration of the product is also manufactured for us. We
supplied the handle design. We expect that fabrication of the dispenser handle
could easily be transferred to another manufacturer, if necessary.
Commercialization
In the U.S., assuming we obtain FDA approval, we intend to create a sales
and marketing force that will target 3,700 periodontists and approximately
25,000 general dentists whom we believe to be "perio-aware", that is, those who
perform the most scaling and root planing procedures. We believe a sales and
marketing force of 50 to 75 persons will provide adequate reach and frequency,
and we expect to begin hiring and training activities in late 2000.
In international markets, we intend to market and sell MPTS through
arrangments with other parties, rather than establish our own sales force. We
are currently holding preliminary discussions with a number of companies.
Additional Product Candidates
We are developing multiple compounds to further establish a presence in
the oral care pharmaceutical market. Some programs are based on our core
technology, while additional programs are based on other technology licensed to
us. In connection with these product candidates, we have formed relationships
to capitalize on our core technology and exploit our expertise in formulation
and development. We believe these relationships will contribute to the
development and commercialization of our product candidates.
OC-1012 for the Prophylaxis and Treatment of Oral Mucositis
We are developing an agent for the prevention and treatment of oral
mucositis. Oral mucositis is a serious complication for patients receiving
chemotherapy and head and neck radiation therapy for cancer. In healthy
patients, the mucosal lining forms an important barrier, preventing entry of
potentially lethal organisms into the body. Normally, cells of the mucous
membranes lining the mouth and gastrointestinal tract undergo rapid renewal.
Both chemotherapy and head and neck radiation therapy for cancer interfere with
this renewal process, and can result in painful ulcers in the mouth and
esophagus. In extreme cases of oral mucositis, these ulcers can be an entry
point for disease organisms. In many cases, the mucositis advances to a point
where patients can no longer eat and must be hospitalized to be fed. In the
most severe cases, cancer treatment may be either stopped, delayed, or
treatment intensity reduced until the condition stabilizes. This may compromise
the patient's response to cancer treatment.
The American Cancer Society expects that approximately 1.2 million cases
of cancer will be diagnosed in the U.S. in 1999. A January 1995 Principles and
Practice of Oncology update states that more than 40% of patients receiving
standard chemotherapy, and virtually all patients who receive head and neck
radiation therapy, develop oral mucositis.
Our oral mucositis program is based on intellectual property developed
initially by Brigham and Women's Hospital of Boston, and licensed by us. We
have identified several compounds that are effective in reducing the severity
of mucositis in preclinical studies. We are currently applying our drug
delivery expertise to develop a formulation optimized for delivery of these
compounds. Our goal is to file an IND for an oral mucositis treatment product
candidate and begin clinical trials during 2001.
OC-1016 for Bone Regeneration
Our bone regeneration program is based on technology licensed from
Children's Hospital of Boston, and is currently in preclinical studies. The
technology is based on the protein osteopontin, which promotes the attachment
of bone forming cells. We are directing our program at two oral health
applications--dental
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implants and bone augmentation. Our technology may also have application
outside the oral cavity in orthopedics, which we believe presents potential
out-licensing opportunities.
We are currently developing two formulations as product candidates. One
formulation is a solution for coating dental implants to be applied prior to
installation. Dental implants are used to replace teeth that are lost due to
injury, or tooth decay, or as a consequence of periodontitis. An implant
procedure involves an initial step of installing a post into the jawbone, and a
second step of attaching an artificial tooth to the post. After the implant
post is installed, a patient must typically wait for three to four months for
the post to integrate securely into the bone before it is loaded with a new
tooth. This waiting period is uncomfortable and aesthetically displeasing, as
patients do not have use of the missing teeth. To the practitioner, it poses a
risk of stressing the implant before it properly integrates into the bone.
According to the National Institute of Dental Research, this premature
stressing is the leading cause of implant failure. Our program is directed at
developing an implant coating that would accelerate and strengthen integration
of the implant into the bone, thus reducing loading time and reducing early
implant failures. The ADA estimated in 1990 that approximately 640,000 implant
procedures were performed in the U.S.
We are also developing a semi-solid material that can be placed at a site
where bone growth is desired. Bone augmentation applications in the oral cavity
involve bone repair where the addition of bone will aid in supporting implants
and/or dentures, or reconstruction after tooth loss. To date, bone augmentation
procedures have lacked predictability in restoring sufficient quantity and
quality of bone. Our program is directed at providing a semi-solid material
that can be shaped precisely in the form of desired bone, thereby overcoming
the unpredictability of current bone growth approaches. We are designing the
material to be resorbed as new bone is deposited, which further simplifies the
procedure.
We are conducting work on the bone regeneration program through a
sponsored-research agreement with Children's Hospital of Boston, in
collaboration with our internal scientific staff. We expect product candidates
from this program to be regulated by the FDA as devices, rather than as drug
product candidates. Our goal is to file an initial IDE for at least one of
these formulations and begin clinical trials in 2001.
Our primary interests in non-oral health care applications include
orthopedic implants and spinal fusion. Other potential orthopedic applications
include wrist fractures, poor-healing fractures, and osteonecrosis, or
conditions of bone degeneration. Our current plan is to seek partners to
develop and commercialize the orthopedic and other non-oral health
applications.
MPTS for the Treatment of Traumatic Tooth Injury
We are engaged in a research and development effort jointly with the
University of North Carolina--Chapel Hill that targets traumatic tooth injury
as a potential line extension for MPTS. Our program is directed at improving
the viability of teeth that have been loosened or dislodged due to traumatic
injury. Recent studies suggest that topical application of antibiotics to the
tooth prior to reinstallation may improve the chance of recovery. We plan to
conduct preclinical studies in 2000 to understand MPTS' effect for this
indication.
Research and Development for the Treatment of Periodontitis
As part of a cooperative research agreement with the University of North
Carolina--Chapel Hill, we have begun work on a second treatment approach for
periodontitis as a follow-up to MPTS. This effort is aimed at identifying new
compounds to be administered via our drug-delivery system. Studies reveal that
much of the tissue destruction associated with periodontal disease is
ultimately caused by the body's response to inflammation, and we are testing
various compounds to affect this response. We believe that modifying the body's
response may augment our current antimicrobial approach.
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Technology, Licenses and Patents
MPTS and Our Core Technology
In February 1997, we licensed our first product candidate, MPTS, and our
core technology from American Cyanamid, now part of AHP. MPTS and this
technology are covered by seven issued U.S. patents that are owned by American
Cyanamid, now part of AHP. These patents claim the process for producing
microspheres, MPTS and other compositions produced by this process, the device
used for administering microspheres, the machine for filling this
administration device, and methods for treating dental conditions by the
administration of MPTS and other compositions produced using our microsphere
process. The AHP patents expire between 2008 and 2010, with the exception of
one patent covering the delivery-system technology that expires in 2014.
Corresponding patents are in effect or pending in other countries including
Australia, Canada, France, Germany, Italy, Japan, and Sweden where we believe
the market potential for MPTS is significant.
Under our agreement with AHP, we have an exclusive, worldwide license
under both the AHP patents and all related AHP technology to commercialize MPTS
and other products for use in the oral cavity. We also have a non-exclusive,
worldwide license under the AHP patents and technology to commercialize
products for use outside of the oral cavity. Additionally, we have the right to
sublicense this technology. Our agreement with AHP expires upon expiration of
the last to expire of the AHP patents, at which time our license rights become
fully paid-up and non-cancelable.
Our agreement with AHP required us to make an initial payment to AHP and
to grant AHP an equity position in OraPharma. The agreement further obligates
us to make payments to AHP if and when two milestones are achieved (FDA
acceptance of our NDA submission and FDA approval of our product candidates)
and to pay AHP royalties on sales of MPTS and other products that are covered
by the AHP patents or developed using the AHP technology.
In order to reacquire some of the rights to our core technology
previously licensed out by AHP, we were required to enter into a license
agreement with Technical Developments and Investments, Est., or TDI, a
corporation formed under the laws of Liechtenstein. Under this agreement, TDI
granted us an exclusive, worldwide sublicense to use the AHP technology in the
oral cavity. This agreement obligates us to pay royalties to TDI on sales of
products using the AHP technology in the oral cavity. Royalties payable to TDI
can be fully credited against up to 50% of the royalties payable under our
agreement with AHP.
In addition to our agreement with AHP, we have licensed three U.S.
patents from a periodontist and inventor, Gary R. Jernberg, DDS. One of these
patents expires in 2004 and covers local delivery of chemotherapeutics to treat
periodontitis by insertion of bioresorbable time-release microspheres into
periodontal pockets. The other two expire in 2010 and cover additional
embodiments of the method for local delivery using periodontal barriers. There
are no corresponding foreign patents. Our agreement with Dr. Jernberg requires
us to make royalty payments to him. In addition, this agreement obligates us to
make milestone payments to Dr. Jernberg (generally, upon the submission of the
NDA covering the licensed patents and upon FDA approval) and to engage him as
an ongoing consultant and to pay him royalties on sales of licensed products.
Royalties payable to Dr. Jernberg can be fully credited against up to 50% of
the royalties payable under our agreement with AHP.
Oral Mucositis Program
In December 1998, we entered into an agreement with Mucosal Therapeutics
LLC to license our oral mucositis technology. Mucosal Therapeutics is a
research entity established to commercially exploit this technology, which was
originally developed at Brigham and Women's Hospital in Boston. The technology
is the subject of two U.S. patent applications that have been assigned to
Mucosal Therapeutics. These patent
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applications claim methods for treating or preventing mucositis by
administering various combinations of inhibitors both alone and in combination
with antibiotics and other compounds. One of these patent applications was
filed in 1998 and the other in 1999. A patent application corresponding to both
U.S. patent applications has been filed under the Patent Cooperation Treaty or
PCT. This PCT application designates foreign countries where we believe the
market potential for a product to treat oral mucositis is significant.
Our license agreement with Mucosal Therapeutics affords us an exclusive,
worldwide license under the Mucosal technology to manufacture and sell
pharmaceutical products. The term of the license agreement is for the longer of
20 years or until expiration of the last to expire of any patents covering this
technology. Shortly after signing the license agreement, we paid Mucosal
Therapeutics an initial license fee and issued it warrants to purchase our
common stock. We are required to make payments to Mucosal Therapeutics, in the
form of cash and warrants to purchase our common stock, as preclinical and
clinical milestones are achieved and upon FDA approval of a pharmaceutical
product for the treatment of oral mucositis. The license agreement further
obligates us to pay Mucosal Therapeutics royalties on sales of pharmaceutical
products covered by or involving use of this technology. Additionally, we have
the right to sublicense this technology.
We have also entered into a research and consulting agreement with an
affiliate of Mucosal Therapeutics, Biomodels LLC to perform preclinical studies
on our behalf and to provide us with research and general consulting services
with respect to our development of the Mucosal technology. Our agreement with
Biomodels expires at the end of 2002.
Regeneration Program
In December 1998, we entered into an agreement to license our bone and
soft-tissue regeneration technology from Children's Medical Center Corporation,
or CMCC. This license covers two technologies, one relating to a non-
immunogenic bulking agent and the other to peptides derived from osteopontin
and related uses in bone regeneration. Two issued U.S. patents and one pending
U.S. patent application claim methods for using non-immunogenic cartilage and
bone suspension as bulking agents and expire in 2014 and 2016, respectively. A
corresponding application is pending in the European Patent Offices. Five
additional patent applications claim novel compositions and methods of use for
osteopontin peptides, methods and compositions for programming an organic
matrix for remodeling into a target tissue, and osteopontin peptide-coated
surfaces and methods of use. All of the patent applications were filed in 1997
and 1998. Corresponding PCT applications have been filed. The PCT applications
designate foreign countries where we believe the market potential for bone and
soft-tissue regeneration products is significant.
Our license agreement with CMCC provides us with worldwide license rights
under the CMCC patents and know-how to commercialize bone and soft-tissue
regeneration products for use in the oral cavity. Our license rights are
exclusive with respect to the CMCC patents and non-exclusive with respect to
the CMCC know-how. For products that are osseoinductive devices for bone
augmentation and regeneration, our license rights extend beyond the oral cavity
to all orthopedic uses in humans and therapeutic uses in animals. The term of
our license agreement with CMCC ends upon expiration of the last of the CMCC
patents to expire. Additionally, we have the right to sublicense this
technology.
Shortly after signing the license agreement, we made a payment to CMCC in
the form of shares of our common stock. We are required to make milestone
payments to CMCC upon submission of our first NDA and upon approval of our
first NDA. The license agreement further obligates us to pay CMCC royalties on
sales of products covered by the CMCC patents or which are specified bone and
soft-tissue regeneration products.
We have also entered into a sponsored-research agreement with Children's
Hospital, a non-profit affiliate of CMCC, to conduct research in the area of
bone and soft-tissue regeneration and perform related preclinical studies. The
sponsored-research agreement expires on October 1, 2002.
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Manufacturing
Our ability to conduct clinical trials on a timely basis, to obtain
regulatory approvals and to commercialize any of our product candidates will
depend in part on our ability to manufacture our product candidates either
directly or through third parties, at a competitive cost and in accordance with
applicable FDA and other regulatory requirements, including cGMPs.
We do not currently operate manufacturing facilities for clinical or
commercial production of our proposed product candidates. We have no experience
in manufacturing, and currently lack the resources and capability to
manufacture any of our proposed product candidates on a clinical or commercial
scale. Accordingly, we are, and intend to continue to be, dependent on third
parties for clinical- and commercial-scale manufacturing and distribution of
MPTS and our other product candidates. We are negotiating with various third-
party manufacturers and suppliers for production of MPTS to support product
candidate approval and commercialization.
Marketing and Sales
We currently have limited internal marketing, and no sales or
distribution capabilities. To promote our first product candidate, MPTS, in the
U.S., we intend to hire, train and, assuming we obtain FDA approval, deploy a
sales and marketing force of 50 to 75 professionals. This sales force would be
available to market our present and future product candidates to oral health
care professionals. In international markets, we intend to seek strategic
relationships to market and sell MPTS rather than establishing our own sales
force. We will also need to establish distribution capabilities to successfully
commercialize any of our product candidates. We may also promote our product
candidates through marketing relationships with one or more companies that have
established distribution systems and direct sales forces.
Government Regulation
The FDA and comparable regulatory agencies in state and local
jurisdictions and in foreign countries impose substantial requirements on the
clinical development, manufacture and marketing of pharmaceutical product
candidates. These agencies and other federal, state and local entities regulate
research and development activities and the testing, manufacture, quality
control, safety, effectiveness, labeling, storage, record-keeping, approval and
promotion of our product candidates. All of our product candidates will require
regulatory approval before commercialization. In particular, therapeutic
product candidates for human use are subject to rigorous preclinical and
clinical testing and other requirements of the Federal Food, Drug, and Cosmetic
Act, or FDC Act, implemented by the FDA, as well as similar statutory and
regulatory requirements of foreign countries. Obtaining these marketing
approvals and subsequently complying with ongoing statutory and regulatory
requirements is costly and time-consuming. Any failure by us or our
collaborators, licensors or licensees to obtain, or any delay in obtaining,
regulatory approvals or in complying with other requirements could adversely
affect the commercialization of product candidates and our ability to receive
product or royalty revenues.
The steps required before a new drug product candidate may be distributed
commercially in the U.S. generally include:
. conducting appropriate preclinical laboratory evaluations of the
product candidate's chemistry, formulation and stability, and
preclinical studies to assess the potential safety and efficacy of the
product candidate;
. submitting the results of these evaluations and tests to the FDA,
along with manufacturing information and analytical data, in an IND;
. making the IND effective after the resolution of any safety or
regulatory concerns of the FDA;
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. obtaining approval of Institutional Review Boards, or IRBs, to
introduce the drug into humans in clinical studies;
. conducting adequate and well-controlled human clinical trials that
establish the safety and efficacy of the product candidate for the
intended use, typically in the following three sequential, or slightly
overlapping stages:
Phase 1: The product candidate is initially introduced into healthy
human subjects or patients and tested for safety, dose tolerance,
absorption, metabolism, distribution and excretion;
Phase 2: The product candidate is studied in patients to identify
possible adverse effects and safety risks, to determine dosage
tolerance and the optimal dosage, and to collect some efficacy data;
and
Phase 3: The product candidate is studied in an expanded patient
population at multiple clinical study sites, to confirm efficacy and
safety at the optimized dose, by measuring a primary endpoint
established at the outset of the study;
. submitting the results of preliminary research, preclinical studies,
and clinical trials as well as chemistry, manufacturing and control
information on the product candidate to the FDA in an NDA; and
. obtaining FDA approval of the NDA prior to any commercial sale or
shipment of the product candidate.
This process can take a number of years and require substantial financial
resources. The results of preclinical studies and initial clinical trials are
not necessarily predictive of the results from large-scale clinical trials, and
clinical trials may be subject to additional costs, delays or modifications due
to a number of factors, including the difficulty in obtaining enough patients,
clinical investigators, product candidate supply, or financial support. The FDA
may also require testing and surveillance programs to monitor the effect of
approved product candidates that have been commercialized, and the agency has
the power to prevent or limit further marketing of a product candidate based on
the results of these post-marketing programs. Upon approval, a product
candidate may be marketed only in those dosage forms and for those indications
approved in the NDA. However, pursuant to recent Federal Court decisions, drug
marketers are in some limited circumstances permitted to distribute materials
concerning indications outside of the FDA labeling for product candidates.
In addition to obtaining FDA approval for each indication to be treated
with each product candidate, each domestic product candidate manufacturing
establishment must register with the FDA, list its product candidates with the
FDA, comply with cGMPs and permit and pass manufacturing plant inspections by
the FDA. Moreover, the submission of applications for approval may require
additional time to complete manufacturing stability studies. Foreign companies
that manufacture product candidates for distribution in the United States also
must list their product candidates with the FDA and comply with cGMPs. They are
also subject to periodic inspection by the FDA or by local authorities under
agreement with the FDA.
Any product candidates that we manufacture or distribute pursuant to FDA
approvals are subject to extensive continuing regulation by the FDA, including
record-keeping requirements and reporting of adverse experiences with the
product candidate. In addition to continued compliance with standard regulatory
requirements, the FDA may also require post-marketing testing and surveillance
to monitor the safety and efficacy of the marketed product candidate. Adverse
experiences with the product candidate must be reported to the FDA. Product
candidate approvals may be withdrawn if compliance with regulatory requirements
is not maintained or if problems concerning safety or efficacy of the product
candidate are discovered following approval.
The FDC Act also mandates that product candidates be manufactured
consistent with cGMPs. In complying with the FDA's regulations on cGMPs,
manufacturers must continue to spend time, money and effort in production,
recordkeeping, quality control, and auditing to ensure that the marketed
product candidate meets
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applicable specifications and other requirements. The FDA periodically inspects
manufacturing facilities to ensure compliance with cGMPs. Failure to comply
subjects the manufacturer to possible FDA action, such as Warning Letters,
suspension of manufacturing, seizure of the product, voluntary recall of a
product or injunctive action, as well as possible civil penalties. We currently
rely on, and intend to continue to rely on, third parties to manufacture our
compounds and product candidates. These third parties will be required to
comply with cGMPs.
Even after FDA approval has been obtained, further studies, including
post-marketing studies, may be required. Results of post-marketing studies may
limit or expand the further marketing of the products. If we propose any
modifications to a product, including changes in indication, manufacturing
process, manufacturing facility or labeling, a supplement to our NDA may be
required to be submitted to the FDA.
Products manufactured in the United States for distribution abroad will
be subject to FDA regulations regarding export, as well as to the requirements
of the country to which they are shipped. These latter requirements are likely
to cover the conduct of clinical trials, the submission of marketing
applications, and all aspects of manufacturing and marketing. Such requirements
can vary significantly from country to country. As part of our strategic
relationships, our collaborators may be responsible for the foreign regulatory
approval process of our product candidates, although we may be legally liable
for noncompliance.
Some of our product candidates may be regulated as medical devices by the
FDA. Under the FDC Act, medical devices are instruments, machines, implants, in
vitro reagents, or any contrivance that is intended to affect the structure or
function of the body of man or animals, which does not achieve its primary
intended purposes through chemical action within or on the body of man or
animals and which is not dependent upon being metabolized for the achievement
of its primary intended purposes. The FDA's regulation of certain types of
medical devices is similar in many respects to its regulation of drugs,
including requirements for pre-approval testing, manufacture, quality control,
safety, effectiveness, labeling and promotion.
We are also subject to various federal, state and local laws, rules,
regulations and policies relating to safe working conditions, laboratory and
manufacturing practices, the experimental use of animals and the use and
disposal of hazardous or potentially hazardous substances used in connection
with our research work. Although we believe that our safety procedures for
handling and disposing of such materials comply with current federal, state and
local laws, rules, regulations and policies, the risk of accidental injury or
contamination from these materials cannot be entirely eliminated.
The extent of government regulation which might result from future
legislation or administrative action cannot be accurately predicted. In this
regard, although the Food and Drug Administration Modernization Act of 1997
modified and created requirements and standards under the FDC Act with the
intent of facilitating product candidate development and marketing, the FDA is
still in the process of developing regulations implementing the Food and Drug
Administration Modernization Act of 1997. Consequently, the actual effect of
these developments on our business is uncertain and unpredictable.
Competition
The pharmaceutical industry, and the oral care pharmaceuticals business
in particular are intensely competitive and are characterized by rapid
technological progress. Some pharmaceutical and oral care pharmaceutical
companies and academic and research organizations currently engage in, have
engaged in or may engage in efforts related to the discovery and development of
new oral care pharmaceuticals, some of which may be competitive. Significant
levels of research also occur in universities and other nonprofit research
institutions. These entities have become increasingly active in seeking patent
protection and licensing revenues for their research results. They also compete
with us in recruiting skilled scientific talent.
We are currently aware of three FDA-approved products introduced in the
U.S. during 1998 for the treatment of periodontitis. They are: Atridox, a
product developed by Atrix Laboratories and marketed by Block
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Drug; PerioChip, a product developed by Perio Products and marketed by Astra;
and Periostat, a drug developed and marketed by CollaGenex. Atridox and
PerioChip are chair-side therapies involving the insertion of drug products
into the periodontal pocket by the oral care professional. Periostat represents
a systemic approach toward treating periodontal disease through enzyme
inhibition.
We are also aware of three products introduced between 1994 and 1998 for
the treatment of periodontitis. Of the three, neither Dentomycin Gel, developed
and marketed by Lederle, nor Elyzol Dental Gel, developed and marketed by
Alpharma, is currently approved for use in the U.S. We believe the third
product, Actisite Fiber, developed by Alza and sold by Procter & Gamble, while
approved in the U.S., is no longer actively promoted.
We believe that if we obtain FDA approval for any of our product
candidates, our ability to compete successfully will be based upon many
factors, including:
. efficacy and safety of our products;
. methods of administering our products;
. degree of clinical benefits of our products relative to their costs;
. timing and scope of regulatory approval;
. product reliability and availability;
. marketing and sales capability;
. patent protection; and
. reimbursement coverage from insurance companies and others.
Our competitive position will also depend upon our ability to attract and
retain qualified personnel, to obtain patent protection or otherwise develop
proprietary products or processes, and to secure sufficient capital resources
for the often substantial period between technological conception and
commercial sales. Because our product candidates have not been approved by the
FDA and are still under development, our relative competitive position in the
future is difficult to predict.
Employees
As of December 31, 1999, we had 18 employees. Of these employees, 11 were
engaged in research, development, clinical testing, regulatory affairs and/or
manufacturing activities, and seven were engaged in marketing, finance and
administrative activities. None of our employees is covered by collective
bargaining agreements. We consider relations with our employees to be good.
Facilities
Our leased corporate facilities, located in Warminster, Pennsylvania,
currently occupy approximately 11,300 square feet. The lease expires in
September of 2003 and has two five-year renewal options. We believe that our
existing facility is adequate for our current needs and that suitable
additional or alternative space will be available in the future on commercially
reasonable terms.
Legal Proceedings
We are not currently a party to any material legal proceedings.
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MANAGEMENT
Executive Officers and Directors
The following table presents information about our executive officers and
directors. Our board of directors is divided into three classes serving
staggered three-year terms.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Michael D. Kishbauch.... 50 President, Chief Executive Officer and Director
Mark B. Carbeau......... 39 Vice President, Corporate Development
J. Ronald Lawter,
Ph.D.................. 56 Vice President, Chief Scientific and Technical Officer
Jan N. Lessem, M.D.,
Ph.D.................. 51 Vice President, Chief Medical Officer
James A. Ratigan........ 51 Vice President, Chief Financial Officer and Secretary
Joseph E. Zack.......... 48 Vice President, Sales and Marketing
James J. Mauzey (1)..... 51 Director
Christopher Moller,
Ph.D. (2)............. 46 Director
Eileen M. More (2)...... 53 Director
Harry T. Rein (1)....... 55 Director
Seth A. Rudnick, M.D.... 51 Director
David I. Scheer (1)..... 47 Director
Jesse I. Treu, Ph.D.
(2)................... 52 Director
</TABLE>
- --------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
Mr. Kishbauch has served as our President and Chief Executive Officer and
as a director of OraPharma since September 1996. He served as President and
Chief Operating Officer for two business units of Nelson Communications, Inc.,
an integrated healthcare services firm, from February 1995 to August 1996. He
also served as President, Chief Operating Officer and director of MedImmune,
Inc., a Maryland-based biotechnology company, from December 1992 to February
1995. From February 1982 to May 1992, Mr. Kishbauch served with the
Pharmaceuticals Division of Ciba-Geigy Corporation in various sales and
marketing positions, ending as Vice President Product Planning and Promotion.
Mr. Kishbauch worked through positions of increasing responsibility in brand
management with The Procter and Gamble Company from June 1976 to February 1982.
Mr. Kishbauch received a B.A. in biology from Wesleyan University and an M.B.A.
from the Wharton School of the University of Pennsylvania.
Mr. Carbeau has served as our Vice President, Corporate Development since
May 1999. From September 1996 to April 1999, he served as General Partner in
The Lucas Group, a Boston-based strategy consulting and mergers and
acquisitions advisory firm, and from January 1995 to September 1996 as a
Principal in North Atlantic Capital, a private equity firm. Prior to that, he
was a consultant and case manager for The Boston Consulting Group, a management
consulting firm, from September 1990 through December 1994. Mr. Carbeau held a
number of cross-functional positions with Eli Lilly and Company, a
pharmaceutical company, from September 1982 to July 1988. He holds a B.S. in
industrial engineering from the Pennsylvania State University and an M.B.A.
from the Wharton School of the University of Pennsylvania.
Dr. Lawter has served as our Vice President, Chief Scientific and
Technical Officer since he joined us in March 1997. From October 1983 to March
1997, he held scientific and management positions in pharmaceutical product
development at American Cyanamid and at American Home Products after its
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acquisition of American Cyanamid in 1994. While at American Cyanamid, he led
the team that developed the drug-delivery technology that is the basis for our
lead product, MPTS. From August 1979 through October 1983, he was a senior
research scientist in the Advanced Drug Delivery Group at Ciba-Geigy. From 1977
through 1979, he was a research manager in the Biomedical Division of Abcor,
Inc. and from 1972 through 1977, was a consultant with Arthur D. Little, Inc.
He received a B.S. in chemistry from the University of South Carolina and a
Ph.D. in physical chemistry from the Massachusetts Institute of Technology.
Dr. Lessem has served as our Vice President, Chief Medical Officer since
June 1998. From May 1995 to June 1998, he served as Medical Director and Vice
President of Drug Strategy at Takeda America, a pharmaceutical company. Prior
to that, he was involved in various clinical research and management roles at
several pharmaceutical companies, specifically: SmithKline Beecham from June
1991 to May 1995; Union Chemique Belgique Pharmaceutical in Brussels, Belgium,
from May 1990 to May 1991; Syntex Research from January 1986 to May 1990;
Bristol Myers from August 1983 to December 1985; and Merck Sharp & Dohme from
May 1982 to August 1983. Between 1974 and 1982, he was a Fellow, instructor and
Associate Professor in Cardiology and Geriatrics, at the University of Lund, in
Sweden. He is a Fellow of the American College of Cardiology, and a member of
the New York Academy of Sciences, as well as The Swedish Medical Association.
Dr. Lessem earned an M.D. from the University of Lund in Sweden in 1974, a
Ph.D. in clinical cardiology from the same university in 1982, and was Board
Certified in Cardiology in Sweden in 1982.
Mr. Ratigan has served as our Vice President, Chief Financial Officer
since June 1997 and was named Secretary in December 1999. From February 1997 to
June 1997, Mr. Ratigan served as the Chief Financial Officer of TL Ventures,
one of the initial investors in OraPharma. From September 1996 to February
1997, Mr. Ratigan served as the Vice President--Finance of Robotic Vision
Systems, Inc., a publicly-held company widely engaged in machine vision and
electronic imaging. From October 1993 to August 1996, Mr. Ratigan served as the
Executive Vice President, Chief Operating Officer and Chief Financial Officer
and a director of Perceptron, Inc., a publicly-held company which provides
three dimensional machine vision technologies to the automotive, forestry
products and aerospace industries. From March 1983 to October 1992, Mr. Ratigan
was with the Adler Group, a venture capital fund, where he served in a number
of positions including venture manager, Chief Financial Officer, and Chief
Executive Officer of a machine vision company controlled by the Adler Group.
Earlier, Mr. Ratigan spent eight years with Arthur Andersen LLP, where, as a
manager, he focused on entrepreneurial clients. Mr. Ratigan received his B.S.
in finance and accounting from LaSalle University, Philadelphia, Pennsylvania
and is a CPA.
Mr. Zack has served as our Vice President, Sales and Marketing since
March 1998. From 1993 to 1998, Mr. Zack held senior management positions of
General Manager and Executive Director Marketing with Advanced Tissue Sciences,
a biotechnology company focused on tissue engineering. Prior to that, he was
Executive Director Marketing for Ciba-Geigy from 1987 to 1993, and Product
Director from 1982 to 1987, where he was responsible for a number of successful
product launches. From 1973 to 1982, he held positions in sales and new product
development with Ciba-Geigy. Mr. Zack obtained a B.A. in biology from Colgate
University, and an M.B.A. from St. John's University in New York.
Mr. Mauzey has been a director of OraPharma since July 1997. Since March
1999, Mr. Mauzey has been the Chief Executive Officer of Innovex, a division of
Quintiles Transnational. From March 1994 through February 1999, Mr. Mauzey was
Chairman and Chief Executive Officer of Alteon, Inc., a biotechnology company.
Prior to that, he spent 22 years in major roles with leading pharmaceutical
companies, including as President of the Bristol-Myers Squibb U.S.
Pharmaceutical Division from March 1989 through March 1994 and as the President
of the Squibb Corporation U.S. Pharmaceutical Group and Vice President of both
U.S. and international operations of Lederle.
Dr. Moller has been a director of OraPharma since March 1997. Since 1990,
he has served as Vice President of TL Ventures, a company which manages a
series of private equity funds. Since 1994, Dr. Moller has served as a Managing
Director of the following funds managed by TL Ventures, Radnor Venture
Partners, Technology Leaders, Technology Leaders II, TL Ventures III and TL
Ventures IV. He is principally responsible
39
<PAGE>
for the life science portfolio at TL Ventures, specializing in financing and
development of early-stage biotechnology, bioinformatics and e-health
companies. Dr. Moller also currently serves as a director on the boards of
Adolor Corporation, Assurance Medical, Esperion Therapeutics, Immunicon
Corporation, eMerge Interactive, Inc., ChromaVision Systems, Inc. and Genomics
Collaborative. Dr. Moller holds a Ph.D. in immunology from the University of
Pennsylvania.
Ms. More has been a director of OraPharma since September 1996. She has
been associated with Oak Investment Partners, a venture capital firm, since
1978 and has been a general partner or managing member since 1980. She
currently serves as a director of several private companies including Halox
Technologies, Psychiatric Solutions and Teloquent Communications Corp. Ms. More
was also a founding investor in Genzyme and has also been responsible for
early-stage investments in numerous companies including Alkermes, Alexion
Pharmaceuticals, Esperion Theraputics, KeraVision, Pharmacopeia, Trophix
Pharmaceuticals, Compaq Computer, Network Equipment Technologies, Octel
Communications and Stratus Computer.
Mr. Rein has been a director of OraPharma since March 1997. He is the
principal founder of Canaan Partners and has served as Managing General Partner
since its inception in 1984, with extensive experience working with small and
mid-sized companies. Prior to that, he was President and Chief Executive
Officer of GE Venture Capital Corporation. Mr. Rein joined General Electric
Company in 1979 and directed several of GE's lighting businesses as General
Manager before joining the venture capital subsidiary. Prior to his GE career,
Mr. Rein worked in various capacities with Polaroid Corporation, Transaction
Systems, Inc. and Gulf Oil Corporation. In addition to serving on the boards of
several private companies, Mr. Rein is also on the board of Anadigics.
Dr. Rudnick has been a director of OraPharma since July 1997. He
currently is consulting for several venture capital firms, and serves on the
board of NaPro BioTherapeutics, Inc. He was Chairman and CEO of
Cytotherapeutics, Inc. from 1995 through 1998. Prior to that, Dr. Rudnick
served as Senior Vice President of the R.W. Johnson Pharmaceutical Research
Group of Ortho Pharmaceutical Corporation, Senior Vice President of Development
with Biogen Research Corporation and Director of Clinical Research with
Schering-Plough. Dr. Rudnick has held various faculty appointments with Brown
University, the University of North Carolina and Yale University, and received
his M.D. from the University of Virginia, with fellowships at Yale in oncology
and epidemiology.
Mr. Scheer has been a director of OraPharma since September 1996. He has
been President of Scheer & Company, Inc., a firm with activities in venture
capital, corporate strategy, and transactional advisory services focused on the
life sciences industry, since 1981. In venture capital, Mr. Scheer has been
involved in the founding of our company, as well as ViroPharma, Inc., Esperion
Therapeutics, Inc. and Achillon Pharmaceuticals, Inc. and has been a member of
the board of directors of Nonlinear Dynamics, Inc. and a series of private and
public companies. He has led engagement teams from Scheer providing corporate
strategic advisory services to a broad range of companies including Agouron
Pharmaceuticals (now a division of Warner-Lambert), American Cyanamid (now a
division of AHP), B.F. Goodrich, Pharmacia AB, Pharmacia & Upjohn, Hoffman La-
Roche, Eli Lilly, and a range of smaller, publicly- and privately-held
companies. Mr. Scheer has also led or played a significant role in a series of
transactions involving corporate alliances, licensing arrangements,
divestments, acquisitions and mergers in the life sciences. He received his
B.A. from Harvard College and his M.S. from Yale University.
Dr. Treu has been a director of OraPharma since December 1998. He is a
managing member of Domain Associates, L.L.C., and has served in this or similar
capacities with this firm since 1986. He has served as a director of over 20
early-stage health companies, ten of which have so far become public companies.
He is currently a director of Focal, Inc., GelTex Pharmaceuticals, Trimeris
Inc. and Simione Central Holdings, Inc. Prior to the formation of Domain, Dr.
Treu had 12 years of health care experience at General Electric and Technicon
Corporation in a number of research, marketing management and corporate staff
positions. Dr. Treu
40
<PAGE>
received his B.S. from Rensselaer Polytechnic Institute, and from Princeton
University his M.A. and Ph.D. in physics.
Board of Directors
Our board of directors is divided into the following three classes, with
the members of the respective classes serving for staggered three-year terms:
. Class 1 directors, whose terms expire at the annual meeting of
stockholders to be held in 2001;
. Class 2 directors, whose terms expire at the annual meeting of
stockholders to be held in 2002; and
. Class 3 directors, whose terms expire at the annual meeting of
stockholders to be held in 2003.
Mr. Mauzey and Dr. Rudnick are our Class 1 directors, Dr. Moller, Mr.
Scheer and Dr. Treu are our Class 2 directors, and Mr. Kishbauch, Ms. More and
Mr. Rein are our Class 3 directors. At each annual meeting of stockholders
following this offering, our stockholders will elect the successors to
directors whose terms have expired to serve from the time of election and
qualification until the third annual meeting following election.
All directors were nominated and elected as directors by the holders of
our common and preferred stock in accordance with provisions of our current
stockholders agreement. These provisions of our stockholders agreement will
terminate upon the completion of this offering. Each of the individuals will
remain as a director until resignation or until the stockholders elect their
replacements in accordance with our certificate of incorporation.
Our executive officers are appointed by the board of directors and serve
until their successors have been duly elected and qualified. There are no
family relationships among any of our executive officers or directors.
Board Committees
Our board of directors has a compensation committee and an audit
committee. The compensation committee is responsible for the administration of
all salary and incentive compensation plans for our officers, including bonuses
and options granted under our option and equity compensation plans. The audit
committee is responsible for reviewing with management our financial controls
and accounting and reporting activities. In addition, the audit committee will
review the qualifications of our independent auditors, make recommendations to
the board of directors regarding the selection of independent auditors, review
the scope, fees and results of any audit and review any non-audit services and
related fees.
41
<PAGE>
Scientific Advisory Board
The Chairman of OraPharma's Scientific Advisory Board is Ray C. Williams,
DMD, who was first introduced to our technology and MPTS while Chairman of
Harvard's Periodontology Department, and who more recently has served as
Chairman of Periodontics at the University of North Carolina--Chapel Hill.
Through Dr. Williams, we have retained a Scientific Advisory Board
consisting of individuals with expertise in dental and periodontal medicine,
oral pathology and soft-tissue therapeutics. This group was assembled during
our first quarter of operations. Members of our Scientific Advisory Board
advise us concerning long-term scientific planning and research and
development, periodically evaluate our research programs, and periodically
review and evaluate our clinical development plans and clinical trials. Dr. Van
Dyke was a principal investigator for one of our Phase 2 trials and Drs.
Cochran and Van Dyke were principal investigators in our Phase 3 trials. The
current members of our Scientific Advisory Board are as follows:
<TABLE>
<CAPTION>
Member University Affiliation Professional Concentration
- --------------------- --------------------------------- -------------------------------
<S> <C> <C>
Dr. Ray Williams Professor/Chairman Educator and expert in host
(Chairman) Periodontology, UNC--Chapel pathways and periodontal
Hill; formerly Chairman, disease
Department of Periodontology,
Harvard University
Dr. Steven Professor, UNC--Chapel Hill; Inflammation research, link
Offenbacher formerly Chairman of between infant birth weight,
Periodontology, Emory cardiac conditions and
University periodontal disease
complications of cancer
therapy
Dr. George McDonald Professor, University of Gastroenterology, Soft-tissue
Washington, Fred Hutchinson disease, oral mucositis
Cancer Center
Dr. David Cochran Professor/Department Chairman, Growth factors, regeneration,
University of Texas San Antonio implantology
Dr. Niklaus Lang Professor/Department Chairman, Periodontology, implantology
University of Bern (Switzerland) research
Dr. Roy Page Professor, University of Microbiology, immunology
Washington
Dr. James Sciubba Director of Dental and Oral Dental education, oral
Medicine, Johns Hopkins Medical pathology and medicine, soft-
Center tissue disease
Dr. Thomas Van Dyke Professor, Boston University Inflammatory process in
periodontal disease, clinical
trials
</TABLE>
Director and Scientific Advisory Board Compensation
We reimburse each member of our board of directors and our scientific
advisory board for out-of-pocket expenses incurred in connection with attending
board meetings. We also pay each member of our board of directors and
scientific advisory board who is not an investor a fee of $1,500 for each board
meeting attended, and have granted stock options to each member of our
scientific advisory board.
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<PAGE>
Executive Compensation
The following table presents information concerning the compensation we
paid for the years ended December 31, 1999 and 1998 to our chief executive
officer and to each of our other five most highly compensated executive
officers.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation Awards
------------------- ---------------------
Restricted Securities
Stock Underlying All Other
Name and Principal Position Year Salary Bonus Awards Options Compensation (1)
- --------------------------- ---- ---------- --------- ---------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Michael D. Kishbauch..... 1999 $ 233,650 $ 67,095 (5) 16,823 $ 6,974
President, Chief 1998 212,458 63,900 (5) -- 13,960
Executive Officer and
Director
James A. Ratigan......... 1999 151,125 30,000 -- 3,750 307
Vice President, Chief 1998 122,875 36,000 -- -- 514
Financial Officer and
Secretary
James R. Lawter, Ph.D. .. 1999 133,087 33,270 (6) 10,000 154
Vice President, Chief 1998 126,469 25,350 (6) -- 5,535
Scientific and
Technical Officer
Jan N. Lessem, M.D.,
Ph.D.(2)............... 1999 195,542 58,663 -- 9,022 20,307
Vice President, Chief
Medical Officer 1998 102,917 22,167 -- 52,500 300
Joseph E. Zack(3)........ 1999 166,000 33,200 -- 3,000 25,307
Vice President, Sales
and Marketing 1998 117,222 24,000 -- 62,500 38,691
Mark B. Carbeau(4) ...... 1999 116,846 23,333 -- 100,000 179
Vice President, Business
Development 1998 -- -- -- -- --
</TABLE>
- --------
(1) Includes in 1999 $6,667, $20,000 and $25,000 forgiveness of loans to Mr.
Kishbauch, Dr. Lessem and Mr. Zack, respectively, and term life insurance
premiums in the amounts of $307, $307, $154, $307, $307 and $179 paid by us
for Mr. Kishbauch, Mr. Ratigan, Dr. Lawter, Dr. Lessem, Mr. Zack and Mr.
Carbeau, respectively, during 1999. Includes $13,583 partial forgiveness of
a loan to Mr. Kishbauch, $4,974 of relocation expense reimbursement to Dr.
Lawter, $38,475 of relocation expenses reimbursed to Mr. Zack, and term
life insurance premiums in the amounts of $377, $514, $561, $300 and $216
paid by us for Mr. Kishbauch, Mr. Ratigan, Dr. Lawter, Dr. Lessem and Mr.
Zack, respectively, during 1998.
(2) Dr. Lessem's employment began on June 1, 1998, and the table above reflects
only compensation paid since this date.
(3) Mr. Zack's employment began on March 23, 1998, and the table above reflects
only compensation paid since this date.
(4) Mr. Carbeau's employment began on May 1, 1999, and the table above reflects
only compensation paid since this date.
(5) No restricted stock grants were made to Mr. Kishbauch during 1999 or 1998.
As of December 31, 1999, Mr. Kishbauch held 336,462 shares of restricted
common stock, subject to a restricted stock purchase agreement, dated March
6, 1997. These restricted shares were deemed to have a value of $5,383,056
as of the last day of the year, based on the assumed offering price of
$16.00 per share less the $.001 price per share paid for those shares. As
of December 31, 1999, 218,700 of these shares had vested and the remaining
35% of the restricted shares will vest at the rate of 5% per calendar
quarter over Mr. Kishbauch's period of continued service with us.
(6) No restricted stock grants were made to Dr. Lawter during 1999 or 1998. As
of December 31, 1999, Dr. Lawter held 89,375 shares of restricted common
stock, subject to a restricted stock purchase agreement, dated March 19,
1997. These restricted shares were deemed to have a value of $1,429,911 as
of the last day of the year, based on the assumed offering price of $16.00
per share less the $.001 per share paid for those shares. As of December
31, 1999, 67,031 of these shares had vested and the remaining 25% of the
restricted shares will vest at the rate of 5% per calendar quarter over Dr.
Lawter's period of continued service with us.
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<PAGE>
Stock Option Grants
The following table contains information concerning stock options to
purchase common stock that we granted in 1999 to each of the officers named in
the summary compensation table. We generally grant stock options at 100% of the
fair market value of the common stock as determined by our board of directors
on the date of grant. In reaching the determination of fair market value at the
time of each grant, the board of directors considers a range of factors,
including our current financial position, results of operations and cash flows,
the status of development activities for our product candidates, our assessment
of competitive position in our market and prospects for the future, current
industry market conditions, including valuations for comparable companies and
the illiquidity of an investment in the common stock. We granted stock options
to employees to purchase a total of 172,270 shares of common stock in 1999.
Option Grants in 1999
<TABLE>
<CAPTION>
Individual Grants
------------------------------------------
Potential Realizable
Value at Assumed
Percent of Annual Rates
Number of Total of Stock Price
Securities Options Appreciation
Underlying Granted to Exercise for Option Term
Options Employees Price Per Expiration --------------------
Name Granted in 1999 Share Date 5% 10%
- ---- ---------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Michael D. Kishbauch.... 16,823 9.8% $.60 1-1-09 $ 6,348 $ 16,087
James A. Ratigan........ 3,750 2.2 .60 1-1-09 1,415 3,586
James R. Lawter, Ph.D... 10,000 5.8 .60 1-1-09 3,773 9,562
Jan N. Lessem, M.D.,
Ph.D. ................ 9,022 5.2 .60 1-1-09 3,404 8,627
Joseph E. Zack.......... 3,000 1.7 .60 1-1-09 1,132 2,869
Mark B. Carbeau......... 100,000 58.0 .60 5-1-09 37,734 95,625
</TABLE>
The following table contains information concerning stock options to
purchase common stock held as of December 31, 1999 by each of the officers
named in the summary compensation table that have stock options.
1999 Year-End Option Values
<TABLE>
<CAPTION>
Number of Shares Value of Unexercised In-
Underlying Unexercised the-Money Options at Year
Options at Year End End(1)
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Michael D. Kishbauch...... -- 16,823 -- $ 259,074
James A. Ratigan.......... 37,500 41,250 $586,500 644,250
James R. Lawter, Ph. D.... -- 10,000 -- 154,000
Jan N. Lessem, M.D.,
Ph.D. .................. 15,750 45,772 246,330 713,709
Joseph E. Zack............ 21,875 43,625 324,125 681,575
Mark B. Carbeau........... -- 100,000 -- 1,540,000
</TABLE>
- --------
(1) There was no public trading market for the common stock as of December 31,
1999. Accordingly, these values have been calculated on the basis of the
assumed offering price of $16.00 per share minus the applicable per share
exercise price.
Employment Agreements
None of our executive officers has entered into employment agreements
with us. Our policy is to provide salary, benefits continuation and continued
vesting for six months if we terminate an executive officer without cause. In
addition, all existing stock options and shares of restricted common stock held
by an executive officer will vest upon any termination without cause following
a change of control of our company.
44
<PAGE>
Equity Compensation Plans
1996 Stock Option Plan
We maintain the 1996 Stock Option Plan, which has been approved by our
board of directors and our stockholders. The 1996 plan provides for grants of
incentive stock options and nonqualified stock options to our directors,
officers, employees, consultants and advisors; however, only employees,
officers, and directors who are our employees may receive grants of incentive
stock options. The 1996 plan authorizes up to 634,412 shares of common stock
for issuance under the terms of the plan. As of December 31, 1999, 586,472
options were outstanding under the 1996 plan. We will not make any additional
grants under the 1996 plan.
1999 Equity Compensation Plan
We also maintain the 1999 Equity Compensation Plan which has been
approved by our board of directors and stockholders. The 1999 plan provides for
grants of incentive stock options, nonqualified stock options, stock awards and
performance units to our employees, advisors, consultants and non-employee
directors.
General. The 1999 plan authorizes up to 1,250,000 shares of our common
stock for issuance under the terms of the plan. No more than 500,000 shares in
the aggregate may be granted to any individual in any calendar year. If options
granted under the plan expire or are terminated for any reason without being
exercised, or if stock awards or performance units are forfeited, the shares of
common stock underlying the grants will again be available for purposes of the
plan. No options have been granted under the 1999 plan.
Administration of the Plan. The compensation committee of the board of
directors administers and interprets the plan. The compensation committee has
the sole authority to:
. determine the individuals to whom grants will be made under the plan;
. determine the type, size and terms of the grants to be made to each
individual;
. determine the time when the grants will be made and the duration of
any exercise or restriction period, including the criteria for
exercisability and acceleration of exercisability;
. amend the terms of any previously issued grant; and
. deal with any other matters arising under the plan.
Grants. Grants under the plan may consist of:
. options intended to qualify as incentive stock options within the
meaning of Section 422 of the Internal Revenue Code;
. nonqualified stock options that are not intended to so qualify;
. stock awards; and
. performance units.
Eligibility for Participation. Grants may be made to any employee of
OraPharma or any of our subsidiaries, including employees who are our officers
or members of our board of directors, and to any non-employee member of our
board of directors. Consultants and advisors who perform services for us or any
of our subsidiaries are also eligible to receive grants under the plan. No
options have been issued under the 1999 plan.
Options. Incentive stock options may be granted only to employees.
Nonqualified stock options may be granted to employees, non-employee directors,
consultants and advisors. The exercise price of common stock
45
<PAGE>
underlying an option will be determined by the compensation committee, and may
be equal to or greater than the fair market value of our common stock on the
date the option is granted.
Participants may pay the exercise price:
. in cash;
. with the approval of the compensation committee, by delivering shares
of common stock owned by the grantee and having a fair market value on
the date of exercise equal to the exercise price of the option;
. payment through a broker in accordance with procedures permitted by
Regulation T of the Federal Reserve Board; or
. by such other method as the compensation committee may approve.
Options become exercisable according to the terms and conditions
determined by the compensation committee and specified in the grant instrument.
The compensation committee may accelerate the exercisability of any or all
outstanding options at any time for any reason. The compensation committee will
determine the term of each option, up to a maximum ten-year term. The term of
an incentive stock option granted to an employee who owns more than 10% of our
stock may not exceed five years from the date of grant.
Stock Awards. The compensation committee may issue shares of common stock
to participants subject to restrictions or no restrictions, as the compensation
committee determines. Unless the compensation committee determines otherwise,
during the restriction period, grantees will have the right to vote shares of
stock awards and to receive dividends or other distributions paid on such
shares. If a grantee's employment or service terminates during the restriction
period or if any other conditions are not met, the stock awards will terminate
as to all shares on which restrictions are still applicable, and the shares
must be immediately returned to us, unless the compensation committee
determines otherwise.
Performance Units. The compensation committee may make grants of
performance units to employees, consultants and advisors. Performance units may
be payable partly in cash or shares of our common stock, provided that the cash
portion does not exceed 50% of the amount to be distributed at the end of a
specified performance period. Payment will be contingent on achieving
performance goals by the end of the performance period. The measure of a
performance unit shall equal the fair market value of a share of our common
stock. The compensation committee will determine the performance criteria, the
length of the performance period, the maximum payment value of an award, the
minimum performance goals required before payment will be made, and any other
conditions the compensation committee deems appropriate and consistent with the
plan and Section 162(m) of the Internal Revenue Code.
Deferrals. The compensation committee may permit or require that a
grantee defer the receipt of cash or the delivery of shares that would
otherwise be due to the grantee in connection with any option, the lapse or
waiver of restrictions applicable to stock awards, or the satisfaction of any
requirements or objectives with respect to performance units.
Transferability. Grants are generally not transferable by the
participant, except in the event of death. However, the compensation committee
may permit participants to transfer nonqualified stock options to family
members or related entities on such terms as the compensation committee deems
appropriate.
Amendment and Termination of the Plan. The board of directors may amend
or terminate the plan at any time. However, the board of directors may not make
any amendment without stockholder approval if such stockholder approval is
required by Section 162(m) or Section 422 of the Internal Revenue Code or is
required by an applicable stock exchange. The plan will terminate on the day
immediately preceding the tenth anniversary of its effective date, unless the
board of directors terminates the plan earlier or extends it with approval of
the stockholders.
46
<PAGE>
Adjustment Provisions. Upon a merger, spin-off, stock split or other
transaction identified in the plan, the compensation committee may
appropriately adjust:
. the maximum number of shares available for grants;
. the maximum number of shares that any participant may be granted in
any year;
. the number of shares covered by outstanding grants;
. the kind of shares issued under the plan; and
. the price per share or the applicable market value of such grants.
Change of Control. Upon a change of control where we are not the
surviving entity or where we survive only as a subsidiary of another entity,
unless the compensation committee determines otherwise, all outstanding grants
will be assumed by or replaced with comparable options or other grants by the
surviving corporation. In addition, upon a change of control, the compensation
committee may:
. accelerate the vesting and exercisability of outstanding stock options
and stock awards;
. determine that grantees holding performance units will receive a
payment in settlement of these performance units;
. require that grantees surrender their outstanding options in exchange
for payment by us, in cash or common stock, as determined by the
compensation committee, in an amount equal to the amount by which the
fair market value of the shares of common stock subject to the
grantee's unexercised options exceeding the exercise price of those
options;
. after giving grantees an opportunity to exercise their outstanding
options terminate any or all unexercised options.
A "change of control" is defined to occur if:
. any person becomes a beneficial owner, directly or indirectly, of
stock representing more than 50% of the voting power of the then-
outstanding shares of our stock;
. the stockholders or the directors, as appropriate, approve:
. any merger or consolidation with another corporation where our
stockholders, immediately before such transaction, will not
beneficially own, immediately after the transaction, shares
entitling such stockholders to more than 50% of all votes to which
all stockholders of the surviving corporation would be entitled in
the election of directors;
. a sale or other disposition of all or substantially all our assets;
or
. a liquidation or dissolution.
. any person commences a tender offer or exchange offer for 30% or more
of the voting power of our then outstanding shares; or
. after any election of our directors, our board of directors consists
of a majority of directors who have been members of our board for less
than two years, unless at least two-thirds of the directors who were
in office prior to the election or nomination of the new director vote
for the new director.
Section 162(m). Under Section 162(m) of the Internal Revenue Code, we may
be precluded from claiming a federal income tax deduction for total
remuneration in excess of $1,000,000 paid to our chief executive officer or to
any of our other four mostly highly compensated officers in any one year. Total
remuneration includes amounts received upon the exercise of stock options
granted under the plan and the value of shares or cash paid pursuant to other
grants. An exception exists, however, for "qualified performance-based
compensation." The 1999 plan is intended to allow grants to meet the
requirements of "qualified performance-based compensation."
47
<PAGE>
Stock options should generally meet the requirements of "qualified
performance-based compensation" if the exercise price is at least equal to the
fair market value of our common stock on the date of grant. The compensation
committee may grant performance units and stock awards that are intended to be
"qualified performance-based compensation" under Section 162(m) of the Internal
Revenue Code. In that event, the compensation committee will establish in
writing the objective performance goals that must be met and other conditions
of the grant at the beginning of the performance period. The performance goals
may relate to the employee's business unit or to our performance as a whole, or
any combination of the two. The compensation committee will use objectively
determinable performance goals based on one or more of the following criteria:
stock price, earnings per share, net earnings, operating earnings, return on
assets, stockholder return, return on equity, growth in assets, unit volume,
sales, market share, scientific goals, pre-clinical or clinical goals,
regulatory approvals, or strategic business criteria consisting of one or more
objectives based on meeting specified revenue goals, market penetration goals,
geographic business expansion goals, cost targets or goals relating to
acquisitions, or divestitures, or strategic partnerships. With respect to stock
awards or performance units granted as "qualified performance-based
compensation," not more than 1,000,000 shares of stock may be granted to an
employee under the performance units or stock awards for any performance
period. At the end of each performance period, the compensation committee will
certify that the performance goals have been met. The compensation committee
may provide for payment of grants in the event of the death or disability of a
participant, or change of control during a performance period.
Plan Benefits. Because the compensation committee will make grants from
time to time to persons selected by the committee, we cannot presently
determine the benefits and amounts that may be received in the future by
persons eligible to participate in the 1999 plan.
401(k) Plan
On July 1, 1998, we adopted a tax-qualified employee savings and
retirement plan, our 401(k) plan, for our eligible employees. At the discretion
of the board of directors, we may make matching contributions on behalf of all
participants who have elected to make deferrals to the 401(k) plan. To date, we
have not made any matching contributions to the 401(k) plan. Any contributions
to the 401(k) plan by us or by our participants are paid to a trustee. The
401(k) plan, and the accompanying trust, are intended to qualify under Section
401(k) of the Internal Revenue Code, as amended, so that contributions and
income earned, if any, are not taxable to employees until withdrawn. The
contributions made by us vest in increments according to a vesting schedule. At
the direction of each participant, the trustee invests the contributions made
to the 401(k) plan in any number of investment options.
48
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Previous Capital Stock Financings
Preferred Stock
We sold 400,000 shares of series A preferred stock in February 1997 and
3,311,828 shares of series B preferred stock in March 1997. In December 1998 we
sold 3,292,177 shares of series C preferred stock. In December 1999 we sold
553,095 shares of series D preferred stock. Substantially all of our shares of
preferred stock have been sold to venture capital funds, each consisting of one
or more related funds.
The detailed description of the ownership within each venture capital
fund is contained in the footnotes to the Principal Stockholder's table on page
52. Each outstanding share of our preferred stock will automatically convert
into one share of common stock upon the completion of this offering.
Series A Preferred Stock. We sold 400,000 shares of series A preferred
stock in February 1997 at a purchase price per share of $2.00 for a total of
$800,000. In these transactions, we sold 100,000 shares to each of Oak
Investment Partners, Canaan Partners, TL Ventures III, and Frazier Healthcare.
We also granted warrants to each of Oak Investment Partners and to Canaan
Partners that are exercisable for 15,625 and 15,624 shares of common stock at
an exercise price of $2.00 per share in connection with loans of $62,500 that
each such venture fund made to us. These warrants expire in December 2003.
Series B Preferred Stock. We sold 3,311,828 shares of series B preferred
stock in March 1997 at a purchase price per share of $3.64 for a total of
approximately $12 million. In these transactions, we sold 824,176 shares of
series B preferred stock to each of Oak Investment Partners and TL Ventures
III; 824,175 to Canaan Partners and 839,301 shares to Frazier Healthcare.
Series C Preferred Stock. We sold 3,292,177 shares of series C preferred
stock in December 1998 at a purchase price per share of $4.86 for a total of
approximately $15.9 million. In these transactions, we sold:
. 545,267 shares to Oak Investment Partners,
. 370,370 shares to Canaan Partners,
. 370,369 shares to TL Ventures III,
. 164,609 shares to Frazier Healthcare,
. 1,037,037 shares to Domain Partners IV, L.P.,
. 259,259 shares to Biotechnology Investments,
. 360,081 shares to HealthCap KB, and
. 185,185 shares to Sentron Medical, Inc.
Series D Preferred Stock. We sold 553,095 shares of series D preferred
stock in December 1999 at a purchase price per share of $9.04 for a total of
approximately $5 million. In these transactions, we sold:
. 132,743 shares to Oak Investment Partners,
. 103,003 shares to Canaan Partners,
. 55,309 shares to TL Ventures III,
. 22,124 shares to Frazier Healthcare,
. 17,699 shares to Domain Partners IV, L.P.,
. 4,425 shares to Biotechnology Investments,
. 151,421 shares to HealthCap KB, and
. 66,371 shares to Sentron Medical, Inc.
49
<PAGE>
We also issued warrants to these investors exercisable for the following
number of shares of our common stock at an exercise price of $12.92 per share.
These warrants expire in December 2006 and are not exercisable until December
2000. These warrants were issued as follows:
. 26,548 to Oak Investment Partners,
. 20,600 to Canaan Partners,
. 11,061 to TL Ventures III,
. 4,425 to Frazier & Company,
. 3,540 to Domain Partners IV, L.P.,
. 885 to Biotechnology Investments,
. 30,284 to HealthCap KB, and
. 13,274 to Sentron Medical, Inc.
Transactions with Directors
Scheer & Company, Inc., a company owned and controlled by David I.
Scheer, one of our directors, provides business consulting and advisory
services to us for which it receives $15,000 per quarter plus out-of-pocket
expenses. Scheer & Company, Inc. was paid $21,190 in 1997, $82,009 in 1998 and
$77,345 in 1999.
Seth Rudnick, M.D., one of our directors, provides product candidate
development consulting services to us. Including out-of-pocket expenses, Dr.
Rudnick was paid $27,095 in 1998 and $22,124 in 1999 for these services.
Transactions with Scientific Advisory Board Members
Dr. Raymond Williams is the Chairman of our scientific advisory board.
Dr. Williams provides product candidate development and industry-specific
consulting services to us. For providing these services, we pay Dr. Williams
$4,000 per month plus expenses. We paid Dr. Williams $38,467 in 1997, $49,759
in 1998 and $48,664 in 1999 for these services.
Dr. Stephen Offenbacher, a member of our scientific advisory board,
provides product candidate development services to us for which we pay him
$3,000 per month plus out-of-pocket expenses. We paid Dr. Offenbacher $27,000
in 1997, $36,711 in 1998 and $36,000 in 1999.
Dr. Thomas Van Dyke, a member of our scientific advisory board, provides
product candidate development consulting services to us. Dr. Van Dyke was a
principal investigator for one of our Phase 2 trials and our Phase 3 trials. We
paid Dr. Van Dyke $4,019 in 1998 and $4,622 in 1999, including out-of-pocket
expenses, for product development consulting services.
Dr. Williams and Dr. Offenbacher are reimbursed for expenses associated
with their attendance at our scientific advisory board meetings. They have
received $3,904 and $3,936, respectively, for this activity. All other
scientific advisory board members are paid $1,500 for each meeting attended,
and are reimbursed for expenses they incur to attend such meetings.
50
<PAGE>
We have granted stock options to each member of our scientific advisory
board that are exercisable for the following number of shares of common stock:
<TABLE>
<CAPTION>
Scientific Advisory
Board Member Shares
------------------- ------
<S> <C>
Dr. Ray C. Williams 61,767
Dr. Stephen Offenbacher 37,060
Dr. David Cochran 10,000
Dr. Niklaus Lang 6,875
Dr. Roy Page 6,875
Dr. James Sciubba 6,875
Dr. Thomas Van Dyke 6,875
Dr. George McDonald 6,875
</TABLE>
51
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table provides information regarding the beneficial
ownership of our common stock as of December 31, 1999, and as adjusted to
reflect the sale of the 4,000,000 shares of our common stock offered hereby,
by:
. each person or entity who beneficially owns more than 5% of our stock;
. each of our directors;
. our named executive officers; and
. all executive officers and directors as a group.
Unless otherwise indicated, the address of each executive officer named
in the table below is care of OraPharma, Inc., 732 Louis Drive, Warminster, PA
18974. The amounts and percentages of common stock beneficially owned are
reported on the basis of regulations of the Securities and Exchange Commission
governing the determination of beneficial ownership of securities. Under the
rules of the Commission, a person is deemed to be a "beneficial owner" of a
security if that person has or shares "voting power," which includes the power
to vote or to direct the voting of such security, or "investment power," which
includes the power to dispose of or to direct the disposition of such security.
A person is also deemed to be a beneficial owner of any securities of which
that person has a right to acquire beneficial ownership within 60 days. Under
these rules, more than one person may be deemed a beneficial owner of the same
securities and a person may be deemed to be the beneficial owner of securities
as to which such person has no economic interest.
<TABLE>
<CAPTION>
Percentage of Shares
Beneficially Owned
Number of Shares ------------------------------
Name of Beneficial Owner Beneficially Owned Before Offering After Offering
- ------------------------ ------------------ --------------- --------------
<S> <C> <C> <C>
5% Stockholders
- ---------------
Oak Investment Partners
(1)....................... 1,804,810 21.4% 14.5%
Canaan Partners (2)......... 1,413,172 16.7 11.4
TL Ventures III (3)......... 1,349,854 16.0 10.9
Frazier & Company (4)....... 1,126,034 13.3 9.1
Domain Partners IV, L.P.
(5)....................... 1,054,736 12.5 8.5
Healthcap KB (6)............ 511,502 6.0 4.1
<CAPTION>
Directors and Executive
Officers
- -----------------------
<S> <C> <C> <C>
Eileen M. More (1).......... 1,804,810 21.4% 14.5%
Harry T. Rein (2)........... 1,413,172 16.7 11.4
Christopher Moller (3)...... 1,349,854 16.0 10.9
Jesse I. Treu (5)........... 1,054,736 12.5 8.5
Michael D. Kishbauch (7).... 222,065 2.6 1.8
David I. Scheer (8)......... 167,750 2.0 1.4
J. Ronald Lawter (9)........ 69,031 * *
James A. Ratigan (10)....... 42,000 * *
Joseph E. Zack (11)......... 25,600 * *
Jan N. Lessem (12).......... 20,179 * *
James J. Mauzey (13)........ 12,500 * *
Seth A. Rudnick (13)........ 12,500 * *
Mark B. Carbeau (14)........ -- * *
All directors and executive
officers as a group (15).. 6,194,197 72.11% 49.2%
</TABLE>
- --------
* less than one percent
52
<PAGE>
(1) Includes 1,748,393 shares owned by Oak Investment Partners VI, Limited
Partnership and 40,792 shares owned by Oak VI Affiliates Fund Limited
Partnership. Also includes 15,625 shares of series A preferred stock
obtainable upon exercise of warrants. Ms. More is the managing member of
Oak Associates VI, LLC and Oak VI Affiliates, LLC, the general partners of
Oak Investment Partners VI, Limited Partnership and Oak VI Affiliates Fund,
Limited Partnership, respectively. Ms. More shares voting and investment
power with respect to these limited partnerships with the other general
partners of Oak Associates VI, LLC and Oak VI Affiliates, LLC. Ms. More
disclaims beneficial ownership of shares in which she does not have a
pecuniary interest. The address of both Oak Investment Partners VI, Limited
Partnership and Oak VI Affiliates Limited Partnership is One Gorham Island,
Westport, CT 06880.
(2) Includes 831,758 shares owned by Canaan S.B.I.C., L.P., 9,888 shares owned
by Canaan Capital Limited Partnership, 82,529 shares owned by Canaan
Capital Offshore Limited Partnership C.V. and 473,373 shares owned by
Canaan Equity L.P. Also includes 15,624 shares of series A preferred stock
obtainable upon exercise of warrants. Mr. Rein is Managing General Partner
of Canaan Partners, the fund manager for each of the Canaan entities. Mr.
Rein disclaims beneficial ownership of shares in which he does not have a
pecuniary interest. The address of all the Canaan Partners entities is 105
Rowayton Avenue, Rowayton, CT 06853.
(3) Includes 1,086,863 shares owned by TL Ventures III L.P., 227,504 shares
owned by TL Ventures III Offshore L.P. and 35,487 shares owned by TL
Ventures III Interfund L.P. TL Ventures III L.P., TL Ventures III Offshore
L.P., and TL Ventures III Interfund L.P. are referred to as TL Ventures
III. TL Ventures III L.P., TL Ventures III Offshore L.P., and TL Ventures
III Interfund L.P. are venture capital partnerships that are required by
their governing documents to make all investment, voting and disposition
actions in tandem. TL Ventures III Management L.P., a limited partnership,
is the sole general partner of TL Ventures III L.P. TL Ventures III
Offshore Partners L.P. is the sole general partner of TL Ventures III
Offshore L.P. TL Ventures III LLC is the sole general partner of TL
Ventures III Interfund L.P. The general partners have sole authority and
responsibility for all investment, voting and disposition decisions for TL
Ventures III. The general partners of TL Ventures III Management L.P., TL
Ventures III Offshore Partners L.P. and TL Ventures III LLC are Safeguard
Scientifics (Delaware), Inc., Robert E. Keith, Jr., Gary J. Anderson, Mark
J. DeNino, Robert A. Fabbio and Christopher Moller, a director of
OraPharma. Dr. Moller disclaims beneficial ownership of shares in which he
does not have a pecuniary interest. The address for each of the TL Ventures
investment funds is 700 Building, 435 Devon Park Drive, Wayne, PA 19087.
(4) Includes 1,110,909 shares owned by Frazier Healthcare II, L.P., 2,750
shares owned by Frazier & Company, Inc., 2,750 shares owned by Charles
Blanchard, 1,375 shares owned by Jon Gilbert, 2,750 shares owned by Nader
Naini, 2,750 shares owned by Glenn Stewart and 2,750 shares owned by Fred
Silverstein. The address for Frazier Healthcare II L.P., Frazier & Company,
Inc., Charles Blanchard, Jon Gilbert, Nader Naini, Glenn Stewart and Fred
Silverstein is 2 Union Square, 601 Union Street, Suite 2110, Seattle, WA
98101. The general partner of Frazier Healthcare II, L.P. is FHMII, LLC.
Charles Blanchard, Jon Gilbert, Nader Naini, Glenn Stewart and Fred
Silverstein are members of Frazier Management, L.L.C., the managing member
of the member of FHMII, LLC and each individually disclaims beneficial
ownership of shares in which he does not have a pecuniary interest.
(5) Includes 1,030,053 shares beneficially owned by Domain Partners IV, L.P.
and 24,683 shares beneficially owned by DP IV Associates, L.P. Dr Treu is a
managing member of One Palmer Square Associates IV, L.L.C., the general
partner of Domain Partners IV, L.P. and DP IV Associates, L.P. Dr. Treu
shares voting and investment power with respect to these shares and
disclaims beneficial ownership of such shares except to the extent of his
proportionate interest therein. Excludes 263,684 shares beneficially owned
by Biotechnology Investments Limited (BIL). Dr. Treu is a managing member
of Domain Associates, L.L.C. Pursuant to a contractual agreement, Domain
Associates, L.L.C. is the U.S. Venture Capital Advisor to BIL. Domain
Associates, L.L.C. has no voting or investment power with respect to BIL's
shares. Dr. Treu disclaims beneficial ownership of BIL's shares.
53
<PAGE>
(6) Includes 214,831 shares owned by HealthCap KB and 296,671 shares owned by
HealthCap Co Invest KB. The address for HealthCap KB and HealthCap Co
Invest KB is Sturegatan 34, S-11436 Stockholm, Sweden. HealthCap KB and
HealthCap Co Invest KB are Swedish limited partnerships.
(7) Includes 3,365 shares of common stock obtainable upon the exercise of
vested stock options. Excludes 117,762 shares of restricted common stock
and 13,458 shares of common stock obtainable upon the exercise of non-
vested stock options.
(8) Includes 167,750 shares owned by Scheer Investment Holdings I, L.L.C. Mr.
Scheer is President of Scheer & Company, Inc., the fund manager of Scheer
Investment Holdings I, L.L.C. Mr. Scheer disclaims beneficial ownership of
any shares in which he does not have a pecuniary interest.
(9) Includes 2,000 shares of common stock obtainable upon the exercise of
vested stock options. Excludes 22,344 shares of restricted common stock and
8,000 shares of common stock obtainable upon the exercise of non-vested
stock options.
(10) Includes 42,000 shares of common stock obtainable upon exercise of vested
stock options. Excludes 36,750 shares of common stock obtainable upon
exercise of non-vested stock options.
(11) Includes 25,600 shares of common stock obtainable upon the exercise of
vested stock options. Excludes 39,900 shares of common stock obtainable
upon exercise of non-vested stock options.
(12) Includes 20,379 shares of common stock obtainable upon exercise of vested
stock options. Excludes 41,143 shares of common stock obtainable upon
exercise of non-vested stock options.
(13) Includes 12,500 shares of common stock obtainable upon exercise of vested
stock options. Excludes 12,500 shares of common stock obtainable upon
exercise of non-vested stock options.
(14) Excludes 100,000 shares of common stock obtainable upon exercise of non-
vested stock options.
(15) Includes 31,249 shares of common stock obtainable upon exercise of
warrants and 118,144 shares of common stock obtainable upon exercise of
stock options.
54
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Our Authorized Capital Stock
. 50 million shares of common stock, par value $.001 per share
. five million shares of preferred stock, par value $.001 per share
. immediately after the sale of the shares of common stock in this
offering, we will have 12,596,735 shares of common stock outstanding and
no shares of preferred stock outstanding
Common Stock
Voting:
. one vote for each share held of record on all matters submitted to a
vote of stockholders
. no cumulative voting rights
. election of directors by plurality of votes cast
. all other matters by majority of votes cast
Dividends:
. subject to preferential dividend rights of outstanding shares of
preferred stock, if any, common stockholders are entitled to receive
ratably declared dividends
. the board of directors may only declare dividends out of legally
available funds
Additional Rights:
. subject to the preferential liquidation rights of outstanding shares of
preferred stock, if any, common stockholders are entitled to receive
ratably net assets, available after the payment of all debts and
liabilities, upon our liquidation, dissolution or winding up
. no preemptive rights
. no subscription rights
. no redemption rights
. no sinking fund rights
. no conversion rights
The rights and preferences of common stockholders are subject to the
right of any series of preferred stock we may issue in the future.
Preferred Stock
We may, by resolution of our board of directors, and without any further
vote or action by our stockholders, authorize and issue, subject to limitations
prescribed by law, up to an aggregate of five million shares of preferred
stock. The preferred stock may be issued in one or more classes or series of
shares of any class or series. With respect to any classes or series, the board
of directors may determine the designation and the number of shares,
preferences, limitations and special rights, including dividend rights,
conversion rights, voting rights, redemption rights and liquidation
preferences. Because of the rights that may be granted, the issuance of
preferred stock may delay, defer or prevent a change of control.
Prior to this offering, we had 400,000 shares of series A preferred
stock, 3,311,828 shares of series B preferred stock, 3,292,177 shares of series
C preferred stock and 553,095 shares of series D preferred stock issued and
outstanding. Upon the completion of this offering, all of our outstanding
shares of preferred stock will automatically convert into a total of 7,557,100
shares of common stock.
55
<PAGE>
Warrants
On completion of this offering we will have outstanding warrants to
purchase:
. 31,249 shares of common stock exercisable at a price of $2.00 per
share which expire in December 2003;
. 27,500 shares of common stock exercisable at a price of $3.64 per
share, which expire in January 2004;
. 110,617 shares of common stock exercisable at $12.92 per share which
expire in December 2006; and
. 41,152 shares of common stock exercisable at $4.86 per share which
expire in December 2006.
To exercise these warrants, the holder must enter into a restricted stock
purchase agreement. The agreement will grant the holder rights to register the
shares of common stock issuable upon exercise of the warrants. The exercise
price and the number of shares of common stock issuable on exercise of the
warrants may be adjusted following specific events including stock splits,
stock dividends, reorganizations, recapitalization, merger or sale of all or
substantially all our assets.
Registration Rights
Following completion of this offering, holders of 7,918,966 shares of
common stock, including holders of warrants to purchase 169,366 shares of
common stock, will have the right to have their shares registered under the
Securities Act of 1933. These rights are provided under the terms of agreements
between us and the holders of such securities. These agreements provide, in
specific instances, the holders of 7,698,966 shares of common stock, including
holders of warrants to purchase 141,866 shares of common stock, with the right
to file a registration statement on their behalf. In addition, pursuant to
these agreements, the holders of 7,918,966 shares of common stock, including
holders of warrants to purchase 169,366 shares of common stock, are entitled to
require us to include their registrable securities in future registration
statements we file under the Securities Act of 1933. Registration of shares of
common stock pursuant to the exercise of these registration rights would result
in such shares becoming freely tradable without restriction under the
Securities Act of 1933 immediately upon the effectiveness of such registration
and may adversely affect our stock price.
Stockholders' Meeting
Our next annual meeting of stockholders will be held in 2001.
Limitations on Liability
Our certificate of incorporation limits or eliminates the liability of
our directors to us or our stockholders for monetary damage to the fullest
extent permitted by the Delaware General Corporation Law. As permitted by the
Delaware General Corporation Law, our certificate of incorporation provides
that our directors shall not be personally liable to us or our stockholders for
monetary damages for a breach of fiduciary duty as a director, except for
liability:
. for any breach of such person's duty of loyalty;
. for acts or omissions not in good faith or involving intentional
misconduct or a knowing violation of law; and
. for any transaction resulting in receipt by such person of an improper
personal benefit.
Our certificate of incorporation also contains provisions indemnifying
our directors and officers to the fullest extent permitted by the Delaware
General Corporation Law.
56
<PAGE>
We currently have directors' and officers' liability insurance to provide
our directors and officers with insurance coverage for losses arising from
claims based on breaches of duty, negligence, errors and other wrongful acts.
Anti-Takeover Effects of Provisions of Charter Documents and Delaware Law
Upon completion of this offering our certificate of incorporation will
provide for the division of our board of directors into three classes. Each
class must be as nearly equal in number as possible. Additionally, each class
must serve a three-year term. The terms of each class are staggered so that
each term ends in a different year over a three-year period. A director may
only be removed for cause and only by the vote of more than 50% of the shares
entitled to vote for the election of directors.
Our certificate of incorporation also provides that our board of
directors may establish the rights of, and cause us to issue, substantial
amounts of preferred stock without the need for stockholder approval. Further,
our board of directors may determine the terms, conditions, rights, privileges
and preferences of the preferred stock. Our board is required to exercise its
business judgment when making such determinations. Our board of directors' use
of the preferred stock may inhibit the ability of third parties to acquire
OraPharma. Additionally, our board may use the preferred stock to dilute the
common stock of entities seeking to obtain control of OraPharma. The rights of
the holders of common stock will be subject to, and may be adversely affected
by, any preferred stock that may be issued in the future. Our preferred stock
provides desirable flexibility in connection with possible acquisitions,
financings and other corporate transactions. However, it may have the effect of
discouraging, delaying or preventing a change in control of OraPharma. We have
no present plans to issue any shares of preferred stock.
The existence of the foregoing provisions in our certificate of
incorporation could make it more difficult for third parties to acquire or
attempt to acquire control of us or substantial amounts of our common stock.
After this offering is completed, Section 203 of the Delaware General
Corporation Law will apply to OraPharma. Section 203 of the Delaware General
Corporation Law generally prohibits certain "business combinations" between a
Delaware corporation and an "interested stockholder." An "interested
stockholder" is generally defined as a person who, together with any affiliates
or associates of such person, beneficially owns, or within three years did own,
directly or indirectly, 15% or more of the outstanding voting shares of a
Delaware corporation. The statute broadly defines business combinations to
include:
. mergers;
. consolidations;
. sales or other dispositions of assets having an aggregate value in
excess of 10% of the consolidated assets of the corporation or
aggregate market value of all outstanding stock of the corporation;
and
. certain transactions that would increase the "interested
stockholder's" proportionate share ownership in the corporation.
The statute prohibits any such business combination for a period of three
years commencing on the date the "interested stockholder" becomes an
"interested stockholder," unless:
. the business combination is approved by the corporation's board of
directors prior to the date the "interested stockholder" becomes an
"interested stockholder";
. the "interested stockholder" acquired at least 85% of the voting stock
of the corporation (other than stock held by directors who are also
officers or by certain employee stock plans) in the transaction in
which it becomes an "interested stockholder"; and
. the business combination is approved by a majority of the board of
directors and by the affirmative vote of at least two-thirds of the
outstanding voting stock that is not owned by the "interested
stockholder."
57
<PAGE>
The Delaware General Corporation Law contains provisions enabling a
corporation to avoid Section 203's restrictions if stockholders holding a
majority of the corporation's voting stock approve an amendment to the
corporation's certificate of incorporation or by-laws to avoid the
restrictions. In addition, the restrictions contained in Section 203 are not
applicable to any of our existing stockholders. We have not and do not
currently intend to "elect out" of the application of Section 203 of the
Delaware General Corporation Law.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is StockTrans,
Inc., Ardmore, Pennsylvania.
58
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of our common stock in the public market
following this offering could adversely affect the market price of our common
stock and adversely affect our ability to raise capital at a time and on terms
favorable to us.
Of the 12,596,735 shares to be outstanding after this offering (assuming
that the underwriters do not exercise their over-allotment option), the
4,000,000 shares of common stock offered hereby will be freely tradable without
restriction in the public market unless such shares are held by "affiliates,"
as that term is defined in Rule 144 under the Securities Act of 1933. The
remaining shares of common stock to be outstanding after this offering are
"restricted securities" under the Securities Act of 1933 and may be sold in the
public market under Rule 144, subject to the manner of sale and other
limitations of Rule 144.
In addition, as of December 31, there were options to purchase 587,472
shares of common stock, of which 194,402 options were fully exercisable. An
additional 1,250,000 shares were reserved for issuance under our stock option
plan, of which no options to purchase shares are being granted on or prior to
the completion of this offering. We intend to register the shares of common
stock issued, issuable or reserved for issuance under the plan following the
date of this prospectus.
Following completion of the offering, holders of 7,918,966 shares of
common stock, including holders of warrants to purchase 169,366 shares of
common stock, are entitled to registration rights with respect to such shares
for resale under the Securities Act. If such holders, by exercising their
registration rights, cause a large number of shares to be registered and sold
in the public market, this will likely cause an adverse effect on the market
price for our common stock. These registration rights may not be exercised
prior to the expiration of 180 days from the date of this prospectus. See
"Description of Capital Stock--Registration Rights."
Lock-Up Agreements
Substantially all of our stockholders, warrant holders and option
holders, and all of our officers and directors, have agreed under written
"lock-up" agreements not to sell any shares of common stock for 180 days after
the date of this prospectus without the prior written consent of FleetBoston
Robertson Stephens Inc.
59
<PAGE>
UNDERWRITING
The underwriters named below, acting through their representatives,
FleetBoston Robertson Stephens Inc., U.S. Bancorp Piper Jaffray Inc., and
Gerard Klauer Mattison & Co., Inc., have severally agreed with us, subject to
the terms and conditions set forth in the underwriting agreement, to purchase
from us the number of shares of common stock set forth opposite their names
below. The underwriters are committed to purchase and pay for all shares if any
are purchased.
<TABLE>
<CAPTION>
Number
Underwriter of Shares
----------- ---------
<S> <C>
FleetBoston Robertson Stephens Inc................................
U.S. Bancorp Piper Jaffray Inc....................................
Gerard Klauer Mattison & Co., Inc.................................
---------
Total........................................................... 4,000,000
=========
</TABLE>
The representatives have advised us that the underwriters propose to
offer the shares of common stock to the public at the initial public offering
price set forth on the cover page of this prospectus and to certain dealers at
that price less a concession of not in excess of $ per share, of which $
may be reallowed to other dealers. After this offering, the public offering
price, concession and reallowance to dealers may be reduced by the
representatives. This reduction shall not change the amount of proceeds to be
received by us as stated on the cover page of this prospectus. The common stock
is offered by the underwriters as stated herein, subject to receipt and
acceptance by them and subject to their right to reject any order in whole or
in part.
The underwriters have informed us that they do not intend to confirm
sales to any accounts over which they exercise discretionary authority. The
underwriters have advised us that they do not expect sales to discretionary
accounts to exceed 5% of the total number of shares offered.
Over-Allotment Option. We have granted to the underwriters an option,
exercisable during the 30-day period after the date of this prospectus, to
purchase up to 600,000 additional shares of common stock at the same price per
share as we will receive for the 4,000,000 shares that the underwriters have
agreed to purchase. If the underwriters exercise this option, each of the
underwriters will have a firm commitment, subject to certain conditions, to
purchase approximately the same percentage of such additional shares that the
number of shares of common stock to be purchased by it shown in the above table
bears to the 4,000,000 shares of common stock offered in this offering. If
purchased, such additional shares will be sold by the underwriter on the same
terms as those on which the 4,000,000 shares offered in this offering are being
sold. We will be obligated, pursuant to the option, to sell shares to the
underwriters to the extent the option is exercised. The underwriters may
exercise such option only to cover over-allotments made in connection with the
sale of the shares of common stock offered in this offering. If such option is
exercised in full, the total public offering price, underwriting discounts and
commissions and proceeds to us will be $ , $ and $ , respectively.
Indemnity. The underwriting agreement contains covenants of indemnity
among the underwriters and us against various civil liabilities, including
liabilities under the Securities Act and liabilities arising from breaches of
representations and warranties contained in the underwriting agreement.
Lock-Up Agreements. Each executive officer, director, and substantially
all of our stockholders, agreed with the representatives for a period of 180
days after the date of this prospectus, subject to certain exceptions, not to
offer to sell, contract to sell, or otherwise sell, dispose of, loan, pledge or
grant any rights with respect to any shares of common stock, any options or
warrants to purchase any shares of common stock, or any securities convertible
into or exchangeable for shares of common stock, owned as of the date of this
prospectus or thereafter acquired directly by such holders or with respect to
which they have or hereafter acquire the power of disposition, without the
prior written consent of FleetBoston Robertson Stephens Inc.
60
<PAGE>
FleetBoston Robertson Stephens Inc. may, in its sole discretion and at any time
or from time to time without notice, release all or any portion of the
securities subject to the lock-up agreements. There are no agreements between
the representatives and any of our stockholders who have executed a lock-up
agreement providing consent to the sale of shares prior to the expiration of
the lock-up period.
Future Sales. In addition, we have agreed that during the 180 days after
the date of this prospectus we will not, subject to certain exceptions, without
the prior written consent of FleetBoston Robertson Stephens Inc. (i) consent to
the disposition of any shares held by stockholders subject to lock-up
agreements prior to the expiration of the lock-up period or (ii) issue, sell,
contract to sell, or otherwise dispose of, any shares of common stock, any
options or warrants to purchase any shares of common stock or any securities
convertible into, exercisable for or exchangeable for shares of common stock
other than the sale of shares in this offering, the issuance of common stock
upon the exercise of outstanding options or warrants and the issuance of
options under our existing stock option and incentive plans, provided that
those options do not vest prior to the expiration of the lock-up period.
Listing. We have applied to have the common stock approved for quotation
on The Nasdaq National Market under the symbol "OPHM."
No Prior Public Market. Prior to this offering, there has been no public
market for our common stock. Consequently, the initial public offering price
for the common stock offered hereby will be determined through negotiations
between us and the representatives of the underwriters. Among the factors to be
considered in such negotiations are prevailing market conditions, certain of
our financial information, market valuations of other companies that we and the
representatives, believe to be comparable to us, estimates of our business
potential, the present state of our development and other factors deemed
relevant.
Stabilization. The representatives of the underwriters have advised us
that, pursuant to Regulation M under the Securities Act, certain persons
participating in this offering may engage in transactions, including
stabilizing bids, syndicate covering transactions or the imposition of penalty
bids, that may have the effect of stabilizing or maintaining the market price
of the common stock at a level above that which might otherwise prevail in the
open market. A "stabilizing bid" is a bid for or the purchase of shares of
common stock on behalf of the underwiters for the purpose of fixing or
maintaining the price of the common stock. A "syndicate covering transaction"
is the bid for or the purchase of the common stock on behalf of the
underwriters to reduce a short position incurred by the underwriters in
connection with this offering. A "penalty bid" is an arrangement permitting the
representatives to reclaim the selling concession otherwise accruing to an
underwriter or syndicate member in connection with this offering if the common
stock originally sold by such underwriter or syndicate member is purchased by
the representatives in a syndicate covering transaction and has therefore not
been effectively placed by such underwriter or syndicate member. The
representatives have advised us that such transactions may be effected on The
Nasdaq National Market or otherwise and, if commenced, may be discontinued at
any time.
Directed Share Program. At our request, the underwriters have reserved up
to 200,000 shares of the common stock to be issued by us and offered for sale
in this offering, at the initial public offering price, to our directors,
officers, employees, business associates and related persons. The number of
shares of common stock available for sale to the general public will be reduced
to the extent such individuals purchase such reserved shares. Any reserved
shares which are not so purchased will be offered by the underwriters to the
general public on the same basis as the other shares offered in this offering.
61
<PAGE>
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for OraPharma by Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania.
Certain legal matters will be passed upon for the Underwriters by Brobeck,
Phleger & Harrison LLP, New York, New York.
The statements in this prospectus under the sections "Risk Factors--If we
or the parties from which we license our technology fail to secure or enforce
the patents and other intellectual property rights underlying MPTS, our core
technology or our other product candidates, we may be unable to compete
effectively"; "Risk Factors--We may face significant expense and liability if
our technologies, product candidates, methods or processes are found to
infringe on the intellectual property rights of others, or if we allege others
infringe our intellectual property rights"; and "Business--Technology, Licenses
and Patents" have been reviewed and approved by Arnall, Golden & Gregory, LLP,
Atlanta, Georgia, our patent counsel.
EXPERTS
The audited financial statements included in this prospectus and
elsewhere in the registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of that firm as
experts in giving said reports.
ADDITIONAL ORAPHARMA INFORMATION
We have filed with the SEC a registration statement on Form S-1 with
respect to the common stock offered hereby. This prospectus, which constitutes
a part of the registration statement, does not contain all of the information
set forth in the registration statement or the exhibits and schedules which are
part of the registration statement. For further information with respect to
OraPharma and our common stock, reference is made to the registration statement
and the exhibits and schedules thereto. You may read and copy any document we
file at the SEC's public reference rooms in Washington, D.C., New York, New
York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information about the public reference rooms. Our SEC filings are also
available to the public from the SEC's web site at http://www.sec.gov. Upon
completion of this offering, we will become subject to the information and
periodic reporting requirements of the Securities Exchange Act and, in
accordance therewith, will file periodic reports, proxy statements and other
information with the SEC. Such periodic reports, proxy statements and other
information will be available for inspection and copying at the SEC's public
reference rooms and the Web site of the SEC referred to above.
62
<PAGE>
ORAPHARMA, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Public Accountants................................. F-2
Balance Sheets........................................................... F-3
Statements of Operations................................................. F-4
Statements of Redeemable Convertible Preferred Stock and Stockholders'
Deficit................................................................ F-5
Statements of Cash Flows................................................. F-6
Notes to Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To OraPharma, Inc.:
We have audited the accompanying balance sheets of OraPharma, Inc. (a
Delaware corporation in the development stage) as of December 31, 1998 and
1999, and the related statements of operations, redeemable convertible
preferred stock and stockholders' deficit and cash flows for each of the three
years in the period ended December 31, 1999 and for the period from inception
(August 1, 1996) to December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of OraPharma, Inc. as
of December 31, 1998 and 1999, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1999 and for
the period from inception (August 1, 1996) to December 31, 1999 in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Philadelphia, Pa.,
January 26, 2000 (except for the
recapitalization discussed in
Note 2, as to which the date
is February 3, 2000)
F-2
<PAGE>
ORAPHARMA, INC.
(a development-stage company)
BALANCE SHEETS
<TABLE>
<CAPTION>
Pro Forma
Stockholders'
Equity (Note
December 31, 8)
-------------------------- December 31,
1998 1999 1999
------------ ------------ -------------
(unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......... $ 19,236,084 $ 13,073,803
Prepaid expenses and other......... 46,441 263,944
Deferred offering costs............ -- 222,012
------------ ------------
Total current assets.............. 19,282,525 13,559,759
Fixed assets, net................... 971,413 957,897
Intangible assets, net.............. 226,464 194,083
------------ ------------
$ 20,480,402 $ 14,711,739
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Current portion of long-term debt.. $ 192,935 $ 192,935
Accounts payable................... 821,931 452,763
Accrued expenses................... 1,091,996 1,420,468
------------ ------------
Total current liabilities......... 2,106,862 2,066,166
------------ ------------
Long-term debt...................... 480,978 288,043
------------ ------------
Redeemable convertible preferred
stock (liquidation preference of
$33,855,013 at December 31,
1999)............................. 28,771,713 33,730,563 $ --
------------ ------------ ------------
Commitments (Note 7)
Stockholders' equity (deficit):
Common stock, par value $.001 per
share, 50,000,000 shares
authorized, 957,036 and 1,039,635
issued and outstanding, actual,
8,596,735 issued and outstanding,
pro forma........................ 957 1,040 $ 8,597
Additional paid-in capital......... 251,093 1,190,372 34,913,378
Deferred compensation.............. (63,370) (349,466) (349,466)
Deficit accumulated during the
development stage................ (11,067,831) (22,214,979) (22,214,979)
------------ ------------ ------------
Total stockholders' equity
(deficit)....................... (10,879,151) (21,373,033) $ 12,357,530
------------ ------------ ============
$ 20,480,402 $ 14,711,739
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
ORAPHARMA, INC.
(a development-stage company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from
Inception
(August 1,
Year Ended 1996)
December 31, Through
-------------------------------------- December 31,
1997 1998 1999 1999
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Operating expenses:
Research and
development.......... $ 1,706,393 $ 7,324,975 $ 9,664,841 $ 18,722,503
General and
administrative....... 939,469 1,590,375 2,119,264 5,057,403
----------- ----------- ------------ ------------
Operating loss...... (2,645,862) (8,915,350) (11,784,105) (23,779,906)
Interest income.......... 505,529 462,506 689,453 1,657,740
Interest expense......... (1,406) (38,018) (52,496) (92,813)
----------- ----------- ------------ ------------
Net loss................. (2,141,739) (8,490,862) (11,147,148) (22,214,979)
Non-cash preferred stock
charge................. -- -- 1,729,651 1,729,651
----------- ----------- ------------ ------------
Net loss to common
stockholders........... $(2,141,739) $(8,490,862) $(12,876,799) $(23,944,630)
=========== =========== ============ ============
Basic and diluted net
loss per share......... $ (5.05) $ (13.28) $ (16.61)
=========== =========== ============
Shares used in computing
basic and diluted net
loss per share......... 424,054 639,339 775,116
=========== =========== ============
Pro forma basic and
diluted net loss per
share (unaudited)...... $ (1.65)
============
Shares used in computing
pro forma basic and
diluted net loss per
share (unaudited)...... 7,792,759
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
ORAPHARMA, INC.
(a development-stage company)
STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
Stockholders' Deficit
---------------------------------------------------------------------
Redeemable Deficit
Convertible Accumulated
Preferred Stock Common Stock Additional During the
---------------------- ----------------- Paid-in Deferred Development
Shares Amount Shares Amount Capital Compensation Stage Total
--------- ----------- --------- ------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at Inception,
August 1, 1996......... -- $ -- -- $ -- $ -- $ -- $ -- $ --
Deferred compensation
related to stock
options and grants.... -- -- -- -- 189,210 (189,210) -- --
Amortization of
deferred stock-based
compensation.......... -- -- -- -- -- 76,159 -- 76,159
Net loss............... -- -- -- -- -- -- (435,230) (435,230)
--------- ----------- --------- ------ ---------- --------- ------------ ------------
Balance, December 31,
1996................... -- -- -- -- 189,210 (113,051) (435,230) (359,071)
Sale of common stock
and restricted common
stock to founders..... 823,088 823 913 -- -- 1,736
Issuance of common
stock and warrant as
partial payment for
intangible assets..... -- -- 110,000 110 23,890 -- -- 24,000
Exercise of warrant to
purchase common
stock................. -- -- 20,000 20 1,980 -- -- 2,000
Sale of Series A
Preferred stock....... 400,000 800,000 -- -- -- -- -- --
Sale of Series B
Preferred stock, net
of expenses .......... 3,311,829 12,022,769 -- -- -- -- -- --
Amortization of
deferred stock-based
compensation.......... -- -- -- -- -- 26,268 -- 26,268
Net loss............... -- -- -- -- -- -- (2,141,739) (2,141,739)
--------- ----------- --------- ------ ---------- --------- ------------ ------------
Balance, December 31,
1997................... 3,711,829 12,822,769 953,088 953 215,993 (86,783) (2,576,969) (2,446,806)
Sale of Series C
Preferred stock, net
of expenses........... 3,292,180 15,948,944 -- -- -- -- -- --
Sale of restricted
common stock to a
founder and exercise
of employee stock
options............... -- -- 3,950 4 43 -- -- 47
Issuance of warrant to
purchase common stock
in connection with
acquisition of
technology............ -- -- -- -- 35,057 -- -- 35,057
Amortization of
deferred stock-based
compensation.......... -- -- -- -- -- 23,413 -- 23,413
Net loss............... -- -- -- -- -- -- (8,490,862) (8,490,862)
--------- ----------- --------- ------ ---------- --------- ------------ ------------
Balance, December 31,
1998................... 7,004,009 28,771,713 957,038 957 251,093 (63,370) (11,067,831) (10,879,151)
Sale of Series D
Preferred stock, net
of expenses........... 553,097 4,958,931 -- -- -- -- -- --
Issuance of common
stock in connection
with acquisition of
technology ........... -- -- 82,500 83 199,567 -- -- 199,650
Issuance of warrant to
purchase common stock
in connection with
acquisition of
technology............ -- -- -- -- 346,108 -- -- 346,108
Exercise of employee
stock options......... -- -- 100 -- 36 -- -- 36
Deferred compensation
related to stock
options .............. -- -- -- -- 393,600 (359,623) -- 33,977
Amortization of
deferred stock-based
compensation ......... -- -- -- -- -- 73,527 -- 73,527
Adjustment related to
stock split........... (6) (81) (3) -- (32) -- -- (32)
Net loss .............. -- -- -- -- -- -- (11,147,148) (11,147,148)
--------- ----------- --------- ------ ---------- --------- ------------ ------------
Balance, December 31,
1999................... 7,557,100 $33,730,563 1,039,635 $1,040 $1,190,372 $(349,466) $(22,214,979) $(21,373,033)
========= =========== ========= ====== ========== ========= ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements
F-5
<PAGE>
ORAPHARMA, INC.
(a development-stage company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period from
Inception
(August 1,
Year Ended 1996)
December 31, Through
-------------------------------------- December 31,
1997 1998 1999 1999
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Cash Flows from Operating
Activities:
Net loss................ $(2,141,739) $(8,490,862) $(11,147,148) $(22,214,979)
Adjustments to reconcile
net loss to net cash
used in operating
activities--
Depreciation and
amortization......... 61,251 188,956 282,842 533,987
Stock based
compensation
expense.............. 26,268 23,413 107,504 233,344
Common stock and
warrants issued in
connection with
acquisition of
technology........... -- 234,707 346,108 580,815
Changes in operating
assets and
liabilities--
Prepaid expenses and
other................ (25,813) (10,382) (217,503) (263,944)
Accounts payable....... 16,920 583,043 (369,168) 452,763
Accrued expenses....... 171,151 647,613 106,078 998,424
----------- ----------- ------------ ------------
Net cash used in
operating
activities........ (1,891,962) (6,823,512) (10,891,287) (19,679,590)
----------- ----------- ------------ ------------
Cash Flows Used in
Investing Activities:
Capital expenditures.... (460,500) (700,055) (236,945) (1,402,328)
Expenditures for
intangible assets..... (250,000) -- -- (259,639)
----------- ----------- ------------ ------------
Net cash used in
investing
activities........ (710,500) (700,055) (236,945) (1,661,967)
----------- ----------- ------------ ------------
Cash Flows Provided by
Financing Activities:
Proceeds from issuance
of notes payable...... 40,000 750,000 -- 915,000
Proceeds from the sale
of preferred stock,
net of expenses....... 12,822,769 15,948,944 4,958,850 33,730,563
Proceeds from the sale
of common stock and
exercise of stock
options and warrant... 3,736 47 36 3,819
Proceeds from PA
Opportunity Grant..... -- -- 200,000 200,000
Repayment of notes
payable............... (165,000) (76,087) (192,935) (434,022)
----------- ----------- ------------ ------------
Net cash provided by
financing
activities........ 12,701,505 16,622,904 4,965,951 34,415,360
----------- ----------- ------------ ------------
Net Increase (decrease)
in Cash and Cash
Equivalents............ 10,099,043 9,099,337 (6,162,281) 13,073,803
Cash and Cash
Equivalents, Beginning
of Period.............. 37,704 10,136,747 19,236,084 --
----------- ----------- ------------ ------------
Cash and Cash
Equivalents, End of
Period................. $10,136,747 $19,236,084 $ 13,073,803 $ 13,073,803
=========== =========== ============ ============
Supplemental Disclosure
of Cash Flow
Information:
Cash paid for interest.. $ 1,406 $ 37,631 $ 48,039 $ 87,076
=========== =========== ============ ============
Noncash financing
activities--
Issuance of common stock
and warrants for
acquisition of
intangible assets..... $ 24,000 $ -- $ -- $ 24,000
=========== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
ORAPHARMA, INC.
(a development-stage company)
NOTES TO FINANCIAL STATEMENTS
1. Background:
OraPharma, Inc. (the "Company") was incorporated on August 1, 1996. In
February 1997, the Company acquired certain technologies and other assets
related to drug delivery technologies, together with certain exclusive patent
license rights to apply the acquired technologies to oral health care, as well
as certain nonexclusive patent license rights for other potential applications
of the acquired technologies.
Since February 1997, the Company has focused its efforts on research and
development activities related to the completion of its lead product candidate,
Minocycline Periodontal Therapeutic System (MPTS), which is based on the
acquired technologies. During 1998, the Company initiated Phase 3 clinical
trials in order to obtain the approval of the United States Food and Drug
Administration ("FDA") for this oral healthcare product. These trials were
completed in October, 1999. The Company plans to file a new drug application
("NDA") with the FDA during the first half of 2000.
During 1998, the Company acquired license rights to certain other
technologies which it intends to develop into future product candidates.
The Company has not generated any revenues from product sales and has
incurred substantial losses since its inception. The Company anticipates
incurring additional losses over at least the next several years and such
losses may increase as the Company expands its research and development
activities. Substantial financing will be needed by the Company to fund its
operations and to commercially develop its product candidates. There is no
assurance that such financing will be available when needed. Operations of the
Company are subject to certain additional risks and uncertainties including,
among others, dependence on MPTS and its exclusive licenses, uncertainty of
product development, supplier and manufacturing dependence, sales and marketing
inexperience, competition, reimbursement availability, dependence on other
exclusive licenses and relationships, uncertainties regarding patents and
proprietary rights, dependence on key personnel and other risks related to
governmental regulations and approvals.
2. Summary of Significant Accounting Policies:
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amount of expenses incurred during the reporting
period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with
maturities of three months or less to be cash equivalents. Fair value
approximates carrying value because of the short maturity of the cash
equivalents.
Fixed Assets
Depreciation and amortization are provided using the straight-line method
of accounting over the estimated useful lives of the related assets or lease
term, whichever is shorter. The Company uses lives of three to five years.
F-7
<PAGE>
ORAPHARMA, INC.
(a development-stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
Intangible Assets
Certain acquired technologies, together with acquired patent license
rights have been recorded at cost and are being amortized on a straight-line
basis over their estimated useful life of ten years.
Research and Development
Research and development costs are charged to expense as incurred.
Stock-Based Compensation
The Company accounts for stock-based compensation to employees using the
intrinsic value method in accordance with Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees." The Company has
recognized deferred stock compensation related to certain stock option grants
(see Note 9). The Company accounts for stock-based compensation to nonemployees
using the fair value method in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation" and Emerging Issues Task Force (EITF) 96-18.
Net Loss Per Common Share
The Company has presented basic and diluted net loss per share pursuant
to SFAS No. 128, "Earnings per Share," and the Securities and Exchange
Commission Staff Accounting Bulletin No. 98. In accordance with SFAS 128, basic
and diluted net loss per share has been computed using the weighted-average
number of shares of common stock outstanding during the period, less shares
subject to repurchase. Pro forma basic and diluted net loss per common share,
as presented in the statements of operations, has been computed for the year
ended December 31, 1999 as described above, and also gives effect to the
conversion of the redeemable convertible preferred stock which will
automatically convert to common stock upon the closing of the Company's initial
public offering from the original date of issuance.
Impairment of Long-Lived Assets
In accordance with SFAS No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed of," if indicators of
impairment exist, the Company assesses the recoverability of the affected long-
lived assets by determining whether the carrying value of such assets can be
recovered through undiscounted future operating cash flows. If impairment is
indicated, the Company measures the amount of such impairment by comparing the
carrying value of the assets to the present value of the expected future cash
flows associated with the use of the asset. While the Company's current and
historical operating and cash flow losses are indicators of impairment, the
Company believes the future cash flows to be received from the long-lived
assets will exceed the assets' carrying value, and accordingly the Company has
not recognized any impairment losses through December 31, 1999.
F-8
<PAGE>
ORAPHARMA, INC.
(a development-stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
The following table presents the calculation of basic, diluted and pro
forma basic and diluted net loss per share:
<TABLE>
<CAPTION>
Year Ended
December 31,
--------------------------------------
1997 1998 1999
----------- ----------- ------------
<S> <C> <C> <C>
Net loss to common stockholders... $(2,141,739) $(8,490,862) $(12,876,799)
=========== =========== ============
Basic and diluted:
Weighted-average shares of common
stock outstanding.............. 835,037 956,719 999,089
Less: weighted-average shares
subject to repurchase.......... (410,983) (317,380) (223,973)
----------- ----------- ------------
Weighted-average shares used in
computing basic and diluted net
loss per share................. 424,054 639,339 775,116
=========== =========== ============
Basic and diluted net loss per
share........................... $ (5.05) $ (13.28) $ (16.61)
=========== =========== ============
Pro forma:
Net loss to common stockholders.. $(12,876,799)
============
Shares used above................ 775,116
Pro forma adjustment to reflect
the weighted-average effect of
assumed conversion of
convertible preferred stock
(unaudited).................... 7,017,643
------------
Shares used in computing pro
forma basic and diluted net
loss per share (unaudited)..... 7,792,759
============
Pro forma basic and diluted net
loss per share (unaudited)..... $ (1.65)
============
</TABLE>
The Company has excluded all redeemable convertible preferred stock,
outstanding stock options and warrants, and shares subject to repurchase from
the calculation of basic and diluted loss per common share because all such
securities are antidilutive for all applicable periods presented. The pro forma
calculations exclude outstanding stock options and warrants as they are
antidilutive.
Recapitalization
In February 2000, the Company effected a 1-for-2 reverse stock split of
all outstanding Common and Preferred stock and increased the number of
authorized shares of common stock to 50,000,000. All references in the
accompanying financial statements to the number of shares and per share amounts
have been retroactively restated to reflect the reverse stock split.
3. Fixed Assets:
<TABLE>
<CAPTION>
December 31,
--------------------
1998 1999
--------- ---------
<S> <C> <C>
Laboratory and production equipment.................. $ 652,848 $ 811,995
Leasehold improvements............................... 293,776 293,776
Furniture and fixtures and office equipment.......... 218,759 296,557
--------- ---------
1,165,383 1,402,328
Less--Accumulated depreciation and amortization...... (193,970) (444,431)
--------- ---------
$ 971,413 $ 957,897
========= =========
</TABLE>
F-9
<PAGE>
ORAPHARMA, INC.
(a development-stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
4. Acquisition of Intangible Assets:
In February 1997, the Company executed agreements with a pharmaceutical
company and a periodontist, whereby the Company acquired certain technologies
and other assets related to drug delivery technologies, together with certain
exclusive patent license rights to apply the acquired technologies to oral
health care, as well as certain nonexclusive patent license rights for other
potential applications for the required technologies.
During 1998, the Company initiated Phase 3 clinical trials on its first
oral healthcare product candidate which is based on the acquired technologies.
These trials were completed on October 15, 1999. The Company plans to file an
NDA with the FDA during the first half of 2000.
On the date of acquisition, the Company paid $250,000 in cash and issued
110,000 shares of common stock and a five-year warrant to purchase 20,000
shares of common stock for the acquired technologies and patent license rights.
These initial payments, valued at $274,000, have been recorded as an intangible
asset. Such intangible asset was recorded as the related technology has
alternative future uses since it represents the Company's core technology. The
shares of common stock had a fair value of $22,000 and the warrants had a fair
value of $2,000 based on using the Black-Scholes option pricing model. The
Company is obligated to make milestone payments which aggregate $3,150,000,
upon submission of an NDA to the FDA, and additional milestone payments upon
the FDA approving the NDA. Under certain circumstances, the Company may make
certain of these milestone payments by issuing shares of its common stock and
five-year warrants to purchase common stock. Should the Company issue any
warrants in connection with these milestone payments, the exercise price of
these warrants would be at the fair market value of the Company's common stock,
as defined, on the date of issuance.
The Company is also obligated to make royalty payments on future revenues
derived from products that are based on the acquired technology.
The Company has engaged one of the licensors as an advisor to the Company
and has agreed to pay $30,000 per year for such advisory services.
5. Accrued Expenses
<TABLE>
<CAPTION>
December 31,
---------------------
1998 1999
---------- ----------
<S> <C> <C>
Accrued compensation..................................... $ 208,273 $ 351,898
Accrued research and development......................... 784,955 537,625
Accrued offering costs................................... -- 150,000
Accrued other............................................ 98,768 180,945
Deferred revenue......................................... -- 200,000
---------- ----------
$1,091,996 $1,420,468
========== ==========
</TABLE>
During 1999, the Company received $200,000 under a Commonwealth of
Pennsylvania Opportunity Grant. Under the terms of the grant, amounts received
are subject to certain performance criteria. The Company has deferred the
$200,000, and will recognize this amount upon attaining the performance
criteria.
F-10
<PAGE>
ORAPHARMA, INC.
(a development-stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
6. Long-Term Debt:
As of December 31, 1999, the Company had a $1,750,000 equipment credit
facility with a bank, of which $1,000,000 was available for future borrowings.
During 1998, the Company borrowed $750,000 under this facility to finance
various fixed assets. Borrowings under the facility are evidenced by notes
which bear interest at the bank's prime rate plus 1%, are payable in equal
monthly principal payments over 48 months and are secured by the assets
financed. The facility expires at June 30, 2000.
As of December 31, 1999, the remaining principal payments were as
follows:
<TABLE>
<S> <C>
2000............................................................ $ 192,935
2001............................................................ 192,935
2002............................................................ 95,108
---------
480,978
Less--Current portion........................................... (192,935)
---------
$ 288,043
=========
</TABLE>
This credit facility requires the Company to maintain minimum tangible
net worth and liquidity ratios. The Company is prohibited from paying
dividends, incurring indebtedness or disposing of assets. The agreement also
places certain restrictions on the Company's ability to make investments,
change its business, ownership or management, or enter into merger or
acquisition agreements.
7. Commitments:
Facility Lease
On October 1, 1998, the Company entered into a five-year operating lease
for the facility that it currently occupies. The following is a summary, as of
December 31, 1999, of the future minimum annual lease payments required under
this lease:
<TABLE>
<S> <C>
2000............................................................. $170,912
2001............................................................. 176,562
2002............................................................. 182,213
2003............................................................. 139,838
--------
Total minimum lease payments.................................... $669,525
========
</TABLE>
The Company has also entered into operating lease agreements for various
office equipment. The term of these lease agreements range from 18 to 60
months. Current minimum annual payments under these leases aggregate $18,626
per year.
Rental expense for all operating leases in 1997, 1998 and 1999 was
$24,089, $176,170 and $183,881, respectively.
License Agreements
In December 1998, the Company entered into agreements to acquire certain
rights to technologies from two entities. Under the terms of these agreements,
the Company received exclusive licenses and patent rights for certain product
applications based on these preclinical development-stage technologies. The
Company also entered into sponsored research and consulting agreements with
these entities to continue the development of these technologies on behalf of
the Company.
F-11
<PAGE>
ORAPHARMA, INC.
(a development-stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
In connection with these agreements, during 1998 the Company incurred a
charge of $434,707, inclusive of $200,000 paid in cash and 82,500 shares of
the Company's common stock valued at $199,650 and a five-year warrant to
purchase 27,500 shares of common stock at an exercise price of $3.64 per share
valued at $35,057. The Company issued the common stock during 1999. The
Company charged the $434,707 amount as research and development expense given
the preclinical development-stage nature of the technology.
During 1999, upon the completion of a milestone achievement, the Company
paid $100,000 in cash and issued a five-year warrant to purchase 41,152 shares
of common stock at an exercise price of $4.86 per share. The Company recorded
$346,108 of expense in connection with the issuance of this warrant. Together
with the $100,000 cash payment and the warrant value, the Company recorded a
$446,108 charged to research and development expense given the preclinical
development stage nature of the technology. The Company has, contingent on
achievement of milestones, future license payment obligations in the aggregate
amount of $3,000,000. These milestone payments are due upon NDA submission and
NDA approval.
During 1998 and 1999, the Company also incurred sponsored research and
consulting expenses in connection with these agreements of $625,600 and
$869,956, respectively. As of December 31, 1999, future sponsored research and
consulting payments are scheduled to be an aggregate of $1,414,444, payable as
follows:
<TABLE>
<S> <C>
2000............................................................. $ 712,778
2001............................................................. 457,778
2002............................................................. 243,888
</TABLE>
Under certain circumstances, either the Company or the other entities
may cancel these agreements.
As discussed in Note 4, the Company is obligated to make certain
milestone and future royalty payments in connection with the 1997 acquisition
of certain technology.
8. Preferred Stock:
Sales of Preferred Stock
As of December 31, 1999, the authorized and outstanding redeemable
convertible preferred stock series and their principal terms are as follows:
<TABLE>
<CAPTION>
Liquidation
Shares Shares Carrying Value
Series Authorized Outstanding Amount Per Share
------ ---------- ----------- -------- -----------
<S> <C> <C> <C> <C>
A 400,000 400,000 $ 800,000 $2.00
B 3,311,828 3,311,828 12,022,754 3.64
C 3,292,177 3,292,177 15,948,904 4.86
D 553,095 553,095 4,958,905 9.04
--------- --------- -----------
7,557,100 7,557,100 $33,730,563
========= ========= ===========
</TABLE>
The Company sold 400,000 shares of Series "A" Convertible Preferred
stock ("Series A"), 3,311,828 shares of Series "B" Convertible Preferred stock
("Series B"), 3,292,177 shares of Series "C" Convertible Preferred stock
("Series C") and 553,095 shares of Series "D" Convertible Preferred stock
("Series D") in February 1997, March 1997, December 1998 and December 1999, at
$2.00, $3.64, $4.86 and $9.04 per share,
F-12
<PAGE>
ORAPHARMA, INC.
(a development-stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
respectively. All of these convertible preferred shares were sold to accredited
investors, and Series A, Series B, Series C and Series D shares have the same
preferences, other than the liquidation value where Series D shares have full
preference. In connection with the Series D sale, warrants to purchase common
stock were issued. (See Note 9).
The preferred shares are convertible into common stock on a share for
share basis and are entitled to vote together with the common stockholders as
one class. The preferred stockholders are entitled to receive 8% annual
cumulative dividends after January 2, 2002, and to participate equally with
respect to dividends or other distributions made on the common stock or any
other class or series of stock then ranking junior to or in parity with the
preferred shares. The preferred shares automatically convert into common stock
upon the closing of an initial public offering, as defined.
At the request of any holder of preferred shares, the Company is
obligated to redeem up to one third of such shares between January 1, 2002 and
December 31, 2002, up to one half of such shares between January 1, 2003 and
December 31, 2003 and all such shares thereafter. The redemption price shall be
$2.00 per share for Series A, $3.64 for Series B, $4.86 for Series C and $9.04
for Series D Convertible Preferred shares plus any unpaid cumulative or other
dividends thereon. The preferred stockholders are also entitled to certain
anti-dilution and registration rights.
Non-Cash Preferred Stock Charge
In accordance with EITF 98-5, the Company has recorded a deemed dividend
on the Series D which represents the excess of the fair market value of the
underlying common stock and warrants issued to the Series D holders over the
sale price of the securities.
Unaudited Pro Forma Stockholders' Equity
Upon completion of the proposed initial public offering of the Company's
common stock, all of the outstanding shares of Series A, B, C and D will
convert into common stock. The unaudited pro forma stockholders' equity at
December 31, 1999 reflects the assumed conversion of the Series A, B, C and D
into 7,557,100 shares of common stock.
9. Stockholders' Deficit:
1996 Stock Option Plan
The Company has adopted the 1996 Stock Option Plan (the "Plan"), which
provides for the granting of options to purchase a maximum of 634,412 shares of
the Company's common stock. Under the Plan, options may be granted to
directors, officers, employees, consultants and advisors to the Company.
Options under the Plan generally become exercisable as follows: 20% at
the first anniversary of the option grant date and 5% at each subsequent
quarterly anniversary date. All options expire ten years after the grant date.
The Company applies APB No. 25, "Accounting for Stock Issued to
Employees," and the related interpretations in accounting for its stock option
plans. The Company follows the disclosure requirement of SFAS No. 123,
"Accounting for Stock-Based Compensation." The weighted average fair value of
the options granted during 1997, 1998 and 1999 is estimated at $.12, $.12 and
$1.98 per share, respectively, on the date of grant using the Black-Scholes
option pricing model with the following assumptions: dividend yield of zero;
volatility of zero; weighted average risk-free interest rate of 6.47% in 1997,
5.81% in 1998 and 5.22% in 1999
F-13
<PAGE>
ORAPHARMA, INC.
(a development-stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
and an expected life of 6 years. Had compensation cost for the Company's common
stock option plan been determined based upon the fair value of the options at
the date of grant, as prescribed under SFAS No. 123, the Company's net loss for
the years ended December 31, 1997, 1998 and 1999 would have been as follows:
<TABLE>
<CAPTION>
December 31,
--------------------------------------
1997 1998 1999
----------- ----------- ------------
<S> <C> <C> <C>
Net loss to common stockholders--
as reported.................... $(2,141,739) $(8,490,862) $(12,876,799)
=========== =========== ============
Net loss to common stockholders--
pro forma...................... $(2,145,157) $(8,495,952) $(12,886,769)
=========== =========== ============
Basic and diluted net loss per
share--as reported............. $ (5.05) $ (13.28) $ (16.61)
=========== =========== ============
Basic and diluted net loss per
share--
pro forma...................... $ (5.06) $ (13.29) $ (16.63)
=========== =========== ============
</TABLE>
Activity under the Plan is shown in the following table:
<TABLE>
<CAPTION>
Aggregate
Exercise Exercise
Shares Price Price
------- -------- ---------
<S> <C> <C> <C>
Outstanding, Date of Inception................ -- $ -- $ --
Granted...................................... 136,827 .02-.20 2,827
------- --------
Outstanding, December 31, 1996................ 136,827 .02-.20 2,827
Granted...................................... 147,500 .36 53,100
------- --------
Outstanding, December 31, 1997................ 284,327 .02-.36 55,927
Granted...................................... 130,875 .36 47,115
Exercised.................................... (200) .20 (40)
Forfeited.................................... (300) .20 (60)
------- --------
Outstanding, December 31, 1998................ 414,702 .02-.36 102,942
Granted...................................... 172,270 .60 103,362
Exercised.................................... (100) .36 (36)
Forfeited.................................... (400) .36 (144)
------- --------
Outstanding, December 31, 1999................ 586,472 $.02-.60 $206,124
======= ========
</TABLE>
The following table summarizes information about stock options at
December 31, 1999:
<TABLE>
<CAPTION>
Outstanding Stock Options Exercisable Stock Options
------------------------- -------------------------
Weighted
Average
Remaining
Exercise Contractual Exercise
Prices Shares Life Shares Price
-------- ------- ----------- -------------- -------------
<S> <C> <C> <C> <C>
$.02 136,327 6.9 years 81,796 $ .02
.36 277,875 7.9 years 112,606 .36
.60 172,270 9.2 years -- .60
</TABLE>
At December 31, 1999, options to purchase 587,472 shares had been
granted, of which 194,402 were exercisable. Options to purchase 47,640 shares
remaining available under the plan were cancelled in December 1999. The
weighted average remaining exercise period relating to the outstanding options
was approximately 8.1 years.
F-14
<PAGE>
ORAPHARMA, INC.
(a development-stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
During the year ended December 31, 1999, in connection with the grant of
options to employees, the Company recorded deferred stock compensation of
$313,532, representing the difference between the exercise price and the deemed
fair value of the Company's common stock for financial reporting purposes on
the date such stock options were granted. Deferred compensation is included as
a component of stockholders' deficit and is being amortized to expense
ratability over the five-year vesting period of the options.
1999 Equity Compensation Plan
In December 1999, the Company's Board of Directors adopted the 1999
Equity Compensation Plan, subject to stockholder approval, which was obtained
in January 2000. 1,250,000 shares were reserved to be granted in the future
under this plan. As of December 31, 1999, no shares had been granted.
Warrants
In November 1996, the Company issued warrants to purchase 31,249 shares
of Series A Preferred stock at an exercise price of $2.00 per share in
connection with the issuance of convertible notes. On the date of issuance,
these warrants were deemed to have nominal fair value. None of these warrants,
which expire in December 2003, have been exercised.
In connection with the acquisition of certain technology, in December
1998, the Company issued a warrant to purchase 27,500 shares of common stock at
$3.64 per share and in December 1999, issued a warrant to purchase 41,152
shares of common stock at $4.86 per share. The fair value of these warrants,
using the Black-Scholes option pricing model, were $35,057 and $346,108,
respectively, and have been recorded as research and development expense. These
warrants expire in January 2004 and December 2004, respectively. (see Note 7).
In December 1999, the Company issued warrants to purchase 110,617 shares
of common stock at $12.92 per share. These warrants, which were issued to the
purchasers of the Company's Series D, expire in December 2006 and are not
exercisable until December 2000. The fair value of these warrants, using the
Black-Scholes option pricing model, of $756,114 has been recorded as a
component of the Preferred Stock charge (See Note 8).
Common Stock Subject to Repurchase
During 1997, the Company sold 467,087 shares of common stock to certain
members of management at $.002 per share. These shares are subject to
repurchase by the Company, at $.002 per share, in the event that their
employment is terminated. The number of shares repurchasable by the Company
decreases upon the individuals first anniversary of employment, and further
reduces upon subsequent quarterly anniversary dates. As of December 31, 1999,
156,606 shares of common stock are subject to repurchase by the Company.
10. Income Taxes:
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes." The Company has net operating loss carryforwards
for tax reporting purposes that will begin to expire in 2011. Since realization
of the tax benefit associated with this carryforward is not assured, a
valuation allowance was recorded against this tax benefit as required by SFAS
No. 109. In addition, pursuant to income tax regulations, the annual
utilization of these losses may be limited. The Company believes that any such
limitation will not have a material impact on the utilization of these
carryforwards.
F-15
<PAGE>
As of December 31, 1999, the Company had federal net operating loss
carryforwards of $20,490,000. The Company also had federal research and
development tax credit carryforwards of $670,000.
The Tax Reform Act of 1986 contains provisions that limit the utilization
of net operating loss and tax credit carryforwards if there has been a
"ownership change." Any such future "ownership change," as described in Section
382 of the Internal Revenue Code, may limit the Company's utilization of its
net operating loss and tax credit carryforwards. Management believes the
proposed initial public offering will not have a material effect on the
Company's ability to utilize these carryforwards.
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amount used for income tax purposes. Based upon the Company's
loss history, a valuation allowance for deferred tax assets has been provided
as it is more likely than not that the deferred tax assets will not be
realized:
<TABLE>
<CAPTION>
December 31,
------------------------
1998 1999
----------- -----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards............... $ 3,144,000 $ 6,971,000
Capitalized research and development expenses.. 464,000 406,000
Research and development credit carryforwards.. 296,000 670,000
Capitalized patent rights...................... 148,000 140,000
----------- -----------
Total deferred tax assets..................... 4,052,000 8,187,000
Valuation allowance for deferred tax assets..... (4,052,000) (8,187,000)
----------- -----------
Net deferred tax assets....................... $ -- $ --
=========== ===========
</TABLE>
F-16
<PAGE>
Orapharma Logo
Until , 2000 (25 days after the date of this prospectus), all dealers
that buy, sell or trade our common stock, whether or not participating in this
offering, may be required to deliver a prospectus. This requirement is in
addition to the dealers' obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The Information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell securities, and we are not soliciting offers to buy these +
+securities, in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED FEBRUARY 7, 2000
[LOGO OF ORAPHARMA, INC.]
4,000,000 Shares
Common Stock
OraPharma is offering 4,000,000 shares of its common stock. This is our
initial public offering. We have applied to have our common stock approved for
quotation on the Nasdaq National Market under the symbol "OPHM." We anticipate
that the initial public offering price will be between $15.00 and $17.00 per
share.
--------------
Investing in our common stock involves a high degree of risk.
See "Risk Factors" beginning on page 5.
--------------
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Public Offering Price.......................................... $ $
Underwriting Discounts and Commissions......................... $ $
Proceeds to OraPharma.......................................... $ $
</TABLE>
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
OraPharma has granted the underwriters a 30-day option to purchase up to an
additional 600,000 shares of common stock to cover over-allotments. FleetBoston
Robertson Stephens International Limited expects to deliver the shares to
purchasers on , 2000.
--------------
Robertson Stephens International
U.S. Bancorp Piper Jaffray
Gerard Klauer Mattison & Co., Inc.
The date of this Prospectus is , 2000
<PAGE>
UNDERWRITING
The underwriters named below, acting through their representatives,
FleetBoston Robertson Stephens International Limited, U.S. Bancorp Piper
Jaffray Inc., and Gerard Klauer Mattison & Co., Inc., have severally agreed
with us, subject to the terms and conditions set forth in the underwriting
agreement, to purchase from us the number of shares of common stock set forth
opposite their names below. The underwriters are committed to purchase and pay
for all shares if any are purchased.
<TABLE>
<CAPTION>
Number
International Underwriter of Shares
------------------------- ---------
<S> <C>
FleetBoston Robertson Stephens International Limited...............
U.S. Bancorp Piper Jaffray Inc.....................................
Gerard Klauer Mattison & Co., Inc..................................
---------
Total............................................................ 4,000,000
=========
</TABLE>
The representatives have advised us that the underwriters propose to
offer the shares of common stock to the public at the initial public offering
price set forth on the cover page of this prospectus and to certain dealers at
that price less a concession of not in excess of $ per share, of which $
may be reallowed to other dealers. After this offering, the public offering
price, concession and reallowance to dealers may be reduced by the
representatives. This reduction shall not change the amount of proceeds to be
received by us as stated on the cover page of this prospectus. The common stock
is offered by the underwriters as stated herein, subject to receipt and
acceptance by them and subject to their right to reject any order in whole or
in part.
The underwriters have informed us that they do not intend to confirm
sales to any accounts over which they exercise discretionary authority. The
underwriters have advised us that they do not expect sales to discretionary
accounts to exceed 5% of the total number of shares offered.
Over-Allotment Option. We have granted to the underwriters an option,
exercisable during the 30-day period after the date of this prospectus, to
purchase up to 600,000 additional shares of common stock at the same price per
share as we will receive for the 4,000,000 shares that the underwriters have
agreed to purchase. If the underwriters exercise this option, each of the
underwriters will have a firm commitment, subject to certain conditions, to
purchase approximately the same percentage of such additional shares that the
number of shares of common stock to be purchased by it shown in the above table
bears to the 4,000,000 shares of common stock offered in this offering. If
purchased, such additional shares will be sold by the underwriter on the same
terms as those on which the 4,000,000 shares offered in this offering are being
sold. We will be obligated, pursuant to the option, to sell shares to the
underwriters to the extent the option is exercised. The underwriters may
exercise such option only to cover over-allotments made in connection with the
sale of the shares of common stock offered in this offering. If such option is
exercised in full, the total public offering price, underwriting discounts and
commissions and proceeds to us will be $ , $ and $ , respectively.
Indemnity. The underwriting agreement contains covenants of indemnity
among the underwriters and us against various civil liabilities, including
liabilities under the Securities Act and liabilities arising from breaches of
representations and warranties contained in the underwriting agreement.
Lock-Up Agreements. Each executive officer, director, and substantially
all of our stockholders, agreed with the representatives for a period of 180
days after the date of this prospectus, subject to certain exceptions, not to
offer to sell, contract to sell, or otherwise sell, dispose of, loan, pledge or
grant any rights with respect to any shares of common stock, any options or
warrants to purchase any shares of common stock, or any securities convertible
into or exchangeable for shares of common stock, owned as of the date of this
prospectus or thereafter acquired directly by such holders or with respect to
which they have or hereafter
60
<PAGE>
acquire the power of disposition, without the prior written consent of
FleetBoston Robertson Stephens International Limited. FleetBoston Robertson
Stephens International Limited may, in its sole discretion and at any time or
from time to time without notice, release all or any portion of the securities
subject to the lock-up agreements. There are no agreements between the
representatives and any of our stockholders who have executed a lock-up
agreement providing consent to the sale of shares prior to the expiration of
the lock-up period.
Future Sales. In addition, we have agreed that during the 180 days after
the date of this prospectus we will not, subject to certain exceptions, without
the prior written consent of FleetBoston Robertson Stephens International
Limited (i) consent to the disposition of any shares held by stockholders
subject to lock-up agreements prior to the expiration of the lock-up period or
(ii) issue, sell, contract to sell, or otherwise dispose of, any shares of
common stock, any options or warrants to purchase any shares of common stock or
any securities convertible into, exercisable for or exchangeable for shares of
common stock other than the sale of shares in this offering, the issuance of
common stock upon the exercise of outstanding options or warrants and the
issuance of options under our existing stock option and incentive plans,
provided that those options do not vest prior to the expiration of the lock-up
period.
Listing. We have applied to have the common stock approved for quotation
on The Nasdaq National Market under the symbol "OPHM."
No Prior Public Market. Prior to this offering, there has been no public
market for our common stock. Consequently, the initial public offering price
for the common stock offered hereby will be determined through negotiations
between us and the representatives of the underwriters. Among the factors to be
considered in such negotiations are prevailing market conditions, certain of
our financial information, market valuations of other companies that we and the
representatives, believe to be comparable to us, estimates of our business
potential, the present state of our development and other factors deemed
relevant.
Stabilization. The representatives of the underwriters have advised us
that, pursuant to Regulation M under the Securities Act, certain persons
participating in this offering may engage in transactions, including
stabilizing bids, syndicate covering transactions or the imposition of penalty
bids, that may have the effect of stabilizing or maintaining the market price
of the common stock at a level above that which might otherwise prevail in the
open market. A "stabilizing bid" is a bid for or the purchase of shares of
common stock on behalf of the underwiters for the purpose of fixing or
maintaining the price of the common stock. A "syndicate covering transaction"
is the bid for or the purchase of the common stock on behalf of the
underwriters to reduce a short position incurred by the underwriters in
connection with this offering. A "penalty bid" is an arrangement permitting the
representatives to reclaim the selling concession otherwise accruing to an
underwriter or syndicate member in connection with this offering if the common
stock originally sold by such underwriter or syndicate member is purchased by
the representatives in a syndicate covering transaction and has therefore not
been effectively placed by such underwriter or syndicate member. The
representatives have advised us that such transactions may be effected on The
Nasdaq National Market or otherwise and, if commenced, may be discontinued at
any time.
Directed Share Program. At our request, the underwriters have reserved up
to 200,000 shares of the common stock to be issued by us and offered for sale
in this offering, at the initial public offering price, to our directors,
officers, employees, business associates and related persons. The number of
shares of common stock available for sale to the general public will be reduced
to the extent such individuals purchase such reserved shares. Any reserved
shares which are not so purchased will be offered by the underwriters to the
general public on the same basis as the other shares offered in this offering.
61
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The expenses (other than underwriting discounts and commissions and the
underwriter's non-accountable expense allowance) payable in connection with
this offering of the rights and the sale of the Common Stock offered hereby are
as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............. $20,645
NASD filing fee................................................. 8,320
Nasdaq filing fee............................................... 100,000
Printing and engraving expenses................................. 150,000
Legal fees and expenses......................................... 250,000
Accounting fees and expenses.................................... 100,000
Blue Sky fees and expenses (including legal fees)............... 10,000
Transfer agent and rights agent and registrar fees and
expenses...................................................... 25,000
Miscellaneous................................................... 36,035
--------
Total......................................................... $700,000
========
</TABLE>
All expenses are estimated except for the SEC fee and the NASD fee.
Item 14. Indemnification of Directors and Officers
The Registrant's Certificate of Incorporation permits indemnification to
the fullest extent permitted by Delaware law. The Registrant's by-laws require
the Registrant to indemnify any person who was or is an authorized
representative of the Registrant, and who was or is a party or is threatened to
be made a party to any corporate proceeding, by reason of the fact that such
person was or is an authorized representative of the Registrant, against
expenses, judgments, penalties, fines and amounts paid in settlement actually
and reasonably incurred by such person in connection with such third-party
proceeding if such person acted in good faith and in a manner such person
reasonably believed to be in, or not opposed to, the best interests of the
Registrant and, with respect to any criminal third-party proceeding (including
any action or investigation which could or does lead to a criminal third-party
proceedings had no reasonable cause to believe such conduct was unlawful. The
Registrant shall also indemnify any person who was or is an authorized
representative of the Registrant and who was or is a party or is threatened to
be made a party to any corporate proceeding by reason of the fact that that
such person was or is an authorized representative of the Registrant, against
expenses actually and reasonably incurred by such person in connection with the
defense or settlement of such corporate action if such person acted in good
faith and in a manner reasonably believed to be in, or not opposed to, the best
interests of the Registrant, except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Registrant unless and only to the extent that the
Delaware Court of Chancery or the court in which such corporate proceeding was
pending shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such authorized
representative is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper. Such
indemnification is mandatory under the Registrant's by-laws as to expenses
actually and reasonably incurred to the extent that an authorized
representative of the Registrant had been successful on the merits or otherwise
in defense of any third party or corporate proceeding or in defense of any
claim, issue or matter therein. The determination of whether an individual is
entitled to indemnification may be made by a majority of disinterested
directors, independent legal counsel in a written legal opinion or the
stockholders. Delaware law also permits indemnification in connection with a
proceeding brought by or in the right of the Registrant to procure a judgment
in its favor. Insofar as indemnification for liabilities arising under the Act
may be permitted to directors, officers or persons controlling
II-1
<PAGE>
the Registrant pursuant to the foregoing provisions, the Registrant has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in that Act and is
therefore unenforceable. The Registrant maintains a directors and officers
liability insurance policy.
The Underwriting Agreement provides that the underwriter is obligated,
under certain circumstances, to indemnify directors, officers, and controlling
persons of the Registrant against certain liabilities, including liabilities
under the Act.
Item 15. Recent Sales of Unregistered Securities
In the preceding three years, the Registrant has issued the following
securities that were not registered under the Act:
Since its inception, the Company has issued an aggregate of 1,039,635
shares of common stock, par value $0.001 per share. These shares include (i)
186,999 shares issued in February 1997 at a purchase price per share of $0.002
for a total of $374; (ii) 167,750 shares issued in March 1997 at a purchase
price of $0.002 for a total of $336; (iii) 110,000 shares issued in February
1997 at a purchase price per share of $0.20 for a total of $22,000; (iv) 20,000
shares issued in April 1997 at a purchase price per share of $.10 for a total
of $2,000; (v) 2,500 shares issued in October 1997 at a purchase price per
share of $0.02 for a total of $50; (vi) 2,500 shares issued in November 1997 at
a purchase price of $0.02 for a total of $50; (vii) 82,500 shares issued in
December 1998 at a purchase price per share of $2.42 for a total of $199,650;
(viii) 300 shares issued in connection with the exercise of stock options for a
total of $46 and (ix) 467,087 shares of restricted stock issued to certain
employees and other persons, consisting of 336,462 shares issued in March 1997
at a purchase price per share of $0.002 for a total of $673; 89,375 shares
issued in October 1997 at a purchase price per share of $0.002 for a total of
$179; 37,500 shares issued in October 1997 at a purchase price per share of
$0.002 for a total of $75; and 3,750 shares issued in February 1998 at a
purchase price per share of $0.002 for a total of $8.
Since its inception, the Company has also issued an aggregate of
7,557,100 shares of preferred stock: consisting of (i) 400,000 shares of series
A preferred stock issued in February 1997 at a purchase price of $2.00 for a
total of $800,000; (ii) 3,311,828 shares of series B preferred stock issued in
March 1997 at a purchase price per share of $3.64 for a total of approximately
$12 million; (iv) 3,292,177 shares of series C preferred stock issued in
December 1998 at a purchase price per share of $4.86 for a total of
approximately $15.9 million; and (v) 553,095 shares of series D preferred stock
issued on December 23, 1999 at a purchase price per share of $9.04 for a total
of approximately $5 million. All such issuances were made under the exemption
from registration provided under Section 4(2) of the Act.
Since its inception, the Company has issued warrants to purchase (i)
31,249 shares of series A preferred stock in February 1997, which will become
exercisable for 31,249 shares of common stock upon the completion of this
offering at an exercise price of $2.00 per share, which expire in December
2003; (ii) 27,500 shares of common stock on February 1, 1999 at an exercise
price of $3.64 per share, which expire in January 2004; (iii) 110,617 shares of
common stock on December 23, 1999, at an exercise price of $12.92 per share,
which expire in December 2006; and (iv) 41,152 shares of common stock on
December 28, 1999, at an exercise price of $4.86 per share, which expire in
December 2006. All such issuances were made under the exemption from
registration provided under Section 4(2) of this Act.
Pursuant to the Company's 1996 Stock Option Plan, since its inception the
Company has granted options to purchase a total of 587,472 shares of common
stock at a weighted average exercise price of $.35 per share, of which options
for 300 shares have been exercised and options for 700 shares have been
forfeited.
II-2
<PAGE>
For a more detailed description of the Company's 1996 Stock Option Plan, see
"Description of Capital Stock--Equity Compensation Plans" in this registration
statement. In granting the options and selling the underlying securities upon
exercise of the options, the Company is relying upon exemptions from
registration set forth in Rule 701 and Section 4(2) of the Act.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits:
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement.#
3.1 Fourth Amended and Restated Certificate of Incorporation of the
Company.!
3.2 Amended and Restated Bylaws of the Company.!
4.1 Second Amended and Restated Stockholders Agreement among Orapharma,
Inc. and the parties set forth therein, dated December 23, 1999.*
4.2 Warrant issued to Oak Investment Partners VI, Limited Partnership.!
4.3 Warrant issued to Oak V Affiliates Fund, Limited Partnership.!
4.4 Warrant issued to Canaan S.B.I.C., L.P.*
4.5 Warrant issued to Canaan Capital Limited Partnership.*
4.6 Warrant issued to Canaan Capital Offshore Limited Partnership.*
4.7 Series A Preferred and Series B Preferred Stock Purchase Agreement
among Orapharma and the parties named therein, date February 26,
1997.!
4.8 Series C Preferred Stock Purchase Agreement among Orapharma, Inc. and
the parties named therein, dated December 1, 1998.!
4.9 Series D Preferred Stock Purchase Agreement among Orapharma, Inc. and
the parties named therein, dated December 23, 1999.*
4.10 Restricted Stock Purchase Agreement between BioMorphics Group, Inc.
and OraPharma dated December 31, 1998.*
4.11 Restricted Stock Purchase Agreement between Children's Medical Center
Corporation and OraPharma dated December 31, 1998.*
4.12 Warrant issued to Mucosal Therapeutics.*
4.13 Restricted Stock Purchase Agreement between American Cyanamid Company
and OraPharma, dated February 26, 1997.*
4.14 Restricted Stock Purchase Agreement between Scheer Investment Holdings
I, L.L.C. and OraPharma dated February 24, 1997.!
4.15 Restricted Stock Purchase Agreement between Oak VI Affiliates Fund,
Limited Partnership and OraPharma, dated February 26, 1997.!
4.16 Restricted Stock Purchase Agreement between Oak Investment Partners
VI, Limited Partnership and OraPharma, dated February 26, 1997.!
4.17 Restricted Stock Purchase Agreement between Michael D. Kishbauch and
OraPharma, dated March 6, 1997.!
4.18 Restricted Stock Purchase Agreement between J. Ronald Lawter and
OraPharma, dated March 19, 1997.!
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
4.19 Warrant issued to Canaan Equity L.P.!
4.20 Warrant issued to Domain Partners IV, L.P.!
4.21 Warrant issued to DP IV Associates, L.P.!
4.22 Warrant issued to Old Court Limited!
4.23 Warrant issued to Frazier Healthcare II, L.P.!
4.24 Warrant issued to HealthCap KB.!
4.25 Warrant issued to HealthCap CoInvest KB.!
4.26 Warrant issued to Oak Investment Partners VI, Limited Partnership.!
4.27 Warrant issued to Oak VI Affiliates Fund, Limited Partnership.!
4.28 Warrant issued to Sentron Medical, Inc.!
4.29 Warrant issued to TL Ventures III L.P.!
4.30 Warrant issued to TL Ventures III Interfund L.P.!
4.31 Warrant issued to TL Ventures III Offshore L.P.!
4.32 Warrant issued to Mucosal Therapeutics LLC.!
4.33 First Amendment to Warrant issued to Oak Investment Partners VI, Limited Partnership.#
4.34 First Amendment to Warrant issued to Oak Affiliates Fund, Limited Partnership.#
4.35 First Amendment to Warrant issued to Canaan S.B.I.C., L.P.#
4.36 First Amendment to Warrant issued to Canaan Capital Limited Partnership.#
4.37 First Amendment to Warrant issued to Canaan Capital Offshore Limited Partnership C.V.#
5.1 Opinion of Morgan, Lewis & Bockius LLP.#
10.1 OraPharma, Inc. 1996 Stock Option Plan.*
10.2 OraPharma, Inc. 1999 Equity Compensation Plan.*
10.3 Office Space Lease for 730 Louis Drive, Warminster, Pennsylvania, between Equivest Management
Corporation and OraPharma, Inc. dated July 31, 1998.#
10.4 Loan and Security Agreement between Silicon Valley Bank and OraPharma dated October 10, 1997.#
10.5 Children's Hospital Sponsored Research Agreement, between Children's Hospital and OraPharma,
dated December 31, 1998.*@
10.6 License Agreement between Children's Medical Center Corporation and OraPharma, dated
December 31, 1998.*@
10.7 License Agreement between Mucosal Therapeutics LLC and OraPharma, dated December 14, 1998.*@
10.8 Research and Consulting Agreement between Biomodels LLC and OraPharma dated
December 14, 1998.*@
10.9 License Agreement between American Cyanamid Company and OraPharma, Inc. dated
February 26, 1997.*@
10.10 License Agreement between Gary R. Jernberg and OraPharma, dated December 19, 1996.*@
10.11 License Agreement between Technical Developments and Investments, Est. and OraPharma dated
February 13, 1997.*@
10.12 Amendment to the OraPharma, Inc. 1996 Stock Option Plan.!
23.1 Consent of Arthur Andersen LLP.!
23.2 Consent of Morgan, Lewis & Bockius LLP (to be included in Exhibit 5.1).#
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
23.3 Consent of Arnall, Golden & Gregory, LLP.!
24.1 Power of Attorney.*
27.1 Financial Data Schedule.!
</TABLE>
- -------
*Previously filed.
!Filed herewith.
#To be filed by amendment.
@Confidential Treatment Requested.
(b) Financial Statement Schedules
All information for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission is either included in
the financial statements or is not required under the related instructions or
are inapplicable, and therefore have been omitted.
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the plan
of distribution no previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to provisions described in Item 14 above, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the
II-5
<PAGE>
securities being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes (1) to provide to the
underwriter at the closing specified in the standby underwriting agreement,
certificates in such denominations and registered in such names as required by
the underwriter to permit prompt delivery to each purchaser; (2) that for
purposes of determining any liability under the Act, the information omitted
from the form of prospectus filed as part of a registration statement in
reliance upon Rule 430(a) and contained in the form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the act shall be
deemed to be part of this registration statement as of the time it was declared
effective; and (3) that for the purpose of determining any liability under the
Act, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to supplement the
prospectus, after the expiration of the subscription period, to set forth the
results of the subscription offer, the transactions by the underwriter during
the subscription period, the amount of unsubscribed securities to be purchased
by the underwriter, and the terms of any subsequent reoffering thereof. If any
public offering by the underwriter is to be made on terms differing from those
set forth on the cover page of the prospectus, a post-effective amendment will
be filed to set forth the terms of such offering.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has duly reasonable grounds to believe that it
meets all of the requirements for filing on Form S-1 and has duly caused this
Amendment No. 1 to Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Warminster, Pennsylvania, on
February 7, 2000.
OraPharma Inc.
/s/ Michael D. Kishbauch
By: _________________________________
Michael D. Kishbauch
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Michael D. Kishbauch President, Chief Executive February 7, 2000
______________________________________ Officer and Director
Michael D. Kishbauch (Principal Executive
Officer)
/s/ James A. Ratigan Vice President, Chief February 7, 2000
______________________________________ Financial Officer and
James A. Ratigan Secretary (Principal
Financial Officer)
/s/ Robert D. Haddow Controller (Principal February 7, 2000
______________________________________ Accounting Officer)
Robert D. Haddow
/s/ * Director February 7, 2000
______________________________________
James J. Mauzey
/s/ * Director February 7, 2000
______________________________________
Christopher Moller
/s/ * Director February 7, 2000
______________________________________
Eileen M. More
/s/ * Director February 7, 2000
______________________________________
Harry T. Rein
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Director February 7, 2000
______________________________________
Seth A. Rudnick
* Director February 7, 2000
______________________________________
David I. Scheer
* Director February 7, 2000
______________________________________
Jesse I. Treu
</TABLE>
/s/ James A. Ratigan
*By: _______________________
James A. Ratigan, Attorney-in-
fact
II-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement.#
3.1 Fourth Amended and Restated Certificate of Incorporation of the
Company.!
3.2 Amended and Restated Bylaws of the Company.!
4.1 Second Amended and Restated Stockholders Agreement among Orapharma,
Inc. and the parties set forth therein, dated December 23, 1999.*
4.2 Warrant issued to Oak Investment Partners VI, Limited Partnership.!
4.3 Warrant issued to Oak V Affiliates Fund, Limited Partnership.!
4.4 Warrant issued to Canaan S.B.I.C., L.P.*
4.5 Warrant issued to Canaan Capital Limited Partnership.*
4.6 Warrant issued to Canaan Capital Offshore Limited Partnership.*
4.7 Series A Preferred and Series B Preferred Stock Purchase Agreement
among Orapharma and the parties named therein, date February 26,
1997.!
4.8 Series C Preferred Stock Purchase Agreement among Orapharma, Inc. and
the parties named therein, dated December 1, 1998.!
4.9 Series D Preferred Stock Purchase Agreement among Orapharma, Inc. and
the parties named therein, dated December 23, 1999.*
4.10 Restricted Stock Purchase Agreement between BioMorphics Group, Inc.
and OraPharma dated December 31, 1998.*
4.11 Restricted Stock Purchase Agreement between Children's Medical Center
Corporation and OraPharma dated December 31, 1998.*
4.12 Warrant issued to Mucosal Therapeutics.*
4.13 Restricted Stock Purchase Agreement between American Cyanamid Company
and OraPharma, dated February 26, 1997.*
4.14 Restricted Stock Purchase Agreement between Scheer Investment Holdings
I, L.L.C. and OraPharma dated February 24, 1997.!
4.15 Restricted Stock Purchase Agreement between Oak VI Affiliates Fund,
Limited Partnership and OraPharma, dated February 26, 1997.!
4.16 Restricted Stock Purchase Agreement between Oak Investment Partners
VI, Limited Partnership and OraPharma, dated February 26, 1997.!
4.17 Restricted Stock Purchase Agreement between Michael D. Kishbauch and
OraPharma, dated March 6, 1997.!
4.18 Restricted Stock Purchase Agreement between J. Ronald Lawter and
OraPharma, dated March 19, 1997.!
4.19 Warrant issued to Canaan Equity L.P.!
4.20 Warrant issued to Domain Partners IV, L.P.!
4.21 Warrant issued to DP IV Associates, L.P.!
4.22 Warrant issued to Old Court Limited!
</TABLE>
II-9
<PAGE>
<TABLE>
<S> <C>
4.23 Warrant issued to Frazier Healthcare II, L.P.!
4.24 Warrant issued to HealthCap KB.!
4.25 Warrant issued to HealthCap CoInvest KB.!
4.26 Warrant issued to Oak Investment Partners VI, Limited Partnership.!
4.27 Warrant issued to Oak VI Affiliates Fund, Limited Partnership.!
4.28 Warrant issued to Sentron Medical, Inc.!
4.29 Warrant issued to TL Ventures III L.P.!
4.30 Warrant issued to TL Ventures III Interfund L.P.!
4.31 Warrant issued to TL Ventures III Offshore L.P.!
4.32 Warrant issued to Mucosal Therapeutics LLC.!
4.33 First Amendment to Warrant issued to Oak Investment Partners VI, Limited Partnership.#
4.34 First Amendment to Warrant issued to Oak Affiliates Fund, Limited Partnership.#
4.35 First Amendment to Warrant issued to Canaan S.B.I.C., L.P.#
4.36 First Amendment to Warrant issued to Canaan Capital Limited Partnership.#
4.37 First Amendment to Warrant issued to Canaan Capital Offshore Limited Partnership C.V.#
5.1 Opinion of Morgan, Lewis & Bockius LLP.#
10.1 OraPharma, Inc. 1996 Stock Option Plan.*
10.2 OraPharma, Inc. 1999 Equity Compensation Plan.*
10.3 Office Space Lease for 730 Louis Drive, Warminster, Pennsylvania, between Equivest Management
Corporation and OraPharma, Inc. dated July 31, 1998.#
10.4 Loan and Security Agreement between Silicon Valley Bank and OraPharma dated October 10, 1997.#
10.5 Children's Hospital Sponsored Research Agreement, between Children's Hospital and OraPharma,
dated December 31, 1998.*@
10.6 License Agreement between Children's Medical Center Corporation and OraPharma, dated
December 31, 1998.*@
10.7 License Agreement between Mucosal Therapeutics LLC and OraPharma, dated December 14, 1998.*@
10.8 Research and Consulting Agreement between Biomodels LLC and OraPharma dated
December 14, 1998.*@
10.9 License Agreement between American Cyanamid Company and OraPharma, Inc. dated
February 26, 1997.*@
10.10 License Agreement between Gary R. Jernberg and OraPharma, dated December 19, 1996.*@
10.11 License Agreement between Technical Developments and Investments, Est. and OraPharma dated
February 13, 1997.*@
10.12 Amendment to the the OraPharma, Inc. 1996 Stock Option Plan.!
23.1 Consent of Arthur Andersen LLP.!
23.2 Consent of Morgan, Lewis & Bockius LLP (to be included in Exhibit 5.1).#
23.3 Consent of Arnall, Golden & Gregory, LLP.!
24.1 Power of Attorney.*
27.1 Financial Data Schedule.!
</TABLE>
- --------
*Previously filed.
!Filed herewith.
#To be filed by amendment.
@Confidential Treatment Requested.
II-10
<PAGE>
Exhibit 3.1
FOURTH AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
ORAPHARMA, INC.
ORAPHARMA, INC. (the "Company"), a corporation organized and existing under
-------
and by virtue of the General Corporation Law of the State of Delaware (the
"General Corporation Law"), hereby certifies as follows:
- ------------------------
FIRST: The name of the Company is OraPharma, Inc. The Certificate of
Incorporation of the Company was originally filed on August 1, 1996 with the
Secretary of State of Delaware.
SECOND: This Fourth Amended and Restated Certificate of Incorporation
restates and integrates and further amends the Third Amended and Restated
Certificate of Incorporation of the Company, as amended to date. This Fourth
Amended and Restated Certificate of Incorporation was duly adopted by the
directors and stockholders of the Company in accordance with the provisions of
Sections 242 and 245 of the Delaware General Corporation Law.
THIRD: The text of the Third Amended and Restated Certificate of
Incorporation of the Company, as amended to date, is hereby amended and restated
to read in its entirety as follows:
ARTICLE FIRST
-------------
Name
----
The name of the corporation is OraPharma, Inc.
ARTICLE SECOND
--------------
Registered Agent
----------------
The address, including street, number, city and county of the registered
office of the Company in the State of Delaware is c/o Corporation Service
Company, 1013 Centre Road, Wilmington, New Castle County, Delaware 19805, and
the registered agent at that address is Corporation Service Company.
<PAGE>
ARTICLE THIRD
-------------
Purpose
-------
The nature of the business and the purposes to be conducted and promoted by
the Company shall be to engage in any lawful act or activity for which
corporations may be organized under the Delaware General Corporation Law.
ARTICLE FOURTH
--------------
Capital Stock
-------------
The Company shall have the authority to issue 62,588,356 shares of all
classes of stock, consisting of (a) 50,000,000 shares of common stock, $.001 par
value per share (the "Common Stock"), and (b) 12,588,356 shares of preferred
------------
stock, par value $.001 per share of which 431,250 shares are designated as
Series A Preferred Stock, par value $.001 per share (the "Series A Preferred
------------------
Stock"), 3,311,829 shares are designated as Series B Preferred Stock, par value
- -----
$.001 per share (the "Series B Preferred Stock"), 3,292,180 shares are
------------------------
designated as Series C Preferred Stock, par value $.001 per share (the "Series C
--------
Preferred Stock"), 553,097 shares are designated as Series D Preferred Stock,
- ---------------
par value $.001 per share (the "Series D Preferred Stock") and, together with
------------------------
the Series A Preferred Stock, Series B Preferred Stock and the Series C
Preferred Stock, the "Preferred Stock" or "Preferred Shares"), and 5,000,000
--------------- ----------------
shares are undesignated preferred stock, par value $.001 per share (the
"Undesignated Preferred Stock"). The shares of Preferred Stock shall be
- -----------------------------
identical in all respects, except as otherwise provided herein.
The Board of Directors is authorized, subject to limitations prescribed by
law, to provide for the issuance of the shares of Undesignated Preferred Stock
in series, and by filing a certificate pursuant to the applicable law of the
State of Delaware, to establish from time to time the number of shares to be
included in each such series, and to fix the designation, voting, powers,
preferences and rights of the shares of each such series and any qualifications,
limitations or restrictions thereof. The number of authorized shares of
Undesignated Preferred Stock may be increased or decreased (but not below the
number of shares thereof then outstanding) by the affirmative vote of the
holders of a majority of the outstanding shares of Common Stock, without a vote
of the holders of the Undesignated Preferred Stock, or of any series thereof,
unless a vote of any such holders is required pursuant to the certificate or
certificates establishing any series of Undesignated Preferred Stock.
Effective as of 5.00 p.m. on January 26, 2000 (the "Effective Time") each
share of Common Stock of the Company:
2
<PAGE>
(i) issued and outstanding immediately prior to the Effective Time,
(ii) issuable upon the exercise of options outstanding at the Effective
Time, or
(iii) issuable upon the exercise of warrants outstanding at the Effective
Time,
shall be automatically, without further action by the Company or any holder or
any person having the right to acquire such shares, be reclassified into 0.5
shares of Common Stock of the Company (the "Common Reverse Stock Split"). No
fractional shares of Common Stock shall be issued or issuable in connection with
the Common Reverse Stock Split and any interest in a fraction of a share
issuable:
(i) to holders of record at the Effective Time of Common Stock,
(ii) upon exercise of options outstanding at the Effective Time, or
(iii) upon the exercise of warrants outstanding at the Effective Time,
shall be converted into the right to receive, upon the surrender of the
instruments formerly representing the right to shares of Common Stock, an amount
in cash equal to the Current Market Price (as hereinafter defined), at the
Effective Time, of the interest in such fraction of a share. Notwithstanding
the Reverse Stock Split (as hereinafter defined), the total number of shares of
Common Stock, par value $.001 per share, that the Company is authorized to issue
shall remain at 50,000,000 shares.
As of the Effective Time each share of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock of the
Company:
(i) issued and outstanding immediately prior to the Effective Time, or
(ii) issuable upon the exercise of warrants outstanding at the Effective
Time,
shall be automatically, without further action by the Company or any holder or
any person having the right to acquire such shares, be reclassified into 0.5
shares of Series A Preferred Stock, Series B Preferred, Series C Preferred or
Series D Preferred Stock of the Company, as appropriate (the "Preferred Reverse
Stock Split"). No fractional shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock shall be
issued or issuable in connection with the Preferred Reverse Stock Split and any
interest in a fraction of a share issuable to:
(i) holders of record at the Effective Time of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock,
or
(ii) upon the exercise of warrants outstanding at the Effective Time,
3
<PAGE>
shall be converted into the right to receive, upon the surrender of the
instruments formerly representing the right to shares of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred
Stock, an amount in cash equal to the Current Market Price (as hereinafter
defined) at the Effective Time of the interest in such fraction of a share.
Following the Preferred Reverse Stock Split, the total number of shares of
Series A Preferred Stock, Series B Preferred, Series C Preferred and Series D
Preferred Stock, par value $.001 per share and Undesignated Preferred Stock, par
value $0.001 per share that the Company is authorized to issue shall remain as
set forth in the first paragraph of this Article Fourth.
The Preferred Reverse Stock Split and the Common Reverse Stock Split
(collectively the "Reverse Stock Split") shall not cause any provision set forth
under Article Fourth of this Fourth Amended and Restated Certificate of
Incorporation to be implicated or put into effect. Notwithstanding any
provisions to the contrary contained in this Fourth Amended and Restated
Certificate of Incorporation, the Reverse Stock Split shall not result in any
adjustment in the Liquidation Preference (as hereinafter defined) or the
Conversion Price (as hereinafter defined) of the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, or Series D Preferred Stock.
A. PREFERRED STOCK.
---------------
The Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock and Series D Preferred Stock (collectively, the "Preferred Stock") shall
have the following designations, powers, preferences, relative, participating,
optional or other special rights, qualifications, limitations and restrictions:
1. Dividends.
---------
(a) If the Board of Directors of the Company declares dividends or
other distributions (other than on Liquidation (as hereinafter defined)) on the
Common Stock or any other class or series of stock then ranking junior to or in
parity with the Preferred Stock in cash, property or securities (including
Common Stock) of the Company (or subscription or other rights to purchase or
acquire securities (including Common Stock) of the Company), the Board of
Directors of the Company shall simultaneously declare a dividend or distribution
at the same rate and in the same form on the Preferred Stock so that the
Preferred Stock participate equally with the Common Stock or any such other
class or series of stock in such dividend or distribution. For purposes of
determining its proportional share of the dividend or distribution, each share
of the Preferred Stock shall be deemed to be that number of shares of Common
Stock into which such share of Preferred Stock is then convertible, rounded to
the nearest one-tenth of a share. No such dividend or other distribution
payable in cash or other property or securities shall be made
4
<PAGE>
to the holders of the Common Stock or other class or series of stock then
ranking junior to or in parity with the Preferred Stock unless the dividend or
other distribution to which the holders of Preferred Shares are entitled
pursuant to this Section 1 shall be so made.
(b) From and after January 1, 2002, the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock
shall be entitled to annual cumulative dividends at the rate of eight percent
(8%) per share of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock or Series D Preferred Stock, as the case may be, as adjusted for
any combinations, consolidations, stock splits, stock distributions or divisions
or similar recapitalizations affecting the Preferred Stock after the original
issuance of the first share of Series A Preferred Stock (the "Series A Original
-----------------
Issuance Date"), Series B Preferred Stock (the "Series B Original Issuance
- ------------- --------------------------
Date"), Series C Preferred Stock (the "Series C Original Issue Date") or Series
----------------------------
D Preferred Stock (the "Series D Original Issue Date"), as the case may be,
----------------------------
payable if, as and when declared by the Board of Directors of the Company or as
otherwise provided herein.
2. Rights on Liquidation, Dissolution, Winding-Up.
----------------------------------------------
(a) In the event of any liquidation, dissolution or winding-up of the
affairs of the Company (a "Liquidation"), whether voluntary or involuntary,
-----------
before any payment of cash or distribution of other property shall be made to
the holders of the Common Stock (the "Common Stockholders") or other class or
-------------------
series of stock ranking junior to the Preferred Stock with respect to rights on
Liquidation, the holders of the Series A Preferred Stock (the "Series A
--------
Preferred Stockholders"), the holders of the Series B Preferred Stock (the
- ----------------------
"Series B Preferred Stockholders"), the holders of Series C Preferred Stock (the
- --------------------------------
"Series C Preferred Stockholders") and the holders of Series D Preferred Stock
-------------------------------
(the "Series D Preferred Stockholders") and, together with the Series A
-------------------------------
Preferred Stockholders, Series B Preferred Stockholders and Series C Preferred
Stockholders, the "Preferred Stockholders" or " Preferred Shareholders") shall
---------------------- ----------------------
be entitled to receive out of the assets and funds of the Company legally
available for distribution to its stockholders an amount equal to $1.00 per
share of Series A Preferred Stock, $1.82 per share of Series B Preferred Stock,
$2.43 per share of Series C Preferred Stock and $4.52 per share of Series D
Preferred Stock (in each case, as appropriately adjusted for any combinations,
consolidations, stock splits, stock distributions or divisions or similar
recapitalizations affecting such Preferred Stock after Series A Original
Issuance Date, Series B Original Issuance Date, Series C Original Issuance Date
or Series D Original Issuance Date, as the case may be) (the "Liquidation
-----------
Preference"), whether from capital, surplus or earnings, plus any accrued and
- ----------
unpaid dividends declared by the Board of Directors of the Preferred Shares.
(b) If, upon any Liquidation, the assets and funds of the Company
available for distribution to its stockholders shall be insufficient to pay the
Preferred Stockholders and any other series then ranking in parity with the
Preferred Stock the full amounts to which they shall be entitled pursuant to
Section 2(a), the Series D Preferred Stockholders shall be entitled to receive
first the Liquidation Preference described in Section 2(a) and then the other
Preferred Stockholders and the holders of any other series then ranking in
parity with the Preferred Stock
5
<PAGE>
shall share ratably in any distribution of assets and funds in proportion to the
respective amounts which would be payable to them in respect of the shares held
upon such distribution if all amounts payable on or with respect to such shares
were paid in full pursuant to Section 2(a).
(c) In the event of a Liquidation, after payment in full of the
Liquidation Preference to which a Preferred Stockholder is entitled, such
Preferred Stockholder shall not be entitled to any further participation in any
distribution of assets of the Company.
(d) Written notice of Liquidation stating a payment date and the
amount of the liquidation value of the Preferred Stock, shall be provided by
mail, postage prepaid, or by facsimile, not less than twenty (20) days prior to
the payment date stated therein, to the record holders of the Preferred Stock,
such notice to be addressed to each such holder at its address as shown in the
records of the Corporation.
3. Merger, Consolidation, etc.
---------------------------
In the event the Company shall sell, lease or otherwise dispose of all
or substantially all of the assets of the Company or merge or consolidate
another corporation into or with the Company (other than a merger or
consolidation or other form of corporate reorganization in which the Preferred
Stockholders receive securities of the surviving corporation having
substantially similar rights to the Series A Preferred Stock , Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock, as the
case may be, and in which the stockholders of the Company immediately prior to
such a transaction are holders of at least a majority of the voting securities
of the surviving corporation immediately thereafter), then, if the holders of
record of at least sixty-six and two-thirds of the outstanding Preferred Stock,
voting together as a single class prior to the effective time of such
transaction, so elect, the proceeds of or any property deliverable from such
transaction shall be distributed among the holders of the Preferred Stock
according to the provisions of Section 2 as if such transaction were a
Liquidation.
4. Voting.
------
(a) General.
-------
In addition to the rights otherwise provided for herein or by law,
the Preferred Stockholders shall be entitled to vote together with the Common
Stockholders as one class on all matters submitted to a vote of stockholders, in
the same manner and with the same effect as the Common Stockholders. In any such
vote, each share of Preferred Stock shall entitle the holder thereof to one vote
per share for each share of Common Stock (including fractional shares) into
which each share of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock or Series D Preferred Stock, as the case may be, is then
convertible, rounded to the nearest one-tenth of a share.
(b) Protective Provisions.
---------------------
6
<PAGE>
(i) So long as any Preferred Stock is outstanding, the Company
shall not, nor shall any Subsidiary, without the written consent in lieu of a
meeting, or the affirmative vote at a meeting called for such purpose, of the
holders of record of at least sixty-six and two-thirds of the outstanding
Preferred Stock, voting together as a single class:
(A) merge or consolidate with or into, or permit any
subsidiary of the Company to merge or consolidate with or into, any other
corporation, corporations or other entity or entities, or effect any transaction
or series of related transactions in which more than 50% of the voting power of
the Company is, directly or indirectly, transferred;
(B) sell, abandon, transfer, lease or otherwise dispose of
all or substantially all of the properties or assets of the Company;
(C) increase the number of authorized directors on the Board
of Directors of the Company;
(D) declare or pay any dividend or make any distribution on
shares of its capital stock other than the Preferred Stock;
(E) redeem, purchase or otherwise acquire for value
(including through an exchange) any shares of capital stock of the Company other
than shares of Preferred Stock or apply any of the Company's assets to the
redemption, retirement, purchase or acquisition, directly or indirectly, through
subsidiaries or otherwise, of any of the capital stock of the Company, except
shares of Common Stock issued pursuant to the Company's stock option plans,
stock bonus plans or other stock compensation plans for employees and others who
render services to the Company may be repurchased by the Company with the prior
approval of the Board of Directors of the Company in any calendar year at prices
not in excess of Current Market Prices (as hereinafter defined in Section
5(d)(vii)); or
(F) make any material change in the nature of the business
conducted by the Company.
(ii) So long as any Series A Preferred Stock is outstanding, the
Company shall not, without the written consent in lieu of a meeting, or the
affirmative vote at a meeting called for such purpose, of Series A Preferred
Stockholders of record that hold at least sixty-six and two-thirds of the
outstanding Series A Preferred Stock, voting as a separate class:
(A) amend, alter or repeal the rights, preferences and
privileges of the Series A Preferred Stock;
(B) issue any shares of capital stock of the Company (other
than Excluded Stock) or any security convertible into or exchangeable for
capital stock of the Company (other than Excluded Stock) at a price per share of
capital stock equal to or less than
7
<PAGE>
the Series A Preferred Conversion Price (as last adjusted and then in effect)
or, with respect to a Liquidation, which have the right to receive out of the
assets of the Company legally available for distribution to its stockholders an
amount per share of capital stock equal to or greater than the then Series A
Preferred Conversion Price (as last adjusted and then in effect); or
(C) authorize, issue or reclassify any shares of the
Company's capital stock as shares ranking senior to or on parity with the Series
A Preferred Stock with respect to rights on Liquidation, redemption or for the
payment of any dividend or distribution other than in Liquidation.
(iii) So long as any Series B Preferred Stock is outstanding, the
Company shall not, without the written consent in lieu of a meeting, or the
affirmative vote at a meeting called for such purpose, of Series B Preferred
Stockholders of record that hold at least sixty-six and two-thirds of the
outstanding Series B Preferred Stock, voting as a separate class:
(A) amend, alter or repeal the rights, preferences and
privileges of the Series B Preferred Stock;
(B) issue any shares of capital stock of the Company (other
than Excluded Stock) or any security convertible into or exchangeable for
capital stock of the Company (other than Excluded Stock) at a price per share of
capital stock equal to or less than the Series B Preferred Conversion Price (as
last adjusted and then in effect) or, with respect to a Liquidation, which have
the right to receive out of the assets of the Company legally available for
distribution to its stockholders an amount per share of capital stock equal to
or greater than the then Series B Preferred Conversion Price (as last adjusted
and then in effect); or
(C) authorize, issue or reclassify any shares of the
Company's capital stock as shares ranking senior to or on parity with the Series
B Preferred Stock with respect to rights on Liquidation, redemption or for the
payment of any dividend or distribution other than in Liquidation.
(iv) So long as any Series C Preferred Stock is outstanding, the
Company shall not, without the written consent in lieu of a meeting, or the
affirmative vote at a meeting called for such purpose, of Series C Preferred
Stockholders of record that hold at least sixty-six and two-thirds of the
outstanding Series C Preferred Stock, voting as a separate class:
(A) amend, alter or repeal the rights, preferences and
privileges of the Series C Preferred Stock;
(B) issue any shares of capital stock of the Company (other
than Excluded Stock) or any security convertible into or exchangeable for
capital stock of the Company (other than Excluded Stock) at a price per share of
capital stock equal to or less than the Series C Preferred Conversion Price (as
last adjusted and then in effect) or, with respect to a Liquidation, which have
the right to receive out of the assets of the Company legally available
8
<PAGE>
for distribution to its stockholders an amount per share of capital stock equal
to or greater than the then Series C Preferred Conversion Price (as last
adjusted and then in effect); or
(C) authorize, issue or reclassify any shares of the
Company's capital stock as shares ranking senior to or on parity with the Series
C Preferred Stock with respect to rights on Liquidation, redemption or for the
payment of any dividend or distribution other than in Liquidation.
(v) So long as any Series D Preferred Stock is outstanding, the
Company shall not, without the written consent in lieu of a meeting, or the
affirmative vote at a meeting called for such purpose, of Series D Preferred
Stockholders of record that hold at least sixty-six and two-thirds of the
outstanding Series D Preferred Stock, voting as a separate class:
(A) amend, alter or repeal the rights, preferences and
privileges of the Series D Preferred Stock;
(B) issue any shares of capital stock of the Company (other
than Excluded Stock) or any security convertible into or exchangeable for
capital stock of the Company (other than Excluded Stock) at a price per share of
capital stock equal to or less than the Series D Preferred Conversion Price (as
last adjusted and then in effect) or, with respect to a Liquidation, which have
the right to receive out of the assets of the Company legally available for
distribution to its stockholders an amount per share of capital stock equal to
or greater than the then Series D Preferred Conversion Price (as last adjusted
and then in effect); or
(C) authorize, issue or reclassify any shares of the
Company's capital stock as shares ranking senior to or on parity with the Series
D Preferred Stock with respect to rights on Liquidation, redemption or for the
payment of any dividend or distribution other than in Liquidation.
5. Conversion.
----------
(a) Right to Convert.
----------------
(i) (A) Any Preferred Stockholder shall have the right, at any
time or from time to time, prior to the closing date (the "Closing Date") of the
------------
Company's first or initial Public Offering (as hereinafter defined) to convert
any or all of its shares of Preferred Stock into that number of fully paid and
nonassessable shares of Common Stock for each share of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock
equal to the quotient of the Liquidation Preference for such share divided by
the Preferred Conversion Price for that share (as defined in Section 5(d)) (as
last adjusted and then in effect) rounded to the nearest one-tenth of a share.
(B) Any Preferred Stock that remains unconverted on the
Closing Date shall be automatically converted without notice and without any
action on the part
9
<PAGE>
of the holder thereof into shares of Common Stock on the Closing Date in
accordance with the preceding sentence. After the Closing Date all rights of
holders of shares of Preferred Stock, except the right to receive shares of
Common Stock in accordance with this Section, shall cease and the shares of
Preferred Stock shall no longer be deemed to be outstanding, whether or not the
Company has received the certificates representing such shares. Upon such
automatic conversion, the Preferred Stock shall no longer constitute authorized
stock of the Company and the Preferred Stock shall no longer be available for
issuance.
(ii) For purposes hereof, the term " Public Offering" is defined as an
---------------
Underwritten Offering (as hereinafter defined) by the Company of Equity Stock
(as defined in Rule 3a 11-1 under the Securities Exchange Act of 1934),
including, but not limited to, shares of Common Stock of the Company, any
security which is convertible into or exercisable or exchangeable for Common
Stock, or any right, option or warrant to acquire any Common Stock of the
Company at a price per share of not less than $4.00 (as adjusted for stock
splits, stock combinations or similar recapitalizations) resulting in gross
proceeds to the Company (before deducting underwriting commissions and expenses
of the offering) of not less than $15 million. An Underwritten Offering is
defined as an offering to the general public by one or more underwriters in an
offering registered under the Securities Act of 1933, as amended (the
"Securities Act").
- ---------------
(iii) The Company shall promptly send by first-class mail, postage
prepaid, to each Preferred Stockholder at such holder's address appearing on the
Company's records a copy of (i) each registration statement filed by the Company
under the Securities Act and each amendment thereof and each exhibit and
schedule thereto, and (ii) each order of the Securities and Exchange Commission
declaring any such registration statement to be effective.
(b) Mechanics of Conversion.
-----------------------
(i) Any Preferred Stockholder that exercises its right to convert
shares of Preferred Stock into Common Stock pursuant to Section 5(a)(i)(A) shall
deliver the certificate(s) for the shares to be converted (the "Preferred
---------
Certificate"), duly endorsed or assigned in blank to the Company, during regular
- -----------
business hours, at the office of the transfer agent of the Company, if any, at
the principal place of business of the Company or at such other place as may be
designated by the Company.
(ii) Each Preferred Certificate shall be accompanied by written notice
stating that such holder elects to convert such shares and stating the name or
names (with address) in which the certificate(s) for the shares of Common Stock
(the "Common Certificate") are to be issued. Such conversion shall be deemed to
------------------
have been effected on the date when the aforesaid delivery is made (the
"Conversion Date").
- ----------------
(iii) As promptly as practicable after the Conversion Date or the
Closing Date, as the case may be, the Company shall issue and deliver to or upon
the written order of each holder of Preferred Stock at the place designated by
such holder, a certificate(s) for
10
<PAGE>
the number of full shares of Common Stock to which such holder is entitled and a
check or cash for any fractional interest in a share of Common Stock, as
provided in Section 5(c) below, payable with respect to the converted shares of
Preferred Stock which are converted into Common Stock, up to and including the
Conversion Date or the Closing Date, as the case may be. Any dividends or
distributions declared by the Board of Directors but unpaid at the time of
conversion shall be paid to such Preferred Stockholder.
(iv) The person in whose name each certificate is to be issued shall
be deemed to have become a stockholder of record of Common Stock on the
applicable Conversion Date or the Closing Date, as the case may be, unless the
transfer books of the Company are closed on that date, in which event such
holder shall be deemed to have become a stockholder of record on the next
succeeding date on which the transfer books are open; provided that the
--------
Preferred Conversion Price shall be that in effect on the Conversion Date or the
Closing Date, as the case may be.
(v) Upon conversion of only a portion of the shares covered by a
Preferred Certificate, the Company, at its own expense, shall issue and deliver
to or upon the written order of the holder of such Preferred Certificate, a new
Preferred Certificate representing the number of unconverted shares of Preferred
Stock from the Preferred Certificate so surrendered.
(c) Issuance of Common Stock on Conversion.
--------------------------------------
(i) If a Preferred Stockholder shall surrender more than one Preferred
Certificate for conversion at any one time, the number of shares of Common Stock
issuable upon conversion thereof shall be computed on the basis of the aggregate
number of shares of Preferred Stock so surrendered.
(ii) No fractional shares of Common Stock shall be issued upon
conversion of shares of Preferred Stock. The Company shall pay a cash
adjustment for such fractional interest in an amount equal to the then Current
Market Price (as hereinafter defined) of a share of Common Stock multiplied by
such fractional interest. The Company shall, at the same time it delivers
certificates for the number of shares of Common Stock to which such holder shall
be entitled, deliver such cash or a check payable to the holder of such
Preferred Stock.
(d) Conversion Price; Adjustment. The preferred conversion price of
----------------------------
the Series A Preferred Stock (the "Series A Preferred Conversion Price"), the
-----------------------------------
Series B Preferred Stock (the "Series B Preferred Conversion Price"), the Series
-----------------------------------
C Preferred Stock (the "Series C Preferred Conversion Price") and the Series D
-----------------------------------
Preferred Stock (the "Series D Preferred Conversion Price," and, together with
-----------------------------------
the Series A Preferred Conversion Price and the Series B Preferred Conversion
Price and the Series C Preferred Conversion Price, the "Preferred Conversion
--------------------
Price") shall initially be equal to the Liquidation Preference with respect to
- -----
each such share of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock or Series D Preferred Stock, as the case may be, and shall be
subject to adjustment from time to time as follows:
11
<PAGE>
(i) If the Company shall at any time or from time to time after the
Series A Original Issuance Date, the Series B Original Issuance Date, the Series
C Original Issuance Date or the Series D Original Issuance Date, as the case may
be, issue any shares of Common Stock, other than Excluded Stock, without
consideration or for a consideration per share less than the applicable
Preferred Conversion Price of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock or Series D Preferred Stock in effect
immediately prior to such issue, or issue any shares of Preferred Stock or other
securities convertible into, exchangeable for or exercisable for shares of
Common Stock, other than Excluded Stock, without consideration or for a
consideration per share of underlying Common Stock, less than the applicable
Preferred Conversion Price of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock or Series D Preferred Stock in effect
immediately prior to such issue, the Preferred Conversion Price for Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D
Preferred Stock, as the case may be, in effect immediately prior to each such
issue shall be changed, effective immediately upon the closing of such issuance,
(A) in the case of the Series A Preferred Stock, Series B Preferred Stock or
Series C Preferred Stock, to a price determined by dividing (x) an amount equal
to the sum of (1) the number of shares of Common Stock outstanding immediately
prior to such issuance multiplied by the then existing applicable Preferred
Conversion Price, and (2) the consideration per share, if any, received by the
Company from such issuance, by (y) the total number of shares of Common Stock
outstanding immediately after such issuance, and (B) in the case of the Series D
Preferred Stock, to a price equal to the consideration per share, if any,
received by the Company from such issuance. With respect to any issuance, the
foregoing sentence shall only apply to shares of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock
held by a holder who purchases at least the full number of shares of capital
stock of the Company which such holder has a right to purchase pursuant to
Section 6 of the Amended and Restated Stockholders Agreement to be entered into
between the Company and certain other parties (the "Stockholders Agreement");
----------------------
provided, however, that in the event that the foregoing sentence does not apply
- -------- -------
to any share or shares of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock or Series D Preferred Stock (the "Non-Participating
-----------------
Shares"), the Company and its stockholders shall take all actions necessary
- ------
under applicable law to create a separate series of preferred stock (the "New
---
Preferred Stock") which has designations, powers, preferences, relative,
- ---------------
participating, optional or other special rights, qualifications, limitations and
restrictions identical to those applicable to the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock,
as the case may be, except that the Preferred Conversion Price for the New
Preferred Stock shall not be adjusted in accordance with the foregoing sentence.
For the purposes of this Section 5(d)(i), all shares of Common Stock
issuable upon exercise, conversion or exchange of outstanding options, warrants
or convertible securities, as the case may be, shall be deemed to be
outstanding. For the purposes of any adjustment of the Preferred Conversion
Price pursuant to this clause (i), the following provisions shall be applicable:
12
<PAGE>
(A) In the case of the issuance of Common Stock in whole or in part
for cash, the consideration shall be deemed to be the aggregate amount of
cash paid therefor, plus the value of any property other than cash received
by the Company as provided in paragraph (B) of this clause (i), less any
discounts, commissions or other expenses allowed, paid or incurred by the
Company for any underwriting or otherwise in connection with the issuance
and sale thereof.
(B) In the case of the issuance of Common Stock for consideration in
whole or in part in property or consideration other than cash, the value of
such property or consideration other than cash shall be deemed to be the
fair market value thereof as determined in good faith by the Board of
Directors of the Company, irrespective of any accounting treatment;
provided, however, that such fair market value shall not exceed the
-------- -------
aggregate Current Market Price of the shares of Common Stock being issued,
less any cash consideration paid for such shares.
(C) In the case of the issuance of (I) options to purchase or rights
to subscribe for Common Stock, (II) securities convertible into or
exchangeable for Common Stock or (III) options to purchase or rights to
subscribe for such convertible or exchangeable securities:
(1) the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options to purchase or rights to
subscribe for Common Stock shall be deemed to have been issued at the
time such options or rights were issued and for a consideration equal
to the consideration (determined in the manner provided in paragraphs
(A) and (B) above), if any, received by the Company upon the issuance
of such options or rights, plus the minimum purchase price provided in
such options or rights for the Common Stock covered thereby;
(2) the aggregate maximum number of shares of Common Stock
deliverable upon conversion of, or in exchange for, any such
convertible or exchangeable securities or upon the exercise of options
to purchase, or rights to subscribe for, such convertible or
exchangeable securities and subsequent conversion or exchange thereof
shall be deemed to have been issued at the time such securities were
issued or such options or rights were issued and for a consideration
equal to the consideration received by the Company for any such
securities and related options or rights (excluding any cash received
on account of accrued interest), plus the additional consideration, if
any, to be received by the Company upon the conversion or exchange of
such securities or the exercise of any related options or rights
(determined in the manner provided in paragraphs (A) and (B) above);
and
(3) if there is any decrease in the conversion or exercise price
of, or any increase in the number of shares to be received upon
exercise, conversion or exchange of any such options, rights or
convertible or exchangeable securities
13
<PAGE>
(other than a change resulting from the antidilution provisions
thereof), the Preferred Conversion Price shall be automatically
lowered to reflect such change.
(ii) "Excluded Stock" shall mean:
--------------
(A) Common Stock issued upon conversion of any shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or
Series D Preferred Stock;
(B) warrants to purchase up to 40,000 shares of Common Stock and the
shares of Common Stock granted in connection with such warrants to Gary R.
Jernberg, DDS, MSD, pursuant to the Agreement dated December 19, 1996
between the Company and Mr. Jernberg;
(C) warrants which may be issued pursuant to an Agreement dated
February 26, 1997 between the Company and American Cyanamid Company to
purchase up to $6,000,000 of Common Stock based upon the OraPharma Stock
FMV (as defined in such agreement) as of certain dates;
(D) warrants to purchase 31,250 shares of Series A Preferred Stock and
the shares of Series A Preferred Stock subject to such warrants granted to
Oak Investment Partners VI, Limited Partnership and/or Oak VI Affiliates
Fund, Limited Partnership in connection with a bridge loan in the amount of
$62,500 made by Oak Investment Partners VI, Limited Partnership and/or Oak
VI Affiliates Fund, Limited Partnership to the Company;
(E) warrants to purchase 31,250 shares of Series A Preferred Stock and
the shares of Series A Preferred Stock subject to such warrants granted to
Canaan S.B.I.C., L.P., Canaan Capital Limited Partnership and Canaan
Capital Offshore Limited Partnership C.V. in connection with a bridge loan
in the amount of $62,500 made by such entities to the Company;
(F) shares of Series A Preferred Stock and Series B Preferred Stock
issued to certain investors of the Company pursuant to a Stock Purchase
Agreement dated February 26, 1997 among the Company and such parties;
(G) shares of Series C Preferred Stock issued to certain investors of
the Company pursuant to a Stock Purchase Agreement dated as of December 1,
1998 among the Company and such parties;
(H) shares of Series D Preferred Stock and warrants to purchase
221,239 shares of Common Stock to be issued to certain investors of the
Company pursuant to a Stock Purchase Agreement to be entered into among the
Company and such parties on or about December 23, 1999;
14
<PAGE>
(I) securities issued pursuant to the acquisition of another
corporation, partnership, limited liability company, joint venture, trust
or other entity by the Company by merger, consolidation, stock acquisition,
reorganization or otherwise, whereby the Company, or its shareholders of
record immediately prior to the effectiveness of such transaction, directly
or indirectly own at least the majority of the voting power of such other
entity or the resulting or surviving corporation immediately after such
transaction;
(J) up to 2,226,750 shares of Common Stock issued to employees,
consultants or others who provide services to the Company, pursuant to any
restricted stock purchase agreement or any options to purchase or rights to
subscribe for such Common Stock, granted pursuant to any restricted stock
purchase agreement, option or rights plan approved by the Company's Board
of Directors;
(K) 335,500, 374,000 and 220,000 shares of Common Stock issued to
Scheer Investment Holdings I, L.L.C., Oak Investment Partners VI, Limited
Partnership and/or Oak VI Affiliates Fund, Limited Partnership and American
Cyanamid Company, respectively, pursuant to the Restricted Stock Agreements
previously entered into on or around February 26, 1997 between the Company
and each of Scheer Investment Holdings
I, L.L.C., Oak Investment Partners VI, Limited Partnership and/or Oak VI
Affiliates Fund, Limited Partnership and American Cyanamid Company;
(L) 165,000 shares of Common Stock issued to Children's Medical Center
Corporation in connection with the Exclusive License Agreement dated
December 31, 1998;
(M) warrants to purchase 55,000 shares of Common Stock issued to
Mucosal Therapeutics LLC in connection with the License Agreement dated
December 14, 1998;
(N) securities issued in connection with equipment and/or financing
transactions or other leasing lines of credit or collaborative arrangements
not primarily intended to provide equity financing to the Company;
(O) securities issued in connection with the Company's acquiring
technologies or rights to technologies developed by other parties; and
(P) Common Stock issued in transactions described in Section
5(d)(iii), (iv) or (v) below.
(iii) If the Company shall at any time after the Series A
Original Issuance Date fix a record date for the subdivision or split-up of
shares of Common Stock, then, following the record date fixed for the
determination of holders of Common Stock entitled to receive such subdivision or
split-up (or the date of such subdivisions or split-up, if no record date is
fixed), the Preferred Conversion Prices of the Series A Preferred Stock, Series
B Preferred
15
<PAGE>
Stock, Series C Preferred Stock and Series D Preferred Stock, respectively,
shall be appropriately decreased so that the number of shares of Common Stock
issuable on conversion of each share of the Preferred Stock shall be increased
in proportion to such increase in outstanding shares.
(iv) If, at any time after the Series A Original Issuance Date,
the number of shares of Common Stock outstanding is decreased by a combination
of the outstanding shares of Common Stock, then, following the record date fixed
for such combination (or the date of such combination, if no record date is
fixed), the Preferred Conversion Prices of the Series A Preferred Stock, Series
B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock,
respectively, shall be appropriately increased so that the number of shares of
Common Stock issuable on conversion of each share of Preferred Stock shall be
decreased in proportion to such decrease in outstanding shares.
(v) If, at any time after the Series A Original Issuance Date,
there shall be any capital reorganization, or any reclassification of the
capital stock of the Company (other than a change in par value or from par value
to no par value or from no par value to par value or as a result of a stock
dividend or subdivision, split-up or combination of shares), or the
consolidation or merger of the Company with or into another corporation (other
than a consolidation or merger described in Section 3 hereof or in which the
Company is the continuing corporation and which does not result in any change in
the powers, designations, preferences and rights (or the qualifications,
limitations or restrictions, if any) of the Preferred Stock) (an "Extraordinary
-------------
Transaction"), the Preferred Conversion Prices with respect to the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock, respectively, outstanding after the Extraordinary Transaction
shall be adjusted to provide that the shares of Series A Preferred Stock, Series
B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock
outstanding immediately prior to the effectiveness of the Extraordinary
Transaction shall be convertible into the kind and number of shares of stock or
other securities or property of the Company or of the corporation resulting from
or surviving such Extraordinary Transaction which the holder of the number of
shares of Common Stock deliverable (immediately prior to the effectiveness of
the Extraordinary Transaction) upon conversion of such Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock
would have been entitled to receive upon such Extraordinary Transaction. The
provisions of this Section 5(d)(v) shall similarly apply to successive
Extraordinary Transactions.
(vi) All calculations under this Section 5(d) shall be made to the
nearest one-tenth of a cent ($.001) or to the nearest one-tenth of a share, as
the case may be.
(vii) As used herein, the "Current Market Price" at any date of
--------------------
one share of Common Stock shall be deemed to be the average of the daily closing
prices for the thirty (30) consecutive business days ending on the fifth (5th)
business day before the day in question (as adjusted for any stock dividend,
split-up, combination or reclassification that took effect during such thirty
(30) business day period) as follows:
16
<PAGE>
(A) If the Common Stock is listed or admitted for trading on a
national securities exchange, the closing price for each day shall be the
last reported sales price regular way or, in case no such reported sales
took place on such day, the average of the last reported bid and asked
prices regular way, in either case, on the principal national securities
exchange on which the Common Stock is listed or admitted to trading.
(B) If the Common Stock is not at the time listed or admitted for
trading on any such exchange, then such price as shall be equal to the last
reported sale price, or, if there is no such sale price, the average of the
last reported bid and asked prices, as reported by the Nasdaq National
Market System ("NASDAQ") on such day.
------
(C) If the Common Stock is not at the time listed or admitted for
trading on a national securities exchange or quoted on the NASDAQ, then
such price shall be equal to the average of the last reported bid and asked
prices on such day as reported by the National Quotation Bureau, Inc. or
any similar reputable quotation and reporting service, if such quotation is
not reported by the National Quotation Bureau, Inc.
(D) If the Common Stock is not traded in such manner that the
quotations referred to in this clause (vii) are available for the period
required hereunder, the Current Market Price shall be determined in good
faith by the Board of Directors of the Company.
(viii) In any case in which the provisions of this Section 5(d)
shall require that an adjustment shall become effective immediately after a
record date for an event, the Company may defer until the occurrence of that
event (A) issuing to the holder of any share of Series A Preferred Stock, Series
B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock
converted after such record date and before the occurrence of such event the
additional shares of capital stock issuable upon such conversion by reason of
the adjustment required by such event over and above the shares of capital stock
issuable upon such conversion before giving affect to such adjustment and (B)
paying to such holder any amount in cash in lieu of a fractional share of
capital stock pursuant to Section 5(c) above; provided, however, that the
-------- -------
Company shall deliver to such holder a due bill or other appropriate instrument
evidencing such holder's right to receive such additional shares, in such case,
upon the occurrence of the event requiring such adjustment.
(e) Notice of Adjustments.
---------------------
(i) Whenever a Preferred Conversion Price shall be adjusted as
provided in Section 5(d) above, the Company shall file, at its principal office,
at the office of the transfer agent for the Preferred Stock, if any, or at such
other place as may be designated by the Company, a statement, signed by its
President and by its Chief Financial Officer, showing in detail the facts
requiring such adjustment and the Preferred Conversion Prices that shall be in
effect after such adjustment. The Company shall also cause a copy of such
statement to be sent by first-class, certified mail, return receipt requested,
postage prepaid, to each Preferred Stockholder at such holder's address
appearing on the Company's records. Where appropriate,
17
<PAGE>
such copy may be given in advance and may be included as part of a notice
required to be mailed under the provisions at Section 5(e)(ii) below.
(ii) In the event the Company shall propose to file a registration
statement under the Securities Act for a Public Offering or to take any action
of the types described in clauses (i), (iii), (iv), (v) or (viii) of Section
5(d) above, the Company shall give notice to each Preferred Stockholder in the
manner set forth in Section 5(e)(i) above, which shall specify the record date,
if any, with respect to any such action and the date on which such action is to
take place. The notice shall also set forth such facts as are reasonably
necessary to indicate the nature, time and effect of such action (to the extent
such effect may be known at the date of such notice) on the Preferred Conversion
Prices of the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock, respectively, and the number, kind
or class of shares or other securities or property which shall be deliverable or
purchasable upon the occurrence of such action or deliverable upon conversion of
shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock or Series D Preferred Stock. In the case of any action which would
require the fixing of a record date, such notice shall be given at least ten
(10) days prior to the date so fixed, and in case of all other action, such
notice shall be given at least fifteen (15) days prior to the taking of such
proposed action. Failure to give such notice, or any defect therein, shall not
affect the legality or validity of any such action.
(f) Transfer Taxes. The Company shall pay all issue, documentary,
--------------
stamp or other transactional taxes (excluding income taxes) attributable to the
issuance or delivery of shares of capital stock of the Company upon conversion
of any shares of Preferred Stock; provided, however, that the Company shall not
-------- -------
be required to pay any taxes which may be payable in respect of any transfer
involved in the issuance or delivery of any certificate for such shares in a
name other than that of the holder of the shares of Preferred Stock in respect
of which such shares are being issued.
(g) Reservation of Common Stock. The Company shall at all times
---------------------------
reserve, free from preemptive rights, out of its authorized but unissued shares
of Common Stock, solely for the purpose of effecting the conversion of the
shares of Preferred Stock, sufficient shares of Common Stock to provide for the
conversion of all outstanding shares of Preferred Stock; and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all of the then outstanding shares of the Preferred
Stock, the Company shall take such corporate action as may, in the opinion of
its counsel, be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such purpose,
including, without limitation, utilizing its best efforts to obtain the
requisite shareholder approval of any necessary amendment to the Certificate of
Incorporation.
(h) Status of Common Stock. All shares of Common Stock which may be
----------------------
issued in connection with the conversion provisions set forth in Section 5(a)
will, upon issuance by the Company, be validly issued, fully paid and
nonassessable, free from preemptive rights and free from all taxes, liens or
charges with respect thereto created or imposed by the Company.
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<PAGE>
(i) No Impairment. The Company shall not, by amendment of its
-------------
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company but shall at all
times in good faith assist in the carrying out of all the provisions of this
Section 5 and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holders of the Preferred Stock
against dilution or impairment.
6. Redemption.
----------
(a) (i) At the request of any holder of the Series A Preferred Stock
then outstanding (a "Series A Requesting Holder") made at any time and from time
--------------------------
to time on or after January 1, 2002 (the date fixed for such redemption, as
determined pursuant to Section 6(b) hereof, being a "Series A Redemption
-------------------
Date")), the Company shall redeem (unless otherwise prevented by law), at a
redemption price per share in cash equal to the Liquidation Preference of the
Series A Preferred Stock, plus an amount equal to any accrued but unpaid
cumulative dividends thereon and any declared but unpaid dividends thereon, up
to 33 1/3% of the Series A Preferred Stock then outstanding as of the Series A
Redemption Date if such request is made on or after January 1, 2002, up to 50%
of the Series A Preferred Stock then outstanding as of the Series A Redemption
Date if such request is made on or after January 1, 2003, and up to 100% of the
Series A Preferred Stock then outstanding as of the Series A Redemption Date if
such request is made on or after January 1, 2004.
(ii) At the request of any holder of the Series B Preferred Stock
then outstanding (a "Series B Requesting Holder") made at any time and from time
--------------------------
to time on or after January 1, 2002 (the date fixed for such redemption, as
determined pursuant to Section 6(b) hereof, being a "Series B Redemption
-------------------
Date")), the Company shall redeem (unless otherwise prevented by law), at a
redemption price per share in cash equal to the Liquidation Preference of the
Series B Preferred Stock, plus an amount equal to any accrued but unpaid
cumulative dividends thereon and any declared but unpaid dividends thereon, up
to 33 1/3% of the Series B Preferred Stock then outstanding as of the Series B
Redemption Date if such request is made on or after January 1, 2002, up to 50%
of the Series B Preferred Stock then outstanding as of the Series B Redemption
Date if such request is made on or after January 1, 2003, and up to 100% of the
Series B Preferred Stock then outstanding as of the Series B Redemption Date if
such request is made on or after January 1, 2004.
(iii) At the request of any holder of the Series C Preferred
Stock then outstanding (a "Series C Requesting Holder") made at any time and
--------------------------
from time to time on or after January 1, 2002 (the date fixed for such
redemption, as determined pursuant to Section 6(b) hereof, being a
"Series C Redemption Date")), the Company shall redeem (unless otherwise
-------------------
prevented by law), at a redemption price per share in cash equal to the
Liquidation Preference of
19
<PAGE>
the Series C Preferred Stock, plus an amount equal to any accrued but unpaid
cumulative dividends thereon and any declared but unpaid dividends thereon, up
to 33 1/3% of the Series C Preferred Stock then outstanding as of the Series C
Redemption Date if such request is made on or after January 1, 2002, up to 50%
of the Series C Preferred Stock then outstanding as of the Series C Redemption
Date if such request is made on or after January 1, 2003 and up to 100% of the
Series C Preferred Stock then outstanding as of the Series C Redemption Date if
such request is made on or after January 1, 2004.
(iv) At the request of any holder of the Series D Preferred Stock
then outstanding (a "Series D Requesting Holder") made at any time and from time
--------------------------
to time on or after January 1, 2002 (the date fixed for such redemption, as
determined pursuant to Section 6(b) hereof, being a "Series D Redemption
-------------------
Date")), the Company shall redeem (unless otherwise prevented by law), at a
redemption price per share in cash equal to the Liquidation Preference of the
Series D Preferred Stock, plus an amount equal to any accrued but unpaid
cumulative dividends thereon and any declared but unpaid dividends thereon, up
to 33 1/3% of the Series D Preferred Stock then outstanding as of the Series D
Redemption Date if such request is made on or after January 1, 2002, up to 50%
of the Series D Preferred Stock then outstanding as of the Series D Redemption
Date if such request is made on or after January 1, 2003 and up to 100% of the
Series D Preferred Stock then outstanding as of the Series D Redemption Date if
such request is made on or after January 1, 2004.
(v) The total sum payable per share of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock,
as the case may be, on the date fixed for redemption is hereinafter referred to
as the "Redemption Price," and the payment to be made on the Series A Redemption
----------------
Date, Series B Redemption Date, Series C Redemption Date or Series D Redemption
Date, as the case may be, is hereinafter referred to as the "Redemption
----------
Payment." For purposes of determining its proportional share of the cash or
other property, each share of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock shall be deemed to
be that number of shares of Common Stock into which such share of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D
Preferred Stock is then convertible, rounded to the nearest one-tenth of a
share.
(b) (i) On or after each Series A Redemption Date, Series B
Redemption Date, Series C Redemption Date or Series D Redemption Date, as the
case may be, all rights of any Series A Preferred Stockholder, Series B
Preferred Stockholder, Series C Preferred Stockholder or Series D Preferred
Stockholder with respect to the shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock,
respectively, redeemed on such Series A Redemption Date, Series B Redemption
Date, Series C Redemption Date or Series D Redemption Date, except the right to
receive the Redemption Payment as provided herein, shall cease, and such shares
shall no longer be deemed to be outstanding, whether or not the Company has
received the certificates representing such shares, on the condition that the
Company pays the Redemption Payment, or irrevocably deposits or sets
20
<PAGE>
aside cash in an amount equal to the Redemption Payment in the case of shares
not tendered for redemption on the Redemption Date.
(ii) Each Series A Requesting Holder, Series B Requesting Holder,
Series C Requesting Holder and Series D Requesting Holder shall send its written
notice of redemption to the Company at its principal place of business or to any
transfer agent of the Company. The Company shall fix a date for redemption
which shall not be more than 60 days after the notice of redemption from the
Series A Requesting Holder, Series B Requesting Holder, Series C Requesting
Holder or Series D Requesting Holder. If, on any Series A Redemption Date,
Series B Redemption Date, Series C Redemption Date or Series D Redemption Date,
as the case may be, less than all of the shares of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock
requested to be redeemed may be legally redeemed by the Company, the redemption
of such Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock or Series D Preferred Stock, as the case may be, shall be pro rata based
--- ----
upon the number of outstanding shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock which
would have been redeemed from each holder at such Series A Redemption Date,
Series B Redemption Date, Series C Redemption Date or Series D Redemption Date,
as the case may be, and any shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock not
redeemed shall be redeemed, at the holder's election, on any date following such
Series A Redemption Date, Series B Redemption Date, Series C Redemption Date or
Series D Redemption Date, on which the Company may lawfully redeem such shares.
Written notice of the redemption of any shares of the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock
shall be mailed by first-class mail to all holders of record of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D
Preferred Stock, as the case may be, at the address for such holder shown on the
Company records, not less than 30 nor more than 60 days prior to the Series A
Redemption Date, Series B Redemption Date, Series C Redemption Date or Series D
Redemption Date, as the case may be; provided, however, that neither the failure
-------- -------
to mail any such notice nor any defects contained in any such notice shall
affect the validity of the proceedings for the redemption of any of the shares
to be redeemed. If less than all the shares owned by a holder are to be
redeemed, the notice shall specify the number of shares and the certificate
numbers thereof which are to be redeemed.
(c) Notwithstanding anything to the contrary contained in this Section
6, the Company shall not be obligated to acquire any shares on any Series A
Redemption Date, Series B Redemption Date, Series C Redemption Date or Series D
Redemption Date to the extent that the acquisition thereof would violate any
law, statute, rule, regulation, policy or guideline promulgated by any federal,
state, local or foreign governmental authority applicable to the Company;
provided that the Company shall use all legally permissible methods in the
- --------
reduction of capital and revaluation of assets, including appraisal, in order to
obtain a legal source of funds with which to pay the Redemption Payment and
shall acquire such shares as soon as permitted by applicable laws, statutes,
rules, regulations, policies and guidelines.
21
<PAGE>
7. Miscellaneous.
-------------
(a) Shares of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock are not subject to or
entitled to the benefit of a sinking fund.
(b) Redeemed shares of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock shall not be
reissued but shall be retired. Upon the retirement of redeemed shares the
capital of the Company shall be reduced.
(c) The shares of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock shall not have any
preferences, voting powers or relative, participating, optional, preemptive or
other special rights except as set forth herein and in the Amended and Restated
Stockholders Agreement, as amended from time to time.
B. COMMON STOCK.
------------
8. Dividends.
---------
Subject to the terms herein, the Common Stockholders are entitled to
receive dividends if and when declared by the Board of Directors, out of funds
legally available therefor.
9. Liquidation.
-----------
Subject to the terms herein, in the event of any Liquidation, after
payment in full to the holders of Preferred Stock of the sums which such holders
may be entitled to receive, the holders of Common Stock shall be entitled to
receive and to be paid, share and share alike, ratably according to the number
of shares held, all the remaining assets of the Company. This provision shall
not, however, be deemed to require the distribution of assets among the holders
of Common Stock in the event of consolidation, merger, lease or sale which does
not result in a Liquidation of the Company.
10. Voting.
------
(a) Except for the voting rights, if any, that may be granted to the
holders of Preferred Stock or one or more series thereof, the entire voting
power shall be vested in the holders of the shares of Common Stock and each
share shall have one vote.
22
<PAGE>
(b) For the election of directors, holders of shares of Common Stock
shall not be entitled to vote their shares on a cumulative basis.
11. Other Rights.
------------
Subject to the foregoing, the Common Stock shall have all rights of
common stock under Title 8 of the Delaware General Corporation Law, as the same
shall be amended from time to time.
ARTICLE FIFTH
-------------
Indemnification
---------------
The Company shall, to the fullest extent permitted by Section 145 of the
Delaware General Corporation Law, as the same may be amended and supplemented,
indemnify any and all persons whom it shall have power to indemnify under said
Section from and against any and all of the expenses, liabilities or other
matters referred to in or covered by said Section. Such indemnification shall
be mandatory and not discretionary.
The Company shall to the fullest extent permitted by the Delaware General
Corporation Law advance all costs and expenses (including, without limitation,
attorneys' fees and expenses) incurred by any director or officer within 15 days
of the presentation of same to the Company, with respect to any one or more
actions, suits or proceedings, whether civil, criminal, administrative or
investigative, so long as the Company receives from the director or officer an
unsecured undertaking to repay such expenses if it shall ultimately be
determined that such director or officer is not entitled to be indemnified by
the Company under the Delaware General Corporation Law. Such obligation to
advance costs and expenses shall be mandatory, and not discretionary, and shall
include, without limitation, costs and expenses incurred in asserting
affirmative defenses, counterclaims and crossclaims. Such undertaking to repay
may, if first requested in writing by the applicable director or officer, be on
behalf of (rather than by) such director or officer, provided that in such case
the Company shall have the right to approve the party making such undertaking.
The indemnification and advancement of expenses provided for herein shall
not be deemed exclusive of any other rights to which those indemnified or
entitled to advancement of expenses may be entitled under any by-law, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his or her official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
ARTICLE SIXTH
-------------
Management
----------
23
<PAGE>
For the management of the business and for the conduct of the affairs of
the Company, and in further definition, limitation and regulation of the powers
of the Company and of its directors and of its stockholders, as the case may be,
it is further provided:
(1) the management of the Company shall be conducted by the officers of the
Company under the supervision of the Board of Directors; and
(2) the Board of Directors shall consist of three classes. Each class of
directors shall be as nearly equal in number as possible. Directors shall be
elected in accordance with Section 141(d) of the Delaware General Corporation
Law. The number of directors which shall constitute the whole Board of
Directors shall be fixed by, or in the manner provided in, the By-Laws.
ARTICLE SEVENTH
---------------
Compromises and Arrangements
----------------------------
Whenever a compromise or arrangement is proposed between the Company and
its creditors or any class of them and/or between the Company and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of the Company or
of any creditor or stockholder thereof or on the application of any receiver or
receivers appointed for the Company under the provisions of Section 291 of the
Delaware General Corporation Law or on the application of trustees in
dissolution or of any receiver or receivers appointed for the Company under the
provisions of Section 279 of the Delaware General Corporation Law order a
meeting of the creditors or class of creditors, and/or of the stockholders or
class of stockholders of the Company, as the case may be, to be summoned in
such manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Company, as the case may be, agree
to any compromise or arrangement and to any reorganization of the Company as
consequence of such compromise or arrangement, the said compromise or
arrangement and the said reorganization shall, if sanctioned by the court to
which the said application has been made, be binding on all the creditors or
class of creditors, and/or on all the stockholders or class of stockholders of
the Company, as the case may be, and also on the Company.
ARTICLE EIGHTH
--------------
Limitation of Liability
-----------------------
No director or officer of the Company shall be personally liable to the
Company or any of its stockholders for monetary damages for breach of fiduciary
duty as a director or officer; provided, however, that nothing contained in this
-------- -------
Article shall eliminate or limit the liability of a director or officer (i) for
any breach of the director's or officer's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under section 174 of
the Delaware General
24
<PAGE>
Corporation Law, or (iv) for any transaction from which the director or officer
derived an improper personal benefit. No amendment to or repeal of this Article
shall apply to or have any effect on the liability or alleged liability of any
director or officer of the Company for or with respect to any acts or omissions
of such director or officer occurring prior to such amendment or repeal.
25
<PAGE>
IN WITNESS WHEREOF, this Fourth Amended and Restated Certificate of
Incorporation has been executed as of the 26th day of January 2000.
ORAPHARMA, INC.
By: /s/ Michael D. Kishbauch
---------------------------------------
Michael D. Kishbauch, President
ATTEST:
/s/ James A. Ratigan
- -------------------------------------
James A. Ratigan, Secretary
26
<PAGE>
Exhibit 3.2
BY-LAWS
of
ORAPHARMA, INC.
Incorporated under the Laws of the State of Delaware
ARTICLE I
OFFICES AND RECORDS
SECTION 1.1 Delaware Office. The principal office of the Corporation in
---------------
the State of Delaware shall be located in the City of Wilmington, County of New
Castle, and the name and address of its registered agent is Corporation Service
Company, 1013 Centre Road, Wilmington, Delaware.
SECTION 1.2 Other Offices. The Corporation may have such other offices,
-------------
either within or without the State of Delaware, as the Board of Directors may
designate or as the business of the Corporation may from time to time require.
SECTION 1.3 Books and Records. The books and records of the Corporation
-----------------
may be kept outside the State of Delaware at such place or places as may from
time to time be designated by the Board of Directors.
ARTICLE II
STOCKHOLDERS
SECTION 2.1 Annual Meeting. The annual meeting of the stockholders of
--------------
the Corporation shall be held on such date and at such place and time as may be
fixed by resolution of the Board of Directors.
SECTION 2.2 Special Meeting. Subject to the rights of the holders of
---------------
any series of stock having a preference over the Common Stock of the Corporation
as to dividends or upon liquidation ("Preferred Stock") with respect to such
series of Preferred Stock, special meetings of the stockholders may be called
only by the Chairman of the Board or by the Board of Directors pursuant to a
resolution adopted by a majority of the total number of directors which the
Corporation would have if there were no vacancies (the "Whole Board").
<PAGE>
SECTION 2.3 Place of Meeting. The Board of Directors or the Chairman of
----------------
the Board, as the case may be, may designate the place of meeting for any annual
meeting or for any special meeting of the stockholders called by the Board of
Directors or the Chairman of the Board. If no designation is so made, the place
of meeting shall be the principal office of the Corporation.
SECTION 2.4 Notice of Meeting. Written or printed notice, stating the
-----------------
place, day and hour of the meeting and the purpose or purposes for which the
meeting is called, shall be delivered by the Corporation not less than ten (10)
days nor more than sixty (60) days before the date of the meeting, either
personally or by mail, to each stockholder of record entitled to vote at such
meeting. If mailed, such notice shall be deemed to be delivered when deposited
in the United States mail with postage thereon prepaid, addressed to the
stockholder at his address as it appears on the stock transfer books of the
Corporation. Such further notice shall be given as may be required by law.
Only such business shall be conducted at a special meeting of stockholders as
shall have been brought before the meeting pursuant to the Corporation's notice
of meeting. Meetings may be held without notice if all stockholders entitled to
vote are present, or if notice is waived by those not present in accordance with
Section 6.4 of these By-Laws. Any previously scheduled meeting of the
stockholders may be postponed, and (unless the Certificate of Incorporation
otherwise provides) any special meeting of the stockholders may be cancelled, by
resolution of the Board of Directors upon public notice given prior to the date
previously scheduled for such meeting of stockholders.
SECTION 2.5 Quorum and Adjournment. Except as otherwise provided by law
----------------------
or by the Fourth Amended and Restated Certificate of Incorporation, as amended
(the "Certificate of Incorporation"), the holders of a majority of the
outstanding shares of the Corporation entitled to vote generally in the election
of directors (the "Voting Stock"), represented in person or by proxy, shall
constitute a quorum at a meeting of stockholders, except that when specified
business is to be voted on by a class or series of stock voting as a class, the
holders of a majority of the shares of such class or series shall constitute a
quorum of such class or series for the transaction of such business. The
Chairman of the meeting or a majority of the shares so represented may adjourn
the meeting from time to time, whether or not there is such a quorum. No notice
of the time and place of adjourned meetings need be given except as required by
law. The stockholders present at a duly called meeting at which a quorum is
present may continue to transact business until adjournment, notwithstanding the
withdrawal of enough stockholders to leave less than a quorum.
SECTION 2.6 Proxies. At all meetings of stockholders, a stockholder may
-------
vote by proxy executed in writing (or in such manner prescribed by the General
Corporation Law of the State of Delaware (the "General Corporation Law")) by the
stockholder, or by his duly authorized attorney in fact.
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SECTION 2.7 Notice of Stockholder Business and Nominations.
----------------------------------------------
(A) Annual Meetings of Stockholders.
-------------------------------
(1) Nominations of persons for election to the Board of
Directors of the Corporation and the proposal of business to be considered by
the stockholders may be made at an annual meeting of stockholders (a) pursuant
to the Corporation's notice of meeting, (b) by or at the direction of the Board
of Directors or (c) by any stockholder of the Corporation who was a stockholder
of record at the time of giving of notice provided for in this By-Law, who is
entitled to vote at the meeting and who complies with the notice procedures set
forth in this By-Law.
(2) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (c) of paragraph
(A) (1) of this By-Law, the stockholder must have given timely notice thereof in
writing to the Secretary of the Corporation and such other business must
otherwise be a proper matter for stockholder action. To be timely, a
stockholder's notice shall be delivered to the Secretary at the principal
executive offices of the Corporation not later than the close of business on the
day prior to the first anniversary of the preceding year's annual meeting;
provided, however, that in the event that the date of the annual meeting is more
than 30 days before or more than 60 days after such anniversary date, notice by
the stockholder to be timely must be so delivered not earlier than the close of
business on the 90th day prior to such annual meeting and not later than the
close of business on the later of the 60th day prior to such annual meeting or
the 10th day following the day on which public announcement of the date of such
meeting is first made by the Corporation. In no event shall the public
announcement of an adjournment of an annual meeting commence a new time period
for the giving of a stockholder's notice as described above. Such stockholder's
notice shall set forth (a) as to each person whom the stockholder proposes to
nominate for election or reelection as a director all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors in an election contest, or is otherwise required, in each
case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and Rule 14a-11 thereunder (including such person's
written consent to being named in the proxy statement as a nominee and to
serving as a director if elected); (b) as to any other business that the
stockholder proposes to bring before the meeting, a brief description of the
business desired to be brought before the meeting, the reasons for conducting
such business at the meeting and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf the proposal is
made; and (c) as to the stockholder giving the notice and the beneficial owner,
if any, on whose behalf the nomination or proposal is made (i) the name and
address of such stockholder, as they appear on the Corporation's books, and of
such beneficial owner and (ii) the class and number of shares of the Corporation
which are owned beneficially and of record by such stockholder and such
beneficial owner.
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(3) Notwithstanding anything in the second sentence of paragraph
(A) (2) of this By-Law to the contrary, in the event that the number of
directors to be elected to the Board of Directors of the Corporation is
increased and there is no public announcement by the Corporation naming all of
the nominees for director or specifying the size of the increased Board of
Directors at least 70 days prior to the first anniversary of the preceding
year's annual meeting, a stockholder's notice required by this By-Law shall also
be considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to the Secretary at the
principal executive offices of the Corporation not later than the close of
business on the 10th day following the day on which such public announcement is
first made by the Corporation.
(B) Special Meetings of Stockholders. Only such business shall be
--------------------------------
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the Corporation's notice of meeting. Nominations of
persons for election to the Board of Directors may be made at a special meeting
of stockholders at which directors are to be elected pursuant to the
Corporation's notice of meeting (a) by or at the direction of the Board of
Directors or (b) provided that the Board of Directors has determined that
directors shall be elected at such meeting, by any stockholder of the
Corporation who is a stockholder of record at the time of giving of notice
provided for in this By-Law, who shall be entitled to vote at the meeting and
who complies with the notice procedures set forth in this By-Law. In the event
the Corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such stockholder
may nominate a person or persons (as the case may be), for election to such
position(s) as specified in the Corporation's notice of meeting, if the
stockholder's notice required by paragraph (A) (2) of this By-Law shall be
delivered to the Secretary at the principal executive offices of the Corporation
not earlier than the close of business on the 90th day prior to such special
meeting and not later than the close of business on the later of the 60th day
prior to such special meeting or the 10th day following the day on which public
announcement is first made of the date of the special meeting and of the
nominees proposed by the Board of Directors to be elected at such meeting. In
no event shall the public announcement of an adjournment of a special meeting
commence a new time period for the giving of a stockholder's notice as described
above.
(C) General.
-------
(1) Only such persons who are nominated in accordance with the
procedures set forth in this By-Law shall be eligible to serve as directors and
only such business shall be conducted at a meeting of stockholders as shall have
been brought before the meeting in accordance with the procedures set forth in
this By-Law. Except as otherwise provided by law, [the Certificate of
Incorporation or these By-Laws,] the Chairman of the meeting shall have the
power and duty to determine whether a nomination or any business proposed to be
brought before the meeting was made or proposed, as the case may be, in
accordance with the procedures set forth in this By-Law and, if any proposed
nomination or business is not in compliance with this By-Law, to declare that
such defective proposal or nomination shall be disregarded.
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(2) For purposes of this By-Law, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the Corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this By-Law, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this By-Law. Nothing in this By-Law shall be deemed to affect any
rights (i) of stockholders to request inclusion of proposals in the
Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act or
(ii) of the holders of any series of Preferred Stock to elect directors under
specified circumstances.
SECTION 2.8 Procedure for Election of Directors; Required Vote. Subject
--------------------------------------------------
to the rights of the holders of any series of Preferred Stock to elect directors
under specified circumstances, election of directors at all meetings of the
stockholders at which directors are to be elected shall be by, and, , a
plurality of the votes cast thereat. Except as otherwise provided by law, the
Certificate of Incorporation, or these By-Laws, in all matters other than the
election of directors, the affirmative vote of a majority of the shares present
in person or represented by proxy at the meeting and entitled to vote on the
matter shall be the act of the stockholders.
SECTION 2.9 Inspectors of Elections; Opening and Closing the Polls. The
------------------------------------------------------
Board of Directors by resolution shall appoint one or more inspectors, which
inspector or inspectors may include individuals who serve the Corporation in
other capacities, including, without limitation, as officers, employees, agents
or representatives, to act at the meetings of stockholders and make a written
report thereof. One or more persons may be designated as alternate inspectors
to replace any inspector who fails to act. If no inspector or alternate has
been appointed to act or is able to act at a meeting of stockholders, the
Chairman of the meeting shall appoint one or more inspectors to act at the
meeting. Each inspector, before discharging his or her duties, shall take and
sign an oath faithfully to execute the duties of inspector with strict
impartiality and according to the best of his or her ability. The inspectors
shall have the duties prescribed by law.
The Chairman of the meeting shall fix and announce at the meeting the date
and time of the opening and the closing of the polls for each matter upon which
the stockholders will vote at a meeting.
SECTION 2.10. No Stockholder Action by Written Consent. Subject to the
----------------------------------------
rights of the holders of any series of Preferred Stock with respect to such
series of Preferred Stock, any action required or permitted to be taken by the
stockholders of the Corporation must be effected at an annual or special meeting
of stockholders of the Corporation and may not be affected by any consent in
writing by such stockholders.
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ARTICLE III
BOARD OF DIRECTORS
SECTION 3.1 General Powers. The business and affairs of the Corporation
--------------
shall be managed under the direction of the Board of Directors. In addition to
the powers and authorities by these By-Laws expressly conferred upon them, the
Board of Directors may exercise all such powers of the Corporation and do all
such lawful acts and things as are not by statute or by the Certificate of
Incorporation or by these By-Laws required to be exercised or done by the
stockholders.
SECTION 3.2 Number, Tenure and Qualifications. Subject to the rights of
---------------------------------
the holders of any series of Preferred Stock to elect directors under specified
circumstances, the number of directors shall be fixed from time to time
exclusively pursuant to a resolution adopted by a majority of the Whole Board.
Commencing with the 2000 annual meeting of stockholders of the Corporation, the
directors, other than those who may be elected by the holders of any series of
Preferred Stock under specified circumstances, shall be divided, with respect to
the time for which they severally hold office, into three classes, as nearly
equal in number as is reasonably possible, with the term of office of the first
class to expire at the 2001 annual meeting of stockholders, the term of office
of the second class to expire at the 2002 annual meeting of stockholders and the
term of office of the third class to expire at the 2003 annual meeting of
stockholders, with each director to hold office until his or her successor shall
have been duly elected and qualified. At each annual meeting of stockholders,
commencing with the 2001 annual meeting, (i) directors elected to succeed those
directors whose terms then expire shall be elected for a term of office to
expire at the third succeeding annual meeting of stockholders after their
election, with each director to hold office until his or her successor shall
have been duly elected and qualified, and (ii) if authorized by a resolution of
the Board of Directors, directors may be elected to fill any vacancy on the
Board of Directors, regardless of how such vacancy shall have been created.
SECTION 3.3 Regular Meetings. A regular meeting of the Board of
----------------
Directors shall be held without other notice than this By-Law immediately after,
and at the same place as, the Annual Meeting of Stockholders. The Board of
Directors may, by resolution, provide the time and place for the holding of
additional regular meetings without other notice than such resolution.
SECTION 3.4 Special Meetings. Special meetings of the Board of
----------------
Directors shall be called at the request of the Chairman of the Board, the
President, the Chief Executive Officer or a majority of the Board of Directors
then in office. The person or persons authorized to call special meetings of
the Board of Directors may fix the place and time of the meetings.
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SECTION 3.5 Notice. Notice of any special meeting of directors shall be
------
given to each director at his business or residence in writing by hand delivery,
first-class or overnight mail or courier service, telegram or facsimile
transmission, or orally by telephone. If mailed by first-class mail, such
notice shall be deemed adequately delivered when deposited in the United States
mails so addressed, with postage thereon prepaid, at least five (5) days before
such meeting. If by telegram, overnight mail or courier service, such notice
shall be deemed adequately delivered when the telegram is delivered to the
telegraph company or the notice is delivered to the overnight mail or courier
service company at least twenty-four (24) hours before such meeting. If by
facsimile transmission, such notice shall be deemed adequately delivered when
the notice is transmitted at least twelve (12) hours before such meeting. If by
telephone or by hand delivery, the notice shall be given at least twelve (12)
hours prior to the time set for the meeting. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the Board
of Directors need be specified in the notice of such meeting, except for
amendments to these By-Laws, as provided under Section 8.1. A meeting may be
held at any time without notice if all the directors are present or if those not
present waive notice of the meeting in accordance with Section 6.4 of these By-
Laws.
SECTION 3.6 Action by Consent of Board of Directors. Any action
---------------------------------------
required or permitted to be taken at any meeting of the Board of Directors or of
any committee thereof may be taken without a meeting if all members of the Board
or committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board or committee.
SECTION 3.7 Conference Telephone Meetings. Members of the Board of
-----------------------------
Directors, or any committee thereof, may participate in a meeting of the Board
of Directors or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation in a meeting shall
constitute presence in person at such meeting.
SECTION 3.8 Quorum. Subject to Section 3.9, a whole number of directors
------
equal to at least a majority of the Whole Board shall constitute a quorum for
the transaction of business, but if at any meeting of the Board of Directors
there shall be less than a quorum present, a majority of the directors present
may adjourn the meeting from time to time without further notice. The act of
the majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors. The directors present at a duly
organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough directors to leave less than a quorum.
SECTION 3.9 Vacancies. Subject to applicable law and the rights of the
---------
holders of any series of Preferred Stock with respect to such series of
Preferred Stock, and unless the Board of Directors otherwise determines,
vacancies resulting from death, resignation, retirement, disqualification,
removal from office or other cause, and newly created directorships resulting
from any increase in the authorized number of directors, may be filled only by
the affirmative
7
<PAGE>
vote of a majority of the remaining directors, though less than a quorum of the
Board of Directors, and directors so chosen shall hold office for a term
expiring at the annual meeting of stockholders at which the term of office of
the class to which they have been elected expires and until such director's
successor shall have been duly elected and qualified. No decrease in the number
of authorized directors constituting the Whole Board shall shorten the term of
any incumbent director.
SECTION 3.10. Executive and Other Committees. The Board of Directors may,
------------------------------
by resolution adopted by a majority of the Whole Board, designate an Executive
Committee to exercise, subject to applicable provisions of law, all the powers
of the Board in the management of the business and affairs of the Corporation
when the Board is not in session, including without limitation the power to
declare dividends, to authorize the issuance of the Corporation's capital stock
and to adopt a certificate of ownership and merger pursuant to Section 253 of
the General Corporation Law of the State of Delaware, and may, by resolution
similarly adopted, designate one or more other committees. The Executive
Committee and each such other committee shall consist of two or more directors
of the Corporation. The Board may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting of the committee. Any such committee, other than the Executive
Committee (the powers of which are expressly provided for herein), may to the
extent permitted by law exercise such powers and shall have such
responsibilities as shall be specified in the designating resolution. In the
absence or disqualification of any member of such committee or committees, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not constituting a quorum, may unanimously appoint another
member of the Board to act at the meeting in the place of any such absent or
disqualified member. Each committee shall keep written minutes of its
proceedings and shall report such proceedings to the Board when required.
A majority of any committee may determine its action and fix the time and
place of its meetings, unless the Board shall otherwise provide. Notice of such
meetings shall be given to each member of the committee in the manner provided
for in Section 3.5 of these By-Laws. The Board shall have power at any time to
fill vacancies in, to change the membership of, or to dissolve any such
committee. Nothing herein shall be deemed to prevent the Board from appointing
one or more committees consisting in whole or in part of persons who are not
directors of the Corporation; provided, however, that no such committee shall
-------- -------
have or may exercise any authority of the Board.
SECTION 3.11. Removal. Subject to the rights of the holders of any series
-------
of Preferred Stock with respect to such series of Preferred Stock, any director,
or the entire Board of Directors, may be removed from office at any time, but
only for cause and only by the affirmative vote of the holders of at least 50
percent of the voting power of all of the then-outstanding shares of Voting
Stock, voting together as a single class.
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SECTION 3.12. Records. The Board of Directors shall cause to be kept a
-------
record containing the minutes of the proceedings of the meetings of the Board
and of the stockholders, appropriate stock books and registers and such books of
records and accounts as may be necessary for the proper conduct of the business
of the Corporation.
ARTICLE IV
OFFICERS
SECTION 4.1 Elected Officers. The elected officers of the Corporation
----------------
shall be a Chairman of the Board of Directors, a Chief Executive Officer, a
President, a Secretary, a Treasurer, and such other officers (including, without
limitation, a Chief Financial Officer) as the Board of Directors from time to
time may deem proper. The Chairman of the Board shall be chosen from among the
directors. All officers elected by the Board of Directors shall each have such
powers and duties as generally pertain to their respective offices, subject to
the specific provisions of this ARTICLE IV. Such officers shall also have such
powers and duties as from time to time may be conferred by the Board of
Directors or by any committee thereof. The Board or any committee thereof may
from time to time elect, or the Chairman of the Board or President may appoint,
such other officers (including one or more Vice Presidents, Assistant
Secretaries, Assistant Treasurers, and Controllers) and such agents, as may be
necessary or desirable for the conduct of the business of the Corporation. Such
other officers and agents shall have such duties and shall hold their offices
for such terms as shall be provided in these By-Laws or as may be prescribed by
the Board or such committee or by the Chairman of the Board or President, as the
case may be.
SECTION 4.2 Election and Term of Office. The elected officers of the
---------------------------
Corporation shall be elected annually by the Board of Directors at the regular
meeting of the Board of Directors held after the annual meeting of the
stockholders. If the election of officers shall not be held at such meeting,
such election shall be held as soon thereafter as convenient. Each officer shall
hold office until his successor shall have been duly elected and shall have
qualified or until his death or until he shall resign, but any officer may be
removed from office at any time by the affirmative vote of a majority of the
Whole Board or, except in the case of an officer or agent elected by the Board,
by the Chairman of the Board or President. Such removal shall be with out
prejudice to the contractual rights, if any, of the person so removed.
SECTION 4.3 Chairman of the Board. The Chairman of the Board shall
---------------------
preside at all meetings of the stockholders and of the Board of Directors. The
Chairman of the Board shall be responsible for the general management of the
affairs of the Corporation and shall perform all duties incidental to his office
which may be required by law and all such other duties as are properly required
of him by the Board of Directors. He shall make reports to the Board of
Directors and the stockholders, and shall see that all orders and resolutions of
the Board of Directors and of any committee thereof are carried into effect.
The Chairman of the Board may also serve as President, if so elected by the
Board.
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SECTION 4.4 Chief Executive Officer. The Chief Executive Officer shall
-----------------------
be the head of the corporation and in the recess of the Board of Directors and
the executive committee shall have the general control and management of all the
business and affairs of the corporation. He shall also exercise such further
powers and perform such other duties as may from time to time be conferred upon
or assigned by these By-Laws, the Board of Directors or the executive committee.
He shall make annual reports and submit the same to the Board of Directors and
also to the shareholders at their annual meeting, showing the condition and the
affairs of the corporation. He shall from time to time make such
recommendations to the Board of Directors, the executive committee and any other
committee as he thinks proper and shall bring before the Board of Directors, the
executive committee and any other committee such information as may be required,
relating to the business and property of the corporation.
SECTION 4.5 President. The President shall act in a general executive
---------
capacity and shall assist the Chairman of the Board in the administration and
operation of the Corporation's business and general supervision of its policies
and affairs. The President shall, in the absence of or because of the inability
to act of the Chairman of the Board, perform all duties of the Chairman of the
Board and preside at all meetings of stockholders and of the Board of Directors.
SECTION 4.6 Vice-Presidents. Each Vice President shall have such powers
---------------
and shall perform such duties as shall be assigned to him by the Board of
Directors.
SECTION 4.7 Chief Financial Officers. The Chief Financial Officer (if
------------------------
any) shall be a Vice President and act in an executive financial capacity. He
shall assist the Chairman of the Board and the President in the general
supervision of the Corporation's financial policies and affairs.
SECTION 4.8 Treasurer. The Treasurer shall exercise general supervision
---------
over the receipt, custody and disbursement of corporate funds. The Treasurer
shall cause the funds of the Corporation to be deposited in such banks as may be
authorized by the Board of Directors, or in such banks as may be designated as
depositaries in the manner provided by resolution of the Board of Directors. He
shall have such further powers and duties and shall be subject to such
directions as may be granted or imposed upon him from time to time by the Board
of Directors, the Chairman of the Board or the President.
SECTION 4.9 Secretary. The Secretary shall keep or cause to be kept in
---------
one or more books provided for that purpose, the minutes of all meetings of the
Board, the committees of the Board and the stockholders; he shall see that all
notices are duly given in accordance with the provisions of these By-Laws and as
required by law; he shall be custodian of the records and the seal of the
Corporation and affix and attest the seal to all stock certificates of the
Corporation (unless the seal of the Corporation on such certificates shall be a
facsimile, as hereinafter provided) and affix and attest the seal to all other
documents to be executed on behalf of the
10
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Corporation under its seal; and he shall see that the books, reports,
statements, certificates and other documents and records required by law to be
kept an filed are properly kept and filed; and in general, he shall perform all
the duties incident to the office of Secretary and such other duties as from
time to time may be assigned to him by the Board, the Chairman of the Board or
the President.
SECTION 4.10. Removal. Any officer elected, or agent appointed, by the
-------
Board of Directors may be removed by the affirmative vote of a majority of the
Whole Board whenever, in their judgment, the best interests of the Corporation
would be served thereby. Any officer or agent appointed by the Chairman of the
Board or the President may be removed by him whenever, in his judgment, the best
interests of the Corporation would be served thereby. No elected officer shall
have any contractual rights against the Corporation for compensation by virtue
of such election beyond the date of the election of his successor, his death,
his resignation or his removal, whichever event shall first occur, except as
otherwise provided in an employment contract or under an employee deferred
compensation plan.
SECTION 4.11. Vacancies. A newly created elected office and a vacancy in
---------
any elected office because of death, resignation, or removal may be filled by
the Board of Directors for the unexpired portion of the term at any meeting of
the Board of Directors. Any vacancy in an office appointed by the Chairman of
the Board or the President because of death, resignation, or removal may be
filled by the Chairman of the Board or the President.
ARTICLE V
STOCK CERTIFICATES AND TRANSFERS
SECTION 5.1 Stock Certificates and Transfers. The interest of each
--------------------------------
stockholder of the Corporation shall be evidenced by certificates for shares of
stock in such form as the appropriate officers of the Corporation may from time
to time prescribe. The shares of the stock of the Corporation shall be
transferred on the books of the Corporation by the holder thereof in person or
by his attorney, upon surrender for cancellation of certificates for at least
the same number of shares, with an assignment and power of transfer endorsed
thereon or attached thereto, duly executed, with such proof of the authenticity
of the signature as the Corporation or its agents may reasonably require.
The certificates of stock shall be signed, countersigned and registered in
such manner as the Board of Directors may by resolution prescribe, which
resolution may permit all or any of the signatures on such certificates to be in
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate has ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the Corporation with the same effect as if he were such
officer, transfer agent or registrar at the date of issue.
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SECTION 5.2 Lost, Stolen or Destroyed Certificates. No certificate for
--------------------------------------
shares of stock in the Corporation shall be issued in place of any certificate
alleged to have been lost, destroyed or stolen, except on production of such
evidence of such loss, destruction or theft and on delivery to the Corporation
of a bond of indemnity in such amount, upon such terms and secured by such
surety, as the Board of Directors or any financial officer may in its or his
discretion require.
ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 6.1 Fiscal Year. The fiscal year of the Corporation shall begin
-----------
on the first day of January and end on the thirty-first day of December of each
year.
SECTION 6.2 Dividends. The Board of Directors may from time to time
---------
declare, and the Corporation may pay, dividends on its outstanding shares in the
manner and upon the terms and conditions provided by law and the Certificate of
Incorporation.
SECTION 6.3 Seal. The corporate seal shall have inscribed thereon the
----
words "Corporate Seal," the year of incorporation and around the margin thereof
the words "OraPharma, Inc. - Delaware."
SECTION 6.4 Waiver of Notice. Whenever any notice is required to be
----------------
given to any stockholder or director of the Corporation under the provisions of
the General Corporation Law of the State of Delaware or these By-Laws, a waiver
thereof in writing, signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice. Neither the business to be transacted at, nor the
purpose of, any annual or special meeting of the stockholders or the Board of
Directors or committee thereof need be specified in any waiver of notice of such
meeting.
SECTION 6.5 Audits. The accounts, books and records of the Corporation
------
shall be audited upon the conclusion of each fiscal year by an independent
certified public accountant selected by the Board of Directors, and it shall be
the duty of the Board of Directors to cause such audit to be done annually.
SECTION 6.6 Resignations. Any director or any officer, whether elected
------------
or appointed, may resign at any time by giving written notice of such
resignation to the Chairman of the Board, the President, or the Secretary, and
such resignation shall be deemed to be effective as of the close of business on
the date said notice is received by the Chairman of the Board, the President, or
the Secretary, or at such later time as is specified therein. No formal action
shall be required of the Board of Directors or the stockholders to make any such
resignation effective.
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SECTION 6.7 Indemnification and Insurance.
-----------------------------
(A) Each person who was or is made a party or is threatened to be made
a party to or is involved in any action, suit, or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he or she or a person of whom he or she is the legal
representative is or was a director or officer of the Corporation or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans maintained
or sponsored by the Corporation, whether the basis of such proceeding is alleged
action in an official capacity as a director, officer, employee or agent or in
any other capacity while serving as a director, officer, employee or agent,
shall be indemnified and held harmless by the Corporation to the fullest extent
authorized by the General Corporation Law of the State of Delaware as the same
exists or may hereafter be amended (but, in the case of any such amendment, only
to the extent that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide prior
to such amendment), against all expense, liability and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid or to be paid in settlement) reasonably incurred or suffered by such person
in connection therewith and such indemnification shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of his or her heirs, executors and administrators; provided,
--------
however, that except as provided in paragraph (C) of this By-Law, the
- -------
Corporation shall indemnify any such person seeking indemnification in
connection with a proceeding (or part thereof) initiated by such person only if
such proceeding (or part thereof) was authorized by the Board of Directors. The
right to indemnification conferred in this By-Law shall be a contract right and
shall include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition, such advances
to be paid by the Corporation within 20 days after the receipt by the
Corporation of a statement or statements from the claimant requesting such
advance or advances from time to time; provided, however, that if the General
-------- -------
Corporation Law of the State of Delaware requires, the payment of such expenses
incurred by a director or officer in his or her capacity as a director or
officer (and not in any other capacity in which service was or is rendered by
such person while a director or officer, including, without limitation, service
to an employee benefit plan) in advance of the final disposition of a
proceeding, shall be made only upon delivery to the Corporation of an
undertaking by or on behalf of such director or officer, to repay all amounts so
advanced if it shall ultimately be determined that such director or officer is
not entitled to be indemnified under this By-Law or otherwise.
(B) To obtain indemnification under this By-Law, a claimant shall
submit to the Corporation a written request, including therein or therewith such
documentation and information as is reasonably available to the claimant and is
reasonably necessary to determine whether and to what extent the claimant is
entitled to indemnification. Upon written request by a claimant for
indemnification pursuant to the first sentence of this paragraph (B), a
determination,
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if required by applicable law, with respect to the claimant's entitlement
thereto shall be made as follows: (1) if requested by the claimant, by
Independent Counsel (as hereinafter defined), or (2) if no request is made by
the claimant for a determination by Independent Counsel, (i) by the Board of
Directors by a majority vote of a quorum consisting of Disinterested Directors
(as hereinafter defined), or (ii) if a quorum of the Board of Directors
consisting of Disinterested Directors is not obtainable or, even if obtainable,
such quorum of Disinterested Directors so directs, by Independent Counsel in a
written opinion to the Board of Directors, a copy of which shall be delivered to
the claimant, or (iii) if a quorum of Disinterested directors so directs, by the
stockholders of the Corporation. In the event the determination of entitlement
to indemnification is to be made by Independent Counsel at the request of the
claimant, the Independent Counsel shall be selected by the Board of Directors
unless there shall have occurred within two years prior to the date of the
commencement of the action, suit or proceeding for which indemnification is
claimed a "Change of Control" as defined in the 1999 Equity Compensation Plan,
in which case the Independent Counsel shall be selected by the claimant unless
the claimant shall request that such selection be made by the Board of
Directors. If it is so determined that the claimant is entitled to
indemnification, payment to the claimant shall be made within 10 days after such
determination.
(C) If a claim under paragraph (A) of this By-Law is not paid in full
by the Corporation within thirty days after a written claim pursuant to
paragraph (B) of this By-Law has been received by the Corporation, the claimant
may at any time thereafter bring suit against the Corporation to recover the
unpaid amount of the claim and, if successful in whole or in part, the claimant
shall be entitled to be paid also the expense of prosecuting such claim. It
shall be a defense to any such action (other than an action brought to enforce a
claim for expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any is required, has been
tendered to the Corporation) that the claimant has not met the standard of
conduct which makes it permissible under the General Corporation Law of the
State of Delaware for the Corporation to indemnify the claimant for the amount
claimed, but the burden of proving such defense shall be on the Corporation.
Neither the failure of the Corporation (including its Board of Directors,
Independent Counsel or stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he or she has met the applicable standard of conduct
set forth in the General Corporation Law of the State of Delaware, nor an actual
determination by the Corporation (including its Board of Directors, Independent
Counsel or stockholders) that the claimant has not met such applicable standard
of conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
(D) If a determination shall have been made pursuant to paragraph (B)
of this By-Law that the claimant is entitled to indemnification, the Corporation
shall be bound by such determination in any judicial proceeding commenced
pursuant to paragraph (C) of this By-Law.
(E) The Corporation shall be precluded from asserting in any judicial
proceeding commenced pursuant to paragraph (C) of this By-Law that the
procedures and
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presumptions of this By-Law are not valid, binding and enforceable and shall
stipulate in such proceeding that the Corporation is bound by all the provisions
of this By-Law.
(F) The right to indemnification and the payment of expenses incurred
in defending a proceeding in advance of its final disposition conferred in this
By-Law shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of the Certificate of
Incorporation, By-Laws, agreement, vote of stockholders or Disinterested
Directors or otherwise. No repeal or modification of this By-Law shall in any
way diminish or adversely affect the rights of any director, officer, employee
or agent of the Corporation hereunder in respect of any occurrence or matter
arising prior to any such repeal or modification.
(G) The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or loss
under the General Corporation Law of the State of Delaware. To the extent that
the Corporation maintains any policy or policies providing such insurance, each
such director or officer, and each such agent or employee to which rights to
indemnification have been granted as provided in paragraph (H) of this By-Law,
shall be covered by such policy or policies in accordance with its or their
terms to the maximum extent of the coverage thereunder for any such director,
officer, employee or agent.
(H) The Corporation may, to the extent authorized from time to time by
the Board of Directors, grant rights to indemnification, and rights to be paid
by the Corporation the expenses incurred in defending any proceeding in advance
of its final disposition, to any employee or agent of the Corporation to the
fullest extent of the provisions of this By-Law with respect to the
indemnification and advancement of expenses of directors and officers of the
Corporation.
(I) If any provision or provisions of this By-Law shall be held to be
invalid, illegal or unenforceable for any reason whatsoever: (1) the validity,
legality and enforceability of the remaining provisions of this By-Law
(including, without limitation, each portion of any paragraph of this By-Law
containing any such provision held to be invalid, illegal or unenforceable, that
is not itself held to be invalid, illegal or unenforceable, that is not itself
held to be invalid, illegal or unenforceable) shall not in any way be affected
or impaired thereby; and (2) to the fullest extent possible, the provisions of
this By-Law (including, without limitation, each such portion of any paragraph
of this By-Law containing any such provision held to be invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal or unenforceable.
15
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(J) For purposes of this By-Law:
(1) "Disinterested Director" means a director of the Corporation
who is not and was not a party to the matter in respect of which
indemnification is sought by the claimant.
(2) "Independent Counsel" means a law firm, a member of a law
firm, or an independent practitioner, that is experienced in matters
of corporation law and shall include any person who, under the
applicable standards of professional conduct then prevailing, would
not have a conflict of interest in representing either the Corporation
or the claimant in an action to determine the claimant's rights under
this By-Law.
(K) Any notice, request or other communication required or permitted
to be given to the Corporation under this By-Law shall be in writing and either
delivered in person or sent by telecopy, telex, telegram, overnight mail or
courier service, or certified or registered mail, postage prepaid, return
receipt requested, to the Secretary of the Corporation and shall be effective
only upon receipt by the Secretary.
ARTICLE VII
Contracts, Proxies, Etc.
SECTION 7.1 Contracts. Except as otherwise required by law, the
---------
Certificate of Incorporation or these By-Laws, any contracts or other
instruments may be executed and delivered in the name and on the behalf of the
Corporation by such officer or officers of the Corporation as the Board of
Directors may from time to time direct. Such authority may be general or
confined to specific instances as the Board may determine. The Chairman of the
Board, the President or any Vice President may execute bonds, contracts, deeds,
leases and other instruments to be made or executed for or on behalf of the
Corporation. Subject to any restrictions imposed by the Board of Directors or
the Chairman of the Board, the President or any Vice President of the
Corporation may delegate contractual powers to others under his jurisdiction, it
being understood, however, that any such delegation of power shall not relieve
such officer of responsibility with respect to the exercise of such delegated
power.
SECTION 7.2 Proxies. Unless otherwise provided by resolution adopted by
-------
the Board of Directors, the Chairman of the Board, the President or any Vice
President may from time to time appoint an attorney or attorneys or agent or
agents of the Corporation, in the name and on behalf of the Corporation, to cast
the votes which the Corporation may be entitled to cast as the holder of stock
or other securities in any other corporation, any of whose stock or other
securities may be held by the Corporation, at meetings of the holders of the
stock or other securities of such other corporation, or to consent in writing,
in the name of the Corporation as
16
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such holder, to any action by such other corporation, and may instruct the
person or persons so appointed as to the manner of casting such votes or giving
such consent, and may execute or cause to be executed in the name and on behalf
of the Corporation and under its corporate seal or otherwise, all such written
proxies or other instruments as he may deem necessary or proper in the premises.
ARTICLE VIII
AMENDMENTS
SECTION 8.1 Amendments. These By-Laws may be altered, amended, or
----------
repealed at any meeting of the Board of Directors or of the stockholders,
provided notice of the proposed change was given in the notice of the meeting
and, in the case of a meeting of the Board of Directors, in a notice given not
less than two days prior to the meeting; provided, however, that, in the case of
-------- -------
amendments by stockholders, notwithstanding any other provisions of these By-
Laws or any provision of law which might otherwise permit a lesser vote or no
vote but in addition to any affirmative vote of the holders of any particular
class or series of the capital stock of the Corporation required by law, the
Certificate of Incorporation or these By-Laws, the affirmative vote of the
holders of at least 80 percent of the voting power of all the then outstanding
shares of the Voting Stock, voting together as a single class, shall be required
to alter, amend or repeal any provision of these By-Laws.
17
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Exhibit 4.2
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR
STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT OR STATE
SECURITIES LAWS.
No. W-3 Right to Purchase 30,538 Shares of Series A
Preferred Stock of OraPharma, Inc.
ORAPHARMA, INC.
Series A Preferred Stock Purchase Warrant
This is to certify that, FOR VALUE RECEIVED, OAK INVESTMENT PARTNERS VI,
LIMITED PARTNERSHIP (the "Holder"), is entitled to purchase, subject to the
provisions of this Warrant, from OraPharma, Inc., a Delaware corporation (the
"Company"), 30,538 fully paid, validly issued and nonassessable shares of Series
A Preferred Stock, par value $.001 per share, of the Company (the "Preferred
Stock") at an exercise price of $1.00 per share. The number of shares of
Preferred Stock to be received upon the exercise of this Warrant and the price
to be paid for each share of Preferred Stock may be adjusted from time to time
as hereinafter set forth. The shares of Preferred Stock deliverable upon such
exercise, and as adjusted from time to time, are hereinafter sometimes referred
to as "Warrant Shares" and the exercise price of a share of Preferred Stock in
effect at any time and as adjusted from time to time is hereinafter sometimes
referred to as the "Exercise Price."
1. EXERCISE OF WARRANT
a. Exercise for Cash. This Warrant may be exercised
in whole or in part at any time or from time to time until 5:00 p.m. Eastern
Standard Time on December 3, 2003 (the "Exercise Period"). This Warrant may be
exercised by presentation and surrender hereof to the Company at its principal
office, or at the office of its stock transfer agent, if any, with the Purchase
Form annexed hereto duly executed and accompanied by payment of the Exercise
Price for the number of Warrant Shares specified in such form. The Exercise
Price may be paid by bank check, wire transfer or cancellation of indebtedness.
As soon as practicable after each such exercise of this Warrant, but not later
than seven (7) days from the date of such exercise, the Company shall issue and
deliver to the Holder a certificate for the Warrant Shares issuable upon such
exercise, registered in the name of the Holder. If this Warrant should be
exercised in part only, the Company shall, upon surrender of this Warrant for
cancellation, execute and deliver a new Warrant evidencing the rights of the
Holder thereof to purchase the balance of the Warrant Shares purchasable
thereunder. Upon receipt by the Company of this Warrant at its office, or by the
stock transfer agent of the Company at its office, in
<PAGE>
proper form for exercise, the Holder shall be deemed to be the holder of record
of the shares of Preferred Stock issuable upon such exercise, notwithstanding
that the stock transfer books of the Company shall then be closed or that
certificates representing such shares of Preferred Stock shall not then be
physically delivered to the Holder.
b. Warrant Exchange. At any time during the Exercise
Period, the Holder may, at its option, exchange this Warrant, in whole or in
part (a "Warrant Exchange"), into the number of Warrant Shares determined in
accordance with this Section 1(b), by surrendering this Warrant at the principal
office of the Company or at the office of its stock transfer agent, accompanied
by a notice stating the Holder's intent to effect such exchange, the number of
Warrant Shares to be exchanged and the date on which the Holder requests that
such Warrant Exchange occur (the "Notice of Exchange"). The Warrant Exchange
shall take place on the date specified in the Notice of Exchange or, if later,
the date the Notice of Exchange is received by the Company (the "Exchange
Date"). Certificates for the shares issuable upon such Warrant Exchange and, if
applicable, a new warrant of like tenor evidencing the balance of the shares
remaining subject to this Warrant, shall be issued as of the Exchange Date and
delivered to the Holder within seven (7) days following the Exchange Date. In
connection with any Warrant Exchange, this Warrant shall represent the right to
subscribe for and acquire the number of Warrant Shares equal to (i) the number
of Warrant Shares specified by the Holder in its Notice of Exchange (the "Total
Number") less (ii) the number of Warrant Shares equal to the quotient obtained
by dividing (A) the product of the Total Number and the existing Exercise Price
by (B) the Fair Market Value. "Fair Market Value" shall be determined as
follows: (1) if the Preferred Stock is listed on a national securities exchange
or admitted to unlisted trading privileges on such exchange or listed for
trading on the Nasdaq Stock Market, the Fair Market Value shall be the average
of the last reported sale prices of the Preferred Stock on such exchange or
system for the twenty (20) business days ending on the last business day prior
to the date for which the determination is being made; or (2) if the Preferred
Stock is not so listed or admitted to unlisted trading privileges, the Fair
Market Value shall be the average of the last reported bid and asked prices
reported by the National Quotation Bureau, Inc. for the twenty (20) business
days ending on the last business day prior to the date for which the
determination is being made; or (3) if the Preferred Stock is not so listed or
admitted to unlisted trading privileges and bid and asked prices are not so
reported, the Fair Market Value shall be an amount, not less than book value
thereof as at the end of the most recent fiscal quarter of the Company ending
prior to the Exchange Date, determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
2. RESERVATION OF SHARES. The Company shall at all times
reserve for issuance and/or delivery upon exercise of this Warrant such number
of shares of its Preferred Stock as shall be required for issuance and delivery
upon exercise of this Warrant.
3. FRACTIONAL SHARES. No fractional shares of Preferred
Stock shall be issued upon the exercise of this Warrant. With respect to any
fraction of a share called for upon any exercise hereof, the Company shall pay
to the Holder an amount in
2
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cash equal to such fraction multiplied by the Fair Market Value of a
share of Preferred Stock.
4. ANTIDILUTION PROVISIONS.
a. Adjustments for Stock Splits, etc. In the event
the Preferred Stock is changed by reason of a stock split, reverse stock split,
stock dividend or recapitalization or is converted into or exchanged for other
securities as a result of a merger, consolidation or reorganization in which the
Company is the surviving corporation, appropriate adjustments shall be made in
the terms of this Warrant, or additional warrants shall be granted to the Holder
as shall be equitable and appropriate, or an adjustment in the number and class
of shares allocated to, and the Exercise Price of, this Warrant shall likewise
be made.
b. Adjustments for Certain Issuances or Sales at Less
than the Exercise Price in Effect.
i. General. If the Company shall, at any time
from time to time, issue any shares of Preferred Stock without consideration or
for a Net Consideration Per Share less than the Exercise Price in effect
immediately prior to such issuance, then, and in each such case, the Exercise
Price in effect thereafter shall be reduced, concurrently with such issue, to a
price equal to the Net Consideration Per Share received by the Company for each
such share of Preferred Stock.
ii. Other Dilutive Issuances of Options,
Warrants or Convertible Securities.
(A) The issuance of any warrants, options
or other subscription or purchase rights with respect to shares of Preferred
Stock and the issuance of any securities convertible into or exchangeable for
shares of Preferred Stock (or the issuance of any warrants, options or any
rights with respect to such convertible or exchangeable securities) shall be
deemed an issuance at such time of such Preferred Stock if the Net Consideration
Per Share which may be received by the Company for such Preferred Stock (as
hereinafter determined) shall be less than the Exercise Price at the time of
such issuance and, except as hereinafter provided, an adjustment in the Exercise
Price and the number of shares of Preferred Stock issuable upon exercise of this
Warrant shall be made upon each such issuance in the manner provided in Section
4(b)(i) above. Any obligation, agreement or undertaking to issue warrants,
options, or other subscription or purchase rights at any time in the future
shall be deemed to be an issuance at the time such obligation, agreement or
undertaking vests. No adjustment of the Exercise Price and the number of shares
of Preferred Stock issuable upon exercise of this Warrant shall be made upon the
issuance of any shares of Preferred Stock which are issued pursuant to the
exercise of any warrants, options or other subscription or purchase rights in
any convertible securities if any adjustment shall previously have been made
upon the issuance of any such warrants, options or other rights or upon the
issuance of
3
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any convertible securities (or upon the issuance of any warrants, options or any
rights therefor) as above provided.
(B) Expiration or Cancellation of
Options, Warrants or Convertible Securities. Any adjustment of the Exercise
Price and the number of shares of Preferred Stock issuable upon exercise of this
Warrant with respect to this Section 4(b)(ii) which relates to warrants, options
or other subscription or purchase rights with respect to shares of Preferred
Stock shall be disregarded if, as, and when all of such warrants, options or
other subscription or purchase rights expire or are cancelled without being
exercised, so that the Exercise Price effective immediately upon such
cancellation or expiration shall be equal to the Exercise Price in effect at the
time of the issuance of the expired or cancelled warrants, options or other
subscriptions or purchase rights, with such additional adjustments as would have
been made to that Exercise Price had the expired or cancelled warrants, options
or other subscriptions or purchase rights not been issued.
iii. Definition of Net Consideration Per Share.
For purposes of this Section 4(b), the "Net Consideration Per Share" which may
be received by the Company be determined as follows:
(A) If the consideration received by the
Company in connection with the issuance of shares of the Preferred Stock or the
issuance of any of the securities described in this Section 4 consists of cash,
such consideration shall be deemed to be the amount of such cash (provided that
in no case shall any deduction be made for any commissions, discounts or other
expenses incurred by the Company in connection therewith). If a part or all of
the consideration received by the Company in connection with the issuance of
shares of the Preferred Stock or the issuance of any of the securities described
in this Section 4, consists of property other than cash, such consideration
shall be deemed to have the same value as shall be determined in good faith by
the Board of Directors of the Company.
(B) For purposes of Section 4(b)(ii)
above, the "Net Consideration Per Share" shall mean the amount equal to the
total amount of consideration, if any, received by the Company for the issuance
of such warrants, options, subscriptions, or other purchase rights or
convertible or exchangeable securities, plus the minimum amount of
consideration, if any, payable to the Company upon exercise or conversion
thereof, divided by the aggregate number of shares of Preferred Stock that would
be issued if all such warrants, options, subscriptions, or other purchase rights
or convertible or exchangeable securities were exercised, exchanged or
converted.
c. Miscellaneous.
i. No adjustment in the Exercise Price shall
be required unless such adjustment would require an increase or decrease of at
least 5% in such Exercise Price; provided, however, that any adjustments which
by reason of this
4
<PAGE>
Section 4(c) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment required to be made hereunder.
ii. Notwithstanding anything contained herein
to the contrary, Section 4(b) above shall not apply under any of the
circumstances described in Section 4(a) above or with respect to Excluded Stock
(as defined in the Company's Certificate of Designation with respect to its
Preferred Stock filed with the Secretary of State of the State of Delaware on
December 2, 1996).
5. CERTAIN EXTRAORDINARY TRANSACTIONS. In the event the
Preferred Stock is exchanged for securities, cash or other property of any other
corporation or entity as the result of a reorganization, merger or consolidation
in which the Company is not the surviving corporation, the dissolution or
liquidation of the Company, or the sale of all or substantially all the assets
of the Company, the Board of Directors of the Company or the board of directors
of any successor corporation or entity may, in its discretion, as to the
unexercised portion of this Warrant, (a) provide for payment of an amount equal
to the excess of the fair market value of the Warrant Shares, as determined by
the Board of Directors of the Company or such board, over the Exercise Price of
such Warrant Shares as of the date of the transaction, in exchange for the
surrender of the right to exercise this Warrant, or (b) provide for the
assumption of this Warrant, or the substitution therefor of new warrants, by the
successor corporation or entity.
6. LOSS OF WARRANT. Upon receipt by the Company of
evidence satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Warrant, if mutilated, the Company will execute and deliver a new warrant of
like tenor and date.
7. NO RIGHTS AS STOCKHOLDER. The Holder shall not, as
holder of this Warrant, be entitled to vote, if applicable, or to receive
dividends or to be deemed the holder of Preferred Stock that may at any time be
issuable upon exercise of this Warrant for any purpose whatsoever, nor shall
anything contained herein be construed to confer upon the Holder, as such, any
of the rights of a stockholder of the Company or, if applicable, any right to
vote for the election of directors or upon any matter submitted to stockholders
at any meeting thereof, or to give or withhold consent to any corporate action
(whether upon any recapitalization, issue or reclassification of stock, change
of par value or change of stock to no par value, consolidation, merger or
conveyance or otherwise), or to receive notice of meetings, or to receive
dividends or subscription rights, until such holder shall have exercised the
Warrant and been issued the Warrant Shares in accordance with the provisions
hereof.
8. NON-TRANSFERABILITY. Neither this Warrant nor any
Warrant Shares shall be registered under the Securities Act of 1933, as amended,
and applicable state securities laws. Therefore, the Company shall require, as a
condition of allowing the transfer or exchange of this Warrant or such Warrant
Shares, that the Holder of this
5
<PAGE>
Warrant or such Warrant Shares, as the case may be, furnish to the Company an
opinion of counsel reasonably acceptable to the Company to the effect that such
transfer or exchange will be exempt from the registration and prospectus
delivery requirements under the Securities Act of 1933, as amended, and
applicable state securities laws. The certificates evidencing the Warrant Shares
shall bear a legend to the effect that the Warrant Shares evidenced by such
certificate have not been registered under the Securities Act of 1933, as
amended, and applicable state securities laws and are, therefore, subject to
restrictions on transfer.
9. INVESTMENT REPRESENTATIONS AND WARRANTIES. The Holder
hereby represents and warrants to the Company that (a) it has knowledge and
experience in financial and business matters sufficient to enable it to evaluate
the merits and risks of an investment in the Company; (b) it has assets
sufficient to enable it to bear the economic risk of its investment in this
Warrant and the Warrant Shares and is an "accredited investor" as defined in
Rule 501 under the Securities Act of 1933, as amended; (c) it is acquiring this
Warrant and, upon exercise, will acquire the Warrant Shares, for its own
account, and not with a view to, or for sale in connection with, any
distribution thereof; (d) it or its representatives have received from the
Company such information with respect to the Company as it has deemed necessary
and relevant in connection with this Warrant and the Warrant Shares and it has
had the opportunity, directly or through such representatives, to ask questions
of and receive answers from persons acting on behalf of the Company necessary to
verify the information so obtained; and (e) it and its officers, directors,
employees and agents have not employed any broker or finder or incurred any
liability for any brokerage or finder's fees or commissions or similar payments
in connection with this Warrant and the Warrant Shares.
10. GOVERNING LAW. This Agreement and all amendments,
modifications, alterations, or supplements hereto shall be construed under and
governed by the laws of the State of Delaware and the United States of America,
without regard to the principles of conflicts of law thereof.
11. MISCELLANEOUS. Except as provided in Sections 4 and 5
hereof, this Warrant and any term hereof may be changed, waived, discharged or
terminated only by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought. The
headings in this Warrant are for purposes of reference only and shall not limit
or otherwise affect any of the terms hereof. The invalidity or unenforceability
of any provision hereof shall in no way affect the validity or enforceability of
any other provision.
12. EXPIRATION. The right to exercise this Warrant shall
expire at 5:00 p.m. Eastern Standard Time on December 3, 2003.
6
<PAGE>
This Warrant is executed as of the date and year first written above.
. ORAPHARMA, INC.
By: /s/ Michael Kishbauch
---------------------------------
. Michael Kishbauch, President
Witness:
_____________________________________
7
<PAGE>
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: OraPharma, Inc.
b. The undersigned, the holder of the within Warrant,
hereby irrevocably elects to exercise this Warrant for, and to purchase
thereunder _______ shares of Series A Preferred Stock, $.001 par value per
share, of OraPharma, Inc. and herewith makes payment of $_____________ therefor,
and requests that the certificates for such shares be issued in the name of, and
delivered to the undersigned at ________________________.
Dated:
____________________________________________
(Signature must conform to name of holder as
specified on the face of the Warrant)
____________________________________________
(Address)
____________________________________________
8
<PAGE>
Exhibit 4.3
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR
STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT OR STATE
SECURITIES LAWS.
No. W-4 Right to Purchase 712 Shares of Series A
Preferred Stock of OraPharma, Inc.
ORAPHARMA, INC.
Series A Preferred Stock Purchase Warrant
This is to certify that, FOR VALUE RECEIVED, OAK VI AFFILIATES FUND,
LIMITED PARTNERSHIP (the "Holder"), is entitled to purchase, subject to the
provisions of this Warrant, from OraPharma, Inc., a Delaware corporation (the
"Company"), 712 fully paid, validly issued and nonassessable shares of Series A
Preferred Stock, par value $.001 per share, of the Company (the "Preferred
Stock") at an exercise price of $1.00 per share. The number of shares of
Preferred Stock to be received upon the exercise of this Warrant and the price
to be paid for each share hereinafter set forth. The shares of Preferred Stock
deliverable upon such exercise, and as adjusted from time to time, are
hereinafter sometimes referred to as "Warrant Shares" and the exercise price of
a share of Preferred Stock in effect at any time and as adjusted from time to
time is hereinafter sometimes referred to as the "Exercise Price."
1. EXERCISE OF WARRANT.
a. Exercise for Cash. This Warrant may be exercised
in whole or in part at any time or from time to time until 5:00 p.m. Eastern
Standard Time on December 3, 2003 (the "Exercise Period"). This Warrant may be
exercised by presentation and surrender hereof to the Company at its principal
office, or at the office of its stock transfer agent, if any, with the Purchase
Form annexed hereto duly executed and accompanied by payment of the Exercise
Price for the number of Warrant Shares specified in such form. The Exercise
Price may be paid by bank check, wire transfer or cancellation of indebtedness.
As soon as practicable after each such exercise of this Warrant, but not later
than seven (7) days from the date of such exercise, the Company shall issue and
deliver to the Holder a certificate for the Warrant issue and deliver to the
Holder a certificate for the Warrant Shares issuable upon such exercise,
registered in the name of the Holder. If this Warrant should be exercised in
part only, the Company shall, upon surrender of this Warrant for cancellation,
execute and deliver a new Warrant evidencing the rights of the Holder thereof to
purchase the balance of the Warrant Shares purchasable thereunder. Upon receipt
by the Company of this Warrant at its office, or by the stock transfer agent of
the Company at its office, in proper form for exercise, the Holder shall be
deemed to be the holder of record of the shares of Preferred Stock
<PAGE>
issuable upon such exercise, notwithstanding that the stock transfer books of
the Company shall then be closed or that certificates representing such shares
of Preferred Stock shall not then be physically delivered to the Holder.
b. Warrant Exchange. At any time during the Exercise
Period, the Holder may, at its option, exchange this Warrant, in whole or in
part (a "Warrant Exchange") into the number of Warrant Shares determined in
accordance with this Section 1(b), by surrendering this Warrant at the principal
office of the Company or at the office of its stock transfer agent, accompanied
by a notice stating the Holder's intent to effect such exchange, the number of
Warrant Shares to be exchanged and the date on which the Holder requests that
such Warrant Exchange occur (the "Notice of Exchange"). The Warrant Exchange
shall take place on the date specified in the Notice of Exchange or, if later,
the date the Notice of Exchange is received by the Company (the "Exchange
Date"). Certificates for the shares issuable upon such Warrant Exchange and, if
applicable, a new warrant of like tenor evidencing the balance of the shares
remaining subject to this Warrant, shall be issued as of the Exchange Date and
delivered to the Holder within seven (7) days following the Exchange Date. In
connection with any Warrant Exchange, this Warrant shall represent the right to
subscribe for and acquire the number of Warrant Shares equal to (i) the number
of Warrant Shares specified by the Holder in its Notice of Exchange (the "Total
Number") less (ii) the number of Warrant Shares equal to the quotient obtained
by dividing (A) the product of the Total Number and the existing Exercise Price
by (B) the Fair Market Value. "Fair Market Value" shall be determined as
follows: (1) if the Preferred Stock is listed on a national securities exchange
or admitted to unlisted trading privileges on such exchange or listed for
trading on the Nasdaq Stock Market, the Fair Market Value shall be the average
of the last reported sale prices of the Preferred Stock on such exchange or
system for the twenty (20) business days ending on the last business day prior
to the date for which the determination is being made; or (2) if the Preferred
Stock is not so listed or admitted to unlisted trading privileges, the Fair
Market Value shall be the average of the last reported bid and asked prices
reported by the National Quotation Bureau, Inc. for the twenty (20) business
days ending on the last business day prior to the date for which the
determination is being made; or (3) if the Preferred Stock is not so listed or
admitted to unlisted trading privileges and bid and asked prices are not so
reported, the Fair Market Value shall be an amount, not less than book value
thereof as at the end of the most recent fiscal quarter of the Company ending
prior to the Exchange Date, determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
2. RESERVATION OF SHARES. The Company shall at all times
reserve for issuance and/or delivery upon exercise of this Warrant such number
of shares of its Preferred Stock as shall be required for issuance and delivery
upon exercise of this Warrant.
3. FRACTIONAL SHARES. No fractional shares of Preferred
Stock shall be issued upon the exercise of this Warrant. With respect to any
fraction of a share called for upon any exercise hereof, the Company shall pay
to the Holder an amount in
2
<PAGE>
cash equal to such fraction multiplied by the Fair Market Value of a share of
Preferred Stock.
4. ANTIDILUTION PROVISIONS.
a. Adjustments for Stock Splits, etc. In the event
the Preferred Stock is changed by reason of a stock split, stock dividend or
recapitalization or is converted into or exchanged for other securities as a
result of a merger, consolidation or reorganization in which the Company is the
surviving corporation, appropriate adjustments shall be made in the terms of
this Warrant, or additional warrants shall be granted to the Holder as shall be
equitable and appropriate, or an adjustment in the number and class of shares
allocated to, and the Exercise Price of, this Warrant shall likewise be made.
b. Adjustments for Certain Issuances or Sales at
Less than the Exercise Price in Effect.
i. General. If the Company shall, at any time
from time to time, issue any shares of Preferred Stock without consideration or
for a Net Consideration Per Share less than the Exercise Price in effect
immediately prior to such issuance, then, and in each such case, the Exercise
Price in effect thereafter shall be reduced, concurrently with such issue, to a
price equal to the Net Consideration Per Share received by the Company for each
such share of Preferred Stock.
ii. Other Dilutive Issuances of Options,
Warrants or Convertible Securities.
(A) The issuance of any warrants, options
or other subscription or purchase rights with respect to shares of Preferred
Stock and the issuance of any securities convertible into or exchangeable for
shares of Preferred Stock (or the issuance of any warrants, options or any
rights with respect to such convertible or exchangeable securities) shall be
deemed an issuance at such time of such Preferred Stock if the Net Consideration
Per Share which may be received by the Company for such Preferred Stock (as
hereinafter determined) shall be less than the Exercise Price at the time of
such issuance and, except as hereinafter provided, an adjustment in the Exercise
Price and the number of shares of Preferred Stock issuable upon exercise of this
Warrant shall be made upon each such issuance in the manner provided in Section
4(b)(i) above. Any obligation, agreement or undertaking to issue warrants,
options, or other subscription or purchase rights at any time in the future
shall be deemed to be an issuance at the time such obligation, agreement or
undertaking vests. No adjustment of the Exercise Price and the number of shares
of Preferred Stock issuable upon exercise of this Warrant shall be made upon the
issuance of any shares of Preferred Stock which are issued pursuant to the
exercise of any warrants, options or other subscription or purchase rights or
pursuant to the exercise of any conversion or exchange rights in any convertible
securities if any adjustment shall previously have been made upon the issuance
of any such warrants, options or other rights or upon the issuance of any
convertible securities (or upon the issuance of any warrants, options or any
rights therefor) as above provided.
3
<PAGE>
(B) Expiration or Cancellation of Options,
Warrants or Convertible Securities. Any adjustment of the Exercise Price and the
number of shares of Preferred Stock issuable upon exercise of this Warrant with
respect to this Section 4(b)(ii) which relates to warrants, options or other
subscription or purchase rights with respect to shares of Preferred Stock shall
be disregarded if, as, and when all such warrants, options or other subscription
or purchase rights expire or are cancelled warrants, options or other
subscriptions or purchase rights not been issued.
ii. Definition of Net Consideration Per Share.
For purposes of this Section 4(b), the "Net Consideration Per Share" which may
be received by the Company shall be determined as follows:
(A) If the consideration received by the
Company in connection with the issuance of shares of the Preferred Stock or the
issuance of any of the securities described in this Section 4 consists of cash,
such consideration shall be deemed to be the amount of such cash (provided that
in no case shall any deduction be made for any commissions, discounts or other
expenses incurred by the Company in connection with the issuance of shares of
the Preferred Stock or the issuance of any of the securities described in this
Section 4, consists of property other than cash, such consideration shall be
deemed to have the same value as shall be determined in good faith by the Board
of Directors of the Company.
(B) For purposes of Section 4(b)(ii)
above, the "Net Consideration Per Share" shall mean the amount equal to the
total amount of consideration, if any, received by the Company for the issuance
of such warrants, options, subscriptions, or other purchase rights or
convertible or exchangeable securities, plus the minimum amount of
consideration, if any, payable to the Company upon exercise or conversion
thereof, divided by the aggregate number of shares of Preferred Stock that would
be issued if all such warrants, options, subscriptions, or other purchase rights
or convertible or exchangeable securities were exercised, exchanged or
converted.
(C) For purposes of Section 4(b)(ii)
above, the "Net Consideration Per Share" which may be received by the Company
shall be determined in each instance as of the date of vesting or warrants,
options, subscriptions or other purchase rights, or convertible or exchangeable
securities without giving effect to any possible future price adjustments or
rate adjustments which may be applicable with respect to such warrants, options,
subscriptions or other purchase rights or convertible securities.
c. Miscellaneous.
i. No adjustment in the Exercise Price shall
be required unless such adjustment would require an increase or decrease of at
least 5% in such Exercise Price; provided, however, that any adjustments which
by reason of this
4
<PAGE>
Section 4(c) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment required to be made hereunder.
ii. Notwithstanding anything contained herein
to the contrary, Section 4(b) above shall not apply under any of the
circumstances described in Section 4(a) above or with respect to Excluded Stock
(as defined in the Company's Certificate of Designation with respect of its
Preferred Stock filed with the Secretary of State of the State of Delaware on
December 2, 1996).
5. CERTAIN EXTRAORDINARY TRANSACTIONS. In the event the
Preferred Stock is exchanged for securities, cash or other property of any other
corporation or entity as the result of a reorganization, merger or consolidation
in which the Company is not the surviving corporation, the dissolution or
liquidation of the Company, or the sale of all or substantially all the assets
of the Company, the Board of Directors of the Company or the board of directors
of any successor corporation or entity may, in its discretion, as to the
unexercised portion of this Warrant, (a) provide for payment of an amount equal
to the excess of the fair market value of the Warrant Shares, as determined by
the Board of Directors of the Company or such board, over the Exercise Price of
such Warrant Shares as of the date of the transaction, in exchange for the
surrender of the right to exercise this Warrant, or (b) provide for the
assumption of this Warrant, or the substitution therefor of new warrants, by the
successor corporation or entity.
6. LOSS OF WARRANT. Upon receipt by the Company of
evidence satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Warrant, if mutilated, the Company will execute and deliver a new warrant of
like tenor and date.
7. NO RIGHTS AS STOCKHOLDER. The Holder shall not, as
holder of this Warrant, be entitled to vote, if applicable, or to receive
dividends or to be deemed the holder of Preferred Stock that may at any time be
issuable upon exercise of this Warrant for any purpose whatsoever, nor shall
anything contained herein be construed to confer upon the Holder, as such, any
of the rights of a stockholder of the Company or, if applicable, any right to
vote for the election of directors or upon any matter submitted to stockholders
at any meeting thereof, or to give or withhold consent to any corporate action
(whether upon any recapitalization, issue or reclassification of stock, change
of par value or change of stock to no par value, consolidation, merger or
conveyance or otherwise), or to receive notice of meetings, or to receive
dividends or subscription rights, until such holder shall have exercised the
Warrant and been issued the Warrant Shares in accordance with the provisions
hereof.
8. NON-TRANSFERABILITY. Neither this Warrant nor any
Warrant Shares shall be registered under the Securities Act of 1933, as amended,
and applicable state securities laws. Therefore, the Company shall require, as a
condition of allowing the transfer or exchange of this Warrant or such Warrant
Share, as the case may be,
5
<PAGE>
furnish to the Company an opinion of counsel reasonably acceptable to the
Company to the effect that such transfer or exchange will be exempt from the
registration and prospectus delivery requirements under the Securities Act of
1933, as amended, and applicable state securities laws. The certificates
evidencing the Warrant Shares shall bear a legend to the effect that the Warrant
Shares evidenced by such certificate have not been registered under the
Securities Act of 1933, as amended, and applicable state securities laws and
are, therefore, subject to restrictions on transfer.
9. INVESTMENT REPRESENTATIONS AND WARRANTIES. The Holder
hereby represents and warrants to the Company that (a) it has knowledge and
experience in financial and business matters sufficient to enable it to evaluate
the merits and risks of an investment in the Company; (b) it has assets
sufficient to enable it to bear the economic risk of its investment in this
Warrant and the Warrant Shares and is an "accredited investor" as defined in
Rule 501 under the Securities Act of 1933, as amended: (c) it is acquiring this
Warrant and, upon exercise, will acquire the Warrant Shares, for its own
account, and not with a view to, or for sale in connection with, any
distribution thereof; (d) it or its representatives have received from the
Company such information with respect to the Company as it has deemed necessary
and relevant in connection with this Warrant and the Warrant Shares and it has
had the opportunity, directly or through such representatives, to ask questions
of and receive answers from persons acting on behalf of the Company necessary to
verify the information so obtained; and (e) it and its officers, directors,
employees and agents have not employed any broker or finder or incurred any
liability for any brokerage or finder's fees or commissions or similar payments
in connection with this Warrant and the Warrant Shares.
10. GOVERNING LAW. This Agreement and all amendments,
modifications, alterations, or supplements hereto shall be construed under and
governed by the laws of the State of Delaware and the United States of America,
without regard to the principles of conflicts of law thereof.
11. MISCELLANEOUS. Except as provided in Sections 4 and 5
hereof, this Warrant and any term hereof may be changed, waived, discharged or
terminated only by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought. The
headings in this Warrant are for purposes of reference only and shall not limit
or otherwise affect any of the terms hereof. The invalidity or unenforceability
of any provision hereof shall in no way affect the validity or enforceability of
any other provision.
12. EXPIRATION. The right to exercise this Warrant shall
expire at 5:00 p.m. Eastern Standard Time on December 3, 2003.
6
<PAGE>
This Warrant is executed as of the date and year first written above.
ORAPHARMA, INC.
By: /s/ Michael Kishbauch
---------------------------------------
Michael Kishbauch, President
Witness:
_____________________________
7
<PAGE>
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: OraPharma, Inc.
The undersigned, the holder of the within Warrant, hereby irrevocably elects
to exercise this Warrant for, and to purchase thereunder ____________ shares of
Series A Preferred Stock, $.001 par value per share, of OraPharma, Inc. and
herewith makes payment of $______________ therefor, and requests that the
certificates for such shares be issued in the name of , and delivered to the
undersigned at ____________________.
Dated: _________________________________________
(Signature must conform to name of holder
as specified on the face of the Warrant)
_________________________________________
(Address)
_________________________________________
<PAGE>
Exhibit 4.7
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement") dated as of the 26th day of
---------
February, 1997 by and among OraPharma, Inc., a Delaware corporation (the
"Company"), and the persons listed on Schedule 1 attached hereto (the "Buyers").
------- ------
The Company and the Buyers are desirous of providing for the issuance of
shares of Series A Preferred Stock and Series B Preferred Stock (each as defined
herein), as more specifically set forth herein.
The parties, intending to be legally bound hereby, agree as follows:
1. Definitions.
-----------
As used in this Agreement, the following terms have the meanings specified
or referred to in this Section 1.
"Applicable Environmental Law" shall mean CERCLA, RCRA, the Federal Waste
----------------------------
Pollution Control Act, 33 U.S.C. (S)(S) 1261 et seq., the Clean Air Act, 42
-------
U.S.C. (S)(S) 7401 et seq., any similar provisions of state or local law in the
-------
jurisdictions where the properties of the Company are located and the
regulations thereunder and any other local, state and/or federal laws or
regulations, whether currently in existence or hereafter enacted, that govern:
(a) the existence, cleanup and/or remedy of contamination on property;
(b) the protection of the environment from spilled, deposited or
otherwise emplaced contamination;
(c) the control of hazardous wastes; or
(d) the use, generation, transport, treatment, storage, disposal,
removal or recovery of Hazardous Materials, including building materials.
"Budget" shall have the meaning set forth in Section 6.3(c).
------
"Business" shall have the meaning set forth in Section 4.17.
--------
"Business and Condition" shall mean the business, operations, properties,
----------------------
assets, prospects or condition (financial or otherwise) of the Company.
"Business Day" shall mean any day that is not a Saturday or Sunday or a day
------------
on which banks located in the State of New Jersey are authorized or required to
be closed.
<PAGE>
"Buyers" shall have the meaning set forth in the first paragraph of this
------
Agreement.
"By-Laws" shall mean the by-laws of the Company.
-------
"CERCLA" shall mean the Comprehensive Environmental Response, Compensation
------
and Liability Act, 42 U.S.C. (S)(S) 6901 et seq.
-------
"Certificate of Incorporation" shall mean the Amended and Restated
----------------------------
Certificate of Incorporation of the Company, as amended from time to time.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
----
"Commission" shall mean the Securities and Exchange Commission.
----------
"Commitment" shall mean all obligations of the Company and its
----------
Subsidiaries, contingent or otherwise, pursuant to long-term leases (other than
leases for real property) or similar agreements.
"Common Stock" shall mean the Common Stock, par value $.001 per share, of
------------
the Company.
"Company" shall have the meaning set forth in the first paragraph of this
-------
Agreement.
"Contemplated Transactions" shall have the meaning set forth in Section
-------------------------
5.3.
"Cyanamid Agreement" shall mean the agreement dated as of the date hereof
------------------
between the Company and American Cyanamid Company.
"Employment Agreement" shall mean the memo dated October 17, 1996 and
--------------------
attached letter agreement between the Company and Michael Kishbauch relating to
Mr. Kishbauch's employment by the Company.
"Encumbrance" shall mean any security interest, mortgage, lien, charge,
-----------
adverse claim or restriction of any kind, including, but not limited to, any
restriction on the use, voting, transfer, receipt of income or other exercise of
any attributes of ownership.
"Equity Stock" shall have the meaning set forth in Rule 3a-11-1 under the
------------
Securities Exchange Act of 1934.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
-----
amended.
"GAAP" shall mean generally accepted accounting principles of the United
----
States.
-2-
<PAGE>
"Governmental Body" shall mean any domestic or foreign national, state or
-----------------
municipal or other local government or multi-national body (including, but not
limited to, the European Economic Community), any subdivision, agency,
commission or authority thereof, or any quasi-governmental or private body
exercising any regulatory or taxing authority thereunder.
"Hazardous Materials" shall mean any substance which as of the date of this
-------------------
Agreement shall be identified as "hazardous" or "toxic" or otherwise regulated
under CERCLA or RCRA or which has been or shall be determined at any time by any
agency or court to be a hazardous or toxic substance under Applicable
Environmental Law. The term "Hazardous Material" shall also include, without
limitation, raw materials, building components, the products of any
manufacturing or other activities on the properties, wastes, petroleum, and
source, special nuclear or by-product material as defined by the Atomic Energy
Act of 1954, as amended (42 U.S.C. (S)(S) 3011 et seq., as amended).
-------
"Indebtedness" shall mean all liabilities for money borrowed by the Company
------------
and its Subsidiaries.
"Initial Public Offering" shall mean the Company's initial distribution of
-----------------------
New Securities in a firm commitment underwritten public offering to the general
public pursuant to a registration statement filed with and declared effective by
the Commission pursuant to the Securities Act at a price per New Security of not
less than $4.00 (as adjusted for stock splits, stock combinations or similar
recapitalizations) and resulting in gross proceeds (before underwriting
commissions and offering expenses) to the Company of not less than $15 million.
"Jernberg Agreement" shall mean the Agreement dated as of December 24, 1996
------------------
between the Company and Gary R. Jernberg, DDS, MSD.
"Net Worth" shall have the meaning set forth in Section 7.6.
---------
"New Securities" shall mean any Equity Stock, including, but not limited
--------------
to, shares of Common Stock of the Company, any security which is convertible
into or exercisable or exchangeable for Common Stock, or any right, option or
warrant to acquire any Common Stock of the Company.
"Person" shall mean any individual, corporation, partnership, limited
------
liability company, joint venture, trust, association, unincorporated
organization, other entity, or
Governmental Body.
"Preferred Shares" shall mean the Series A Preferred Shares and the Series
----------------
B Preferred Shares.
"Proprietary Rights" shall mean all patents, patent applications, patent
------------------
licenses, trademarks, trademark applications, trade names, service marks,
service mark applications, brand marks, brand names, copyrights, trade secrets,
inventions, technologies, know-how, formulae, processes, names and likeness.
-3-
<PAGE>
"Public Offering" shall mean a distribution of New Securities in an
---------------
underwritten public offering to the general public pursuant to a registration
statement filed with and declared effective by the Commission pursuant to the
Securities Act.
"RCRA" shall mean the Resource Conservation and Recovery Act, 42 U.S.C.
----
(S)(S) 6901 et seq.
-------
"Registrable Securities" shall mean any shares of Common Stock issued or to
----------------------
be issued pursuant to conversion of the Preferred Shares (including any shares
issued as a dividend or distribution with respect to, or in exchange for, the
Preferred Shares).
"Related Party" shall mean (a) any individual who is a director or officer
-------------
of the Company; (b) any person who is an affiliate of the Company, as such term
is defined in Rule 405 under the Securities Act, (c) any Person that owns five
percent or more of the outstanding Equity Stock of any class of the Company; (d)
any member of the family (as defined in Section 267(c)(4) of the Code) of, or
any individual who has the same home as, any individual (or the spouse of any
such individual) described in clause (a), (b) or (c) of this Section; or (e) any
trust, estate or partnership of which an individual described in clause (a),
(b), (c) or (d) of this Section is a grantor, fiduciary, beneficiary or partner.
"Restricted Stock Agreements" shall mean the Restricted Stock Purchase
---------------------------
Agreements between the Company and each of Scheer Investment Holdings I, L.L.C.,
Oak Investment Partners VI, Limited Partnership, Oak VI Affiliates Fund, Limited
Partnership and American Cyanamid Company, all of which are dated the date
hereof except for the Scheer Restricted Stock Agreement, which was executed on
February 24, 1997.
"SBIA" shall have the meaning set forth in Section 4.17.
----
"SBIC" shall mean Canaan S.B.I.C., L.P., a Delaware limited partnership,
----
one of the Buyers hereunder.
"Scheer Restricted Stock Agreement" shall mean the Restricted Stock
---------------------------------
Purchase Agreement by and between the Corporation and Scheer Investment Holdings
I, L.L.C. dated February 24, 1997.
"Securities Act" shall mean the Securities Act of 1933, as amended.
--------------
"Series A Closing" shall have the meaning set forth in Section 2.4.
----------------
"Series B Closing" shall have the meaning set forth in Section 3.4.
----------------
"Series A Closing Date" shall mean the date and time of the Series A
---------------------
Closing.
"Series B Closing Date" shall mean the date and time of the Series B
---------------------
Closing.
-4-
<PAGE>
"Series A Preferred Shares" shall mean the Series A Preferred Stock of the
-------------------------
Company to be issued to the Buyers hereunder.
"Series B Preferred Shares" shall mean the Series B Preferred Stock of the
-------------------------
Company to be issued to the Buyers hereunder.
"Series A Preferred Stock" shall mean the Series A Preferred Stock, par
------------------------
value $.001 per share, of the Company.
"Series B Preferred Stock" shall mean the Series B Preferred Stock, par
------------------------
value $.001 per share, of the Company.
"Stockholders Agreement" shall mean the Stockholders Agreement dated as of
----------------------
the date hereof between the Company and the stockholders of the Company named
therein.
"Subsidiary" shall mean with respect to any Person, any corporation of
----------
which securities having the power to elect a majority of that corporation's
Board of Directors (other than securities having that power only upon the
happening of a contingency that has not occurred) are held by such Person or one
or more of its Subsidiaries.
"Taxes" shall mean all taxes, duties, charges, fees, levies, interest,
-----
penalties, additions to tax or other assessments, including, but not limited to,
income, excise, employment, property, sales, use, value added and franchise
taxes and customs duties, imposed by any Governmental Body and any payments with
respect thereto required under any tax-sharing agreement.
2. The Series A Acquisition.
------------------------
2.1 Preferred Shares. The Series A Preferred Shares shall have the voting
----------------
powers, liquidation rights, designations, preferences and relative,
participating, optional or other special rights, and the qualifications,
limitations and restrictions thereof as set forth in the Certificate of
Incorporation.
2.2 Purchase and Sale. Subject to the terms and conditions of this
-----------------
Agreement, at the Series A Closing to be held as provided in Section 2.4 below,
the Company shall issue and sell to the Buyers an aggregate of 800,000 shares of
Series A Preferred Stock, which shall be issuable to each Buyer in the amount
set forth opposite the name of such Buyer listed on Schedule 2.2, free and clear
of all Encumbrances, and each of the Buyers agrees, severally and not jointly,
to purchase from the Company the shares of Series A Preferred Stock listed by
such Buyer's name on Schedule 2.2.
2.3 Purchase Price. The aggregate purchase price for the shares of Series
--------------
A Preferred Stock to be issued at the Series A Closing shall be $800,000, and
each Buyer shall pay the amount of the purchase price set forth opposite the
name of such Buyer listed on Schedule 2.2. The purchase price shall be paid by
each of the Buyers to the Company at the Series A Closing
-5-
<PAGE>
(a) by cancellation of indebtedness, and/or (b) in immediately available funds
by wire transfer or by delivery of bank cashier's checks or certified checks.
2.4 Place and Time. The closing of the sale and purchase of the Series A
--------------
Preferred Shares (the "Series A Closing") shall take place at the offices of
----------------
Sills Cummis Zuckerman Radin Tischman Epstein & Gross, One Riverfront Plaza,
Newark, New Jersey 07102-5400 on February 26, 1997 or at such other place, date
and time as the parties may agree in writing.
2.5 Deliveries by the Company. At the Series A Closing, the Company shall
-------------------------
deliver the following to each of the Buyers:
(a) Certificates representing the Series A Preferred Shares, duly
registered in the names of the Buyers.
(b) The documents contemplated by Section 9.
(c) The Stockholders Agreement.
(d) A copy of the Cyanamid Agreement.
(e) A copy of the Jernberg Agreement.
(f) A copy of the Employment Agreement.
(g) Copies of the Restricted Stock Agreements.
(h) All other documents, instruments and writings required by this
Agreement to be delivered by the Company at the Series A Closing.
(i) Completed and executed Small Business Administration Forms 480 and
652 and Section A of Form 1031.
2.6 Deliveries by the Buyers. At the Series A Closing, each of the Buyers
------------------------
shall deliver the following to the Company:
(a) A wire transfer or bank cashier's or certified check payable to
the order of the Company in the amount of the purchase price (less, in the event
that such Buyer surrenders one or more promissory notes made by the Company to
such Buyer for cancellation, the principal amount of such promissory note(s)
plus interest accrued but unpaid thereon), determined in accordance with Section
2.3.
(b) The Stockholders Agreement.
(c) All other documents, instruments and writings required by this
Agreement to be delivered by the Buyers at the Series A Closing.
-6-
<PAGE>
3. The Series B Acquisition.
------------------------
3.1 Preferred Shares. The Series B Preferred Shares shall have the voting
----------------
powers, liquidation rights, designations, preferences and relative,
participating, optional or other special rights, and the qualifications,
limitations and restrictions thereof as set forth in the Certificate of
Incorporation.
3.2 Purchase and Sale. Subject to the terms and conditions of this
-----------------
Agreement, at the Series B Closing to be held as provided in Section 3.4 below,
the Company shall issue and sell to the Buyers an aggregate of 6,593,408 shares
of Series B Preferred Stock, which shall be issuable to each Buyer in the amount
set forth opposite the name of such Buyer listed on Schedule 3.2, free and clear
of all Encumbrances, and each of the Buyers agrees, severally and not jointly,
to purchase from the Company the shares of Series B Preferred Stock listed by
such Buyer's name on Schedule 3.2.
3.3 Purchase Price. The aggregate purchase price for the shares of Series
--------------
B Preferred Stock to be issued at the Series B Closing shall be $1.82 per share,
and each Buyer shall pay the amount of the purchase price set forth opposite the
name of such Buyer listed on Schedule 3.2. The purchase price shall be paid by
each of the Buyers to the Company at the Series B Closing in immediately
available funds by wire transfer or by delivery of bank cashier's checks or
certified checks.
3.4 Place and Time. The closing of the sale and purchase of the Series B
--------------
Preferred Shares (the "Series B Closing") shall take place at the offices of
----------------
Sills Cummis Zuckerman Radin Tischman Epstein & Gross One Riverfront Plaza,
Newark, New Jersey 07102-5400 on March 7, 1997 or at such other place, date and
time as the parties may agree in writing.
3.5 Deliveries by the Company. At the Series B Closing, the Company shall
-------------------------
deliver the following to each of the Buyers:
(a) Certificates representing the Series B Preferred Shares, duly
registered in the names of the Buyers.
(b) The documents contemplated by Section 9.
(c) All other documents, instruments and writings required by this
Agreement to be delivered by the Company at the Series B Closing.
(d) Completed and executed Small Business Administration Forms 480 and
652 and Section A of Form 1031.
3.6 Deliveries by the Buyers. At the Series B Closing, each of the Buyers
------------------------
shall deliver the following to the Company:
-7-
<PAGE>
(a) A wire transfer or bank cashier's or certified check payable to
the order of the Company in the amount of the purchase price (less, in the event
that such Buyer surrenders one or more promissory notes made by the Company to
such Buyer for cancellation, the principal amount of such promissory note(s)
plus interest accrued but unpaid thereon), determined in accordance with Section
3.3.
(b) All other documents, instruments and writings required by this
Agreement to be delivered by the Buyers at the Series B Closing.
4. Representations and Warranties of the Company.
---------------------------------------------
The Company represents and warrants (both as of the date of this Agreement
and as of the Series A Closing Date and Series B Closing Date) to each of the
Buyers as follows:
4.1 Organization of the Company; Authorization. (a) The Company was
------------------------------------------
incorporated under the laws of the State of Delaware on August 1, 1996, and
since such date the Company has not, directly or indirectly, (i) engaged in any
business, (ii) entered into any agreements, contracts, guaranties,
understandings or other commitments (written or oral), or (iii) incurred any
liabilities of any nature (matured or unmatured, fixed or contingent), except:
(A) the Company and certain of the Buyers have entered into a
written Loan Agreement dated December 2, 1996 (pursuant to which the
Company executed and delivered Promissory Notes and Series A Preferred
Stock Warrants to such Buyers) and an oral loan agreement dated
January 30, 1997 (pursuant to which the Company executed and delivered
Promissory Notes to such Buyers) pursuant to which the Company
borrowed an aggregate of $165,000 from such Buyers;
(B) the Company has negotiated, executed and delivered this
Agreement, the Stockholders Agreement, the Employment Agreement, the
Restricted Stock Agreements and the other agreements related hereto
and thereto;
(C) the Company has negotiated, executed and delivered the
Cyanamid Agreement, the Jernberg Agreement and the other agreements
related to each of them; and
(D) the Company has engaged in those additional activities, has
negotiated, executed and delivered those additional agreements,
contracts or instruments and has incurred those liabilities set forth
on Schedule 4.1 attached hereto.
(b) The Company has never had, nor does it presently have, any
subsidiaries, nor has it owned, nor does it presently own, any capital stock or
other proprietary interest, directly or indirectly, in any corporation,
association, trust, partnership, joint venture or other entity.
-8-
<PAGE>
(c) The Company is a corporation validly existing and in good standing
under the laws of the State of Delaware, with full corporate power and authority
to enter into this Agreement and the Stockholders Agreement and to perform all
of its obligations hereunder and thereunder, and to own its properties and to
engage in its business as presently conducted or contemplated. The Company is
duly qualified and in good standing as a foreign corporation under the laws of
the State of New Jersey and is not required to qualify as a foreign corporation
in any other jurisdiction except where the failure to be so qualified would not
have a material adverse affect on the condition (financial or otherwise) of the
Company. The Company has no subsidiaries, nor does it own any equity interest
in, or control directly or indirectly, any other entity. The Company is not a
party to any joint venture or partnership agreement.
(d) The execution, delivery and performance of this Agreement and the
Stockholders Agreement by the Company have been authorized by all necessary
action and constitute valid and binding obligations of the Company, enforceable
against it in accordance with their terms.
4.2 Capitalization. (a) The authorized Equity Stock of the Company
--------------
consist of (i) 10,143,408 shares of Common Stock, 335,400 of which are issued
and outstanding immediately prior to consummation of this Agreement, the
Restricted Stock Agreements other than the Scheer Restricted Stock Agreement and
the Cyanamid Agreement, and (ii) 800,000 shares of Series A Preferred Stock and
6,593,408 shares of Series B Preferred Stock, none of which are issued and
outstanding immediately prior to the consummation of the transactions
contemplated by this Agreement, the Restricted Stock Agreements and the Cyanamid
Agreement. All of the issued and outstanding shares of the Company are fully
paid and non-assessable.
(b) A true and complete list of the holders of record of all issued
and outstanding Equity Stock of the Company, including all outstanding options,
warrants or other rights to purchase Equity Stock, as adjusted to reflect the
consummation of the transactions contemplated by this Agreement, the Restricted
Stock Agreements, the Cyanamid Agreement and the Jernberg Agreement, including
the number of securities owned by each such holder, is set forth on Schedule
4.2(b) attached hereto.
(c) The issuance of the Preferred Shares hereunder and the shares of
Common Stock issuable upon conversion of the Preferred Shares have been duly and
validly authorized. No further approval or authorization of the shareholders or
the directors of the Company, of any Governmental Body or of any other Person is
required for the issuance and sale of the Preferred Shares, or the shares of
Common Stock issuable on conversion thereof. When paid for by, and issued to,
the Buyers, the Preferred Shares will be duly and validly issued, fully paid and
non-assessable and will be free and clear of any Encumbrances. The Preferred
Shares will have the designations, preferences and relative, participating,
optional and other special rights as set forth in the Certificate of
Incorporation. Assuming the truth of the Buyers' representations and warranties
contained in Section 5, the offer, sale and issuance of the Preferred Shares
(and any shares of Common Stock issuable on conversion thereof) are exempt from
the registration requirements of the Securities Act and state securities laws.
-9-
<PAGE>
(d) Except as contemplated by this Agreement or as set forth in
Schedule 4.2(b), there are no outstanding options, rights, conversion rights,
agreements or commitments of any kind relating to the issuance, sale, purchase,
redemption, voting or transfer of any Equity Stock or other securities of the
Company or any rights outstanding which permit or allow the holder thereof to
cause the Company to file a registration statement or which permit or allow the
holder thereof to include securities of the Company in a registration statement
filed by the Company. There are no preemptive or other similar rights with
respect to any Equity Stock of the Company, except rights granted under the
Stockholders Agreement. None of the outstanding Equity Stock of the Company was
issued in violation of the Securities Act or the securities laws of any state or
other jurisdiction except for the filing of certain notices that may be required
under applicable Federal or state securities laws, which filings shall be timely
made. The offer, sale and issuance of the Preferred Shares and the shares of
Common Stock issuable upon conversion of the Preferred Shares in conformity with
the terms of this Agreement constitute transactions exempt from the registration
requirements of Section 5 of the Securities Act. The Company is not an
"investment company" within the meaning of the Investment Company Act of 1940.
The Company has delivered to the Buyers copies of the Certificate of
Incorporation and By-Laws (or other governing instrument) of the Company, as
currently in effect.
4.3 No Conflict as to the Company. Neither the execution and delivery of
-----------------------------
this Agreement or the Stockholders Agreement nor the issuance of the Preferred
Shares or the Common Stock issuable on conversion thereof will (a) violate any
provision of the Certificate of Incorporation or By-Laws of the Company, or (b)
violate, or be in conflict with, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under, or
result in the termination of, or accelerate the performance required by, or
excuse performance by any Person of any of its obligations under, or cause the
acceleration of the maturity of any debt or obligation pursuant to, or result in
the creation or imposition of any Encumbrance upon any property or assets of the
Company under, any material agreement or commitment to which the Company is a
party or by which any of its property or assets is bound, or to which any of the
property or assets of the Company is subject, or (c) violate any statute or law
or any judgment, decree, order, regulation or rule of any court or other
Governmental Body applicable to the Company.
4.4 Title to Properties; Encumbrances; Condition. (a) The Company owns no
--------------------------------------------
interests in real properties. The Company has good and valid title to all other
properties (personal and mixed, tangible and intangible) that it purports to own
and a valid leasehold interest in all properties that it has leased.
(b) All properties and assets owned by the Company are owned free and
clear of all Encumbrances, except for security interests incurred in connection
with the purchase of property or assets (such security being limited to the
property or assets so acquired).
(c) The properties and assets of the Company include all rights,
properties and other assets necessary to permit the Company to conduct its
business in all material respects in the same manner as presently conducted or
contemplated and as it has been conducted prior to the date of this Agreement.
The equipment of the Company is in good operating condition and
-10-
<PAGE>
repair and is adequate for its present and contemplated uses to which it is
being, or is contemplated to be, used.
4.5 Litigation. (a) There is no action, suit, inquiry, proceeding or
----------
investigation by or before any court or Governmental Body pending or, to the
best of the Company's knowledge, threatened involving the Company, and (b) there
is no valid basis for any such action, suit, inquiry, proceeding or
investigation. The Company is not subject to any judgment, order or decree.
4.6 Proprietary Rights. The Company owns, or is licensed or otherwise has
------------------
the full and exclusive rights to use, sell and license, all Proprietary Rights
used in or necessary for the conduct of its business as heretofore conducted,
and as presently contemplated to be conducted, all of which are listed on
Schedule 4.6 hereto (the "Requisite Rights"). To the Company's knowledge, each
----------------
of the patents comprising the owned or licensed Requisite Rights is valid and
enforceable. Except as set forth in the Cyanamid Agreement, the Jernberg
Agreement and on Schedule 4.6, no royalties, honoraria, fees or other amounts
are payable by the Company to any third party be reason of the ownership, use,
sale or license of the Requisite Rights. Except as set forth on Schedule 4.6
hereto, no product, service or process currently or proposed to be manufactured,
marketed, sold or used by the Company violates any license or infringes any
Proprietary Rights of any third party. There is no pending or threatened claim
or litigation against the Company contesting the validity or right to use any of
the Requisite Rights, nor does there exist any basis therefor.
4.7 Contracts and Commitments. Schedule 4.7 contains a true and complete
-------------------------
and accurate list of all contracts, agreements, understandings or other
obligations (whether written or oral) to which the Company is a party or by
which any of its assets or properties are bound.
4.8 Status of Agreements. All contracts, agreements, commitments,
--------------------
obligations, plans, leases, policies and licenses to which the Company is a
party are valid and binding agreements and are in full force and effect; there
are no existing defaults (or events which, with notice or lapse of time or both,
would constitute a default) by the Company or, to the best of the Company's
knowledge, any other party thereunder. The Company is not a party to any
contract, agreement, commitment or other obligation that has or may reasonably
be expected to have individually or in the aggregate with any other contracts,
agreements, commitments or other obligations a material adverse effect on the
Business and Condition of the Company.
4.9 Labor Relations. Except as set forth in Schedule 4.9, the Company is
---------------
not obligated under any employment contract, nor is it a party to any union,
collective bargaining or similar agreement, any profit-sharing, deferred
compensation, bonus, stock option, stock ownership, stock purchase, pension,
consulting, retirement, welfare or incentive plan or agreement, or any plan
providing for "fringe benefits" to its employees, including, but not limited to,
salary continuation, service awards, severance pay, welfare, medical,
hospitalization, disability, life insurance and other insurance plans or related
benefits with respect thereto. The Company is in compliance in all material
respects with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and
-11-
<PAGE>
hours, and the Company is not nor has it been engaged in any unfair labor
practice; there is no unfair labor practice complaint against the Company
pending before the National Labor Relations Board; there is no labor strike,
dispute, slowdown or stoppage pending or threatened against or affecting the
Company or any attempt to organize employees of the Company for union
representation; no representation question exists respecting the employees of
the Company; and the Company's relations with its employees are satisfactory.
4.10 Employee Benefit Plans. The Company does not have, none of its
----------------------
current or former employees are covered by, and the Company has no obligation
with respect to, any employee benefit plan (as defined in Section 3(3) of
ERISA), whether formal or informal.
4.11 Compliance with Law. The operations of the Company have been
-------------------
conducted in all material respects in accordance with all applicable laws,
regulations and other requirements of all Governmental Bodies having
jurisdiction over the Company. The Company has not received any notification of
any asserted present or past failure to comply with any such laws, rules or
regulations. The Company has all material licenses, permits, orders or approvals
from Governmental Bodies required for the conduct of its business and, to the
best of the Company's knowledge, it is not in violation of any such license,
permit, order or approval.
4.12 Environmental Protection. (a) The Company is in compliance in all
------------------------
material respects with all limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
any Applicable Environmental Laws, or in any plan, order, decree, judgment,
notice or demand letter issued, entered, promulgated or approved thereunder. The
Company is not aware of, nor has the Company received notice of, any past,
present or future events, conditions, circumstances, activities, practices,
incidents, actions or plans which may interfere with or prevent continued
compliance, or which may give rise to any common law or legal liability, or
otherwise form the basis of any claim, action, suit, proceeding, hearing or
investigation, based on or related to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling, or the emission,
discharge, release or threatened release into the environment, of any pollutant,
contaminant or hazardous or toxic material or waste.
(b) To the best of the Company's knowledge, no Hazardous Material has
been incorporated in, used on, stored on or under, released from, treated on,
transported to or from, or disposed of on or from any real property leased by
the Company such that, under Applicable Environmental Laws, (i) any such
Hazardous Material would be required to be removed, cleaned-up or remediated
before the property could be altered, renovated, demolished or transferred, or
(ii) the lessee of the property could be subjected to liability for the removal,
clean-up or remediation of such Hazardous Material; and the Company has not
received any notification from any Governmental Bodies or other third parties
relating to Hazardous Material on or affecting any property owned or leased by
the Company or relating to any potential or known liability under Applicable
Environmental Laws arising from the ownership or leasing of any property.
-12-
<PAGE>
4.13 Related Party Transactions. (a) Except as set forth in Schedule 4.13
--------------------------
and except for the transactions contemplated to occur at the Series A Closing
and the Series B Closing, (i) there have been no transactions between the
Company and any Related Party or any payment (however characterized) by the
Company to any Related Party or by any Related Party to the Company, and (ii)
there is no lease, agreement or commitment between the Company and any Related
Party. As used in the preceding sentence, the term "transaction" includes, but
is not limited to, any sale or other transfer of property of assets, the lease
or other use of property or assets, the provision of services and the furnishing
of personnel, whether or not for consideration.
(b) Except as set forth in Schedule 4.13, no Related Party has any
material interest in any property, real or personal, tangible or intangible,
including, without limitation, any Proprietary Rights, used in or pertaining to
the business of the Company, no Related Party is indebted to the Company and the
Company is not indebted to any Related Party.
4.14 No Brokers or Finders. Neither the Company, nor any of its officers,
---------------------
directors or employees, has employed any broker or finder or incurred any
liability for any brokerage or finder's fees or commissions or similar payments
in connection with this Agreement or the transactions contemplated hereby.
4.15 Insurance. The Company has obtained insurance for its benefit in such
---------
amounts and covering such risks as are customary for businesses comparable to
the business conducted by the Company under policies in effect and issued by
insurers of recognized responsibility.
4.16 Disclosure. No representations or warranties by the Company in this
----------
Agreement and no statement contained in any document (including, without
limitation, financial statements, certificates, projections, business plans or
other writings furnished or to be furnished to the Buyers or any of their
representatives pursuant to the provisions hereof or in connection with the
transactions contemplated hereby), contains any untrue statement of material
fact or omits to state any material fact necessary, in light of the
circumstances under which it was made, in order to make the statements herein or
therein not misleading. Documents delivered to the Buyers pursuant to this
Agreement are true and complete copies of what they purport to be.
4.17 Small Business Matters. (a) The Company, together with its
----------------------
"affiliates" (as that term is defined in Title 13, Code of Federal Regulations,
(S)121.103), is a "small business concern" within the meaning of the Small
Business Investment Act of 1958, as amended (the "SBIA"), and the regulations
----
thereunder, including Title 13, Code of Federal Regulations, (S)121.301(c). The
information set forth in the Small Business Administration Forms 480, 652 and
Part A of Form 1031 regarding the Company and its affiliates, when delivered to
Canaan, will be accurate and complete. Copies of such forms shall be completed
and executed by the Company and delivered to Canaan at the Series A Closing and
Series B Closing.
(b) The proceeds from the sale of the Preferred Shares will be used by
the Company to (i) finance working capital and other general corporate needs
(including amounts to be paid by the Company pursuant to the Cyanamid
Agreement), and (ii) pay expenses related to the transactions contemplated by
this Agreement, the Stockholders Agreement, the Cyanamid
-13-
<PAGE>
Agreement, the Jernberg Agreement, the Restricted Stock Agreements and the other
transactions and documents related hereto and thereto. No portion of such
proceeds (i) will be used to provide capital to a corporation licensed under the
SBIA, (ii) will be used to acquire farm land, (iii) will be used to fund
production of a single item or defined limited number of items, generally over a
defined production period, that constitute the majority of the activities of the
Company (examples include motion pictures and electric generating plants), or
(iv) will be used for any purpose contrary to the public interest (including,
but not limited to, activities which are in violation of law or inconsistent
with free competitive enterprise), in each case, within the meaning of 13 C.F.R.
(S)107.720.
(c) The primary business activity of the Company does not involve,
directly or indirectly, providing funds to others, purchasing or discounting
debt obligations or factoring or long-term leasing of equipment with no
provision for maintenance or repair. The Company is not classified under Major
Group 65 (Real Estate) of the SIC Manual. The assets of the business of the
Company (the "Business") will not be reduced or consumed, generally without
--------
replacement, as the life of the Business progresses, and the nature of the
Business does not require that a stream of cash payments be made to the
Company's financing sources on a basis associated with the continuing sale of
assets (examples include real estate development projects and oil and gas
wells). (See 13 C.F.R. (S)107.720.)
---
(d) The proceeds from the sale of the Series A Preferred Shares will
not be used substantially for a foreign operation and at the Series A Closing or
within one year thereafter no more than 49 percent of the employees or tangible
assets of the Company and its subsidiaries will be located outside the United
States. The proceeds from the sale of the Series B Preferred Shares will not be
used substantially for a foreign operation and at the Series B Closing or within
one year thereafter no more than 49 percent of the employees or tangible assets
of the Company and its subsidiaries will be located outside the United States.
This subsection (d) does not prohibit such proceeds from being used to acquire
foreign materials and equipment or foreign property rights for use or sale in
the United States (unless such use or sale is for a specific domestic purpose) .
5. Representations and Warranties of the Buyers.
--------------------------------------------
Each Buyer, severally and not jointly, represents and warrants (both as of
the date of this Agreement and as of the Series A Closing Date and Series B
Closing Date) to the Company as follows:
5.1 Authorization. Such Buyer has the full power and authority to enter
-------------
into this Agreement and the Stockholders Agreement and to perform all of its
obligations hereunder and thereunder. The execution, delivery and performance of
this Agreement and the Stockholders Agreement by it have been duly authorized by
all necessary action, and this Agreement and the Stockholders Agreement
constitute valid and binding obligations of such Buyer enforceable against such
Buyer in accordance with their respective terms. The execution, delivery and
performance of this Agreement and the Stockholders Agreement by such Buyer does
not violate any provision of the governing instrument of Buyer, conflict with or
constitute a default under
-14-
<PAGE>
any material agreement, indenture or instrument to which such Buyer is a party
or by which it is bound or violate any statute or order of any court or
Governmental Body applicable to such Buyer.
5.2 Investment Representations. Such Buyer has knowledge and experience
--------------------------
in financial and business matters sufficient to enable it to evaluate the merits
and risks of an investment in the Company. Such Buyer has assets sufficient to
enable it to bear the economic risk of its investment in the Preferred Shares
and is an "accredited investor", as defined in Rule 501 under the Securities
Act. Such Buyer is acquiring the Preferred Shares for its own account, and not
with a present view to, or for sale in connection with, any distribution
thereof. Such Buyer understands that the Preferred Shares and the Common Stock
issuable upon conversion thereof have not been registered under the Securities
Act by reason of their issuance in a transaction exempt from the registration
requirements of the Securities Act pursuant to the exemption provided in Section
4(2) thereof, that the Preferred Shares and the Common Stock issuable upon
conversion thereof have not been registered under applicable state securities
laws by reason of their issuance in a transaction exempt from such registration
requirements, and that the Preferred Shares and the Common Stock issuable upon
conversion thereof may not be sold or otherwise disposed of unless registered
under the Securities Act and applicable state securities laws (the Company being
under no obligation so to register such Preferred Shares or the Common Stock
issuable on conversion thereof, except as set forth in Section 8 of the
Stockholders Agreement) or exempted from registration. Such Buyer further
understands that the exemption from registration afforded by Rule 144
promulgated under the Securities Act is not presently available with respect to
the Preferred Shares or the Common Stock issuable on conversion thereof.
5.3 Buyers' Acknowledgment as to Information. Such Buyer or
----------------------------------------
representatives of such Buyer have received from the Company such information
(including the Schedules and Exhibits to this Agreement and of such documents
referred to herein and therein as they have requested) with respect to the
Company as such Buyer has deemed necessary and relevant in connection with the
transactions contemplated by this Agreement (the "Contemplated Transactions"),
-------------------------
and such Buyer has had the opportunity, directly or through such
representatives, to ask questions of and receive answers from persons acting on
behalf of the Company necessary to verify the information so obtained; provided,
--------
however, that such receipt of information and such opportunity shall not affect
- -------
or otherwise diminish or obviate the representations and warranties of the
Company set forth in this Agreement or such Buyer's reliance thereon.
5.4 No Brokers or Finders. No Buyer nor any of its officers, directors or
---------------------
employees has employed any broker or finder or incurred any liability for any
brokerage or finder's fees or commissions or similar payments in connection with
any of the Contemplated Transactions.
6. Affirmative Covenants of the Company.
------------------------------------
Subject to Section 13, the Company agrees that so long as any shares of
Series A Preferred Stock or Series B Preferred Stock are outstanding:
-15-
<PAGE>
6.1 Use of Proceeds. The proceeds of the sale of the Preferred Shares
---------------
shall be used by the Company for working capital, research and development and
other general corporate purposes (including amounts to be paid by the Company
pursuant to the Cyanamid Agreement).
6.2 Consent as to Issuance of Common Stock. The Company will obtain any
--------------------------------------
authorization, consent, approval or other action by or make any filing with any
court or Governmental Body that may be required under applicable state
securities laws in connection with the issuance of any shares of Common Stock
upon conversion of the Preferred Shares.
6.3 Financial Information. (a) Until the consummation of an Initial
---------------------
Public Offering, the Company will deliver to each holder of the Preferred
Shares: (a) as soon as practicable and in any event within 90 days after the
close of each fiscal year of the Company, copies of (i) the audited balance
sheet of the Company as of the end of such fiscal year, (ii) audited statements
of operations of the Company for such fiscal year, and (iii) audited statements
of cash flow of the Company for such fiscal year, setting forth in each case in
comparative form the corresponding figures of the previous annual period and the
most recent annual operating budget for the Company, containing a budget of
profit and loss and cash flow (the "Budget"), all in reasonable detail, prepared
------
in accordance with GAAP consistently applied throughout the periods involved
and, except for the comparison to the most recent Budget, together with the
report of a firm of independent certified public accountants of recognized
national standing;
(b) as soon as practicable, and in any event within 45 days after the
end of each of the first three fiscal quarters of the Company, an unaudited
balance sheet of the Company as at the end of each such fiscal quarter and
unaudited statements of operations, shareholders' equity and cash flow for such
fiscal quarter, setting forth in each case in comparative form corresponding
figures for the preceding year's respective fiscal quarter and the most recent
Budget, all in reasonable detail, prepared in accordance with GAAP consistently
applied throughout the periods involved and certified as being correct and
complete and fairly presenting the results of operations of the Company for the
quarter indicated (subject to normal year-end audit adjustments and the absence
of footnotes), by the principal financial officer of the Company;
(c) for each calendar month, as soon as practicable and in any event
within 25 days after the close of such month, copies of (i) the balance sheet of
the Company as of the end of such month, (ii) statements of operations of the
Company for such month, and (iii) statements of cash flow of the Company for
such month, all in reasonable detail, prepared in accordance with GAAP
consistently applied throughout the periods involved and certified as being
correct and complete and fairly presenting the results of operations of the
Company for the month indicated, subject to normal recurring year-end audit
adjustments, by the principal financial officer of the Company;
(d) as soon as practicable and in any event not less than 30 days
prior to the end of each fiscal year of the Company, a Budget; and
-16-
<PAGE>
(e) such other reports and financial and other information as any
holder of at least 5% of the Preferred Shares shall reasonably request; and
(f) concurrently with the furnishing of the report pursuant to Section
6.3(a) and (b) hereof, an officer's certificate stating that the Company is not
in default under, and has not breached, any material agreements or obligations,
including, without limitation, this Agreement, or if any such default or breach
exists, specifying the nature thereof and what actions the Company has taken and
proposes to take with respect thereto. If for any period the Company shall have
any Subsidiary or Subsidiaries whose accounts are consolidated with those of the
Company, then the financial statements delivered for such period pursuant to the
foregoing clauses (a), (b) and (c) of this Section 6.3 shall be the consolidated
and consolidating financial statements of the Company and all such consolidated
Subsidiaries and, if such Subsidiary or Subsidiaries are not consolidated with
those of the Company, separate financial statements for such Subsidiary or
Subsidiaries shall be provided.
6.4 Other Reports and Inspection. The Company will, upon reasonable prior
----------------------------
notice, make available to each holder of at least 5% of the Preferred Shares or
its representatives or designees during normal business hours (a) all assets,
properties and business records of the Company for inspection and copying and
(b) the directors, officers, employees and public accountants (and by this
provision the Company hereby authorizes and instructs said accountants to
discuss with such holder and such representatives and designees its affairs,
finances and accounts and the responses of attorneys representing the Company to
inquiries made by the Company on behalf of said accountants in connection with
their audit of the financial affairs of the Company), of the Company for
interviews concerning the business, affairs and finances of the Company.
6.5 Corporate Existence; Properties. The Company will, and will cause
-------------------------------
each of its Subsidiaries to, maintain, preserve and renew its corporate
existence and all material licenses, authorizations and permits necessary to the
conduct of its business and take all action reasonably necessary to obtain,
preserve, defend, renew and extend all material licenses and Proprietary Rights
(including, without limitation, the Requisite Rights) which are necessary to the
conduct of its business.
6.6 Insurance. The Company will maintain policies of insurance,
---------
including, but not limited to, fire, liability and workmen's compensation, in
such amounts and covering such risks as are customarily carried by businesses
comparable to the business conducted by the Company, subject to availability at
commercially reasonable cost.
6.7 Maintenance of Properties. The Company will, and will cause each of
-------------------------
its Subsidiaries to, maintain and keep its properties in good repair, working
order and condition, and from time to time make all necessary or desirable
repairs, renewals and replacements, so that its businesses may be properly and
advantageously conducted at all times.
6.8 Compliance with Obligations. The Company will, and will cause each of
---------------------------
its Subsidiaries to, comply with all material obligations which it incurs
pursuant to any contract or
-17-
<PAGE>
agreement, whether oral or written, express or implied, as such obligations
become due to the extent to which the failure to so comply could reasonably be
expected to have a material adverse effect upon the Business and Condition of
the Company and its Subsidiaries taken as a whole, unless and to the extent that
the same are being contested in good faith and by appropriate proceedings and
adequate reserves (as determined in accordance with GAAP consistently applied)
have been established on its books with respect thereto.
6.9 Taxes. The Company will, and will cause each of its Subsidiaries to,
-----
pay when due (a) all Taxes imposed upon it or any of its properties or income,
other than Taxes which are being contested in good faith and which Taxes in the
aggregate do not involve material amounts, and (b) all claims or demands of
materialmen, mechanics, carriers, warehousemen, landlords and other like persons
which, if unpaid, might result in the creation of a lien upon any of its
properties, other than claims or demands which are being contested in good
faith.
6.10 Compliance with Law. The Company will, and will cause each of its
-------------------
Subsidiaries to, comply, in all material respects, with all applicable statutes,
rules, regulations and orders of all Governmental Bodies with respect to the
conduct of its business and the ownership of its properties; provided, that the
--------
Company shall not be deemed to be in violation of this Section 6.10 as a result
of any failure to comply with any provisions of such statutes, rules,
regulations and orders, the noncompliance with which would not result in fines,
penalties, injunctive relief or other civil or criminal liabilities which, in
the aggregate, would materially and adversely affect the Business and Condition
of the Company and its Subsidiaries taken as a whole.
6.11 Environmental Matters. The Company shall promptly advise the Buyers
---------------------
and each holder of at least 5% of the Preferred Shares in writing of any pending
or threatened claim, demand or action by any governmental authority or third
party relating to any Hazardous Materials affecting any properties owned or
leased by the Company of which it has knowledge. The Company shall not
discharge, place, release, spill or dispose of any Hazardous Materials or any
other pollutants or effluents upon any properties owned or leased by the Company
or elsewhere (including, but not limited to, underground injection of such
substances) other than in compliance with Applicable Environmental Laws and the
Company shall not discharge into the air any emission which would require a
permit under the Clean Air Act or its state counterparts or any other
Environmental Laws without obtaining such permit. The stockholders of the
Company shall have no control over, or authority with respect to, the waste
disposal operations of the Company.
6.12 Accounting System. The Company will maintain a system of accounting
-----------------
and proper books of record and account, in accordance with GAAP, and will set
aside on its books reserves for depreciation, depletion, obsolescence,
amortization, pending and threatened litigation and otherwise as may be
appropriate in conformance with procedures and recommendations of the Company's
independent public accountants.
6.13 Reservation of Common Stock. The Company shall reserve and keep
---------------------------
available out of its authorized but unissued Common Stock the number of shares
of Common Stock required for issuance upon the conversion of all of the Series A
Preferred Stock and Series B
-18-
<PAGE>
Preferred Stock (including any additional shares of Common Stock which may
become so issuable by reason of the operation of anti-dilution provisions of the
Series A Preferred Stock and Series B Preferred Stock).
6.14 Proprietary Information and Confidentiality Agreements with Employees
---------------------------------------------------------------------
and Consultants. The Company will enter into proprietary information and
- ---------------
confidentiality agreements in a form approved by its Board of Directors with all
key employees and consultants of the Company. The Company will avail itself of
all rights and remedies under all existing and future proprietary information
and confidentiality agreements.
6.15 Board of Directors Meetings. The Company shall call, and use its best
---------------------------
efforts to have, regular meetings of the Board of Directors on at least a
quarterly basis. The Company shall pay all reasonable travel expenses and other
out-of-pocket expenses incurred by Directors in connection with attending
meetings of the Board or any committee thereof.
6.16 SBIC Compliance. (a) Within 75 days after each of the Series A
---------------
Closing Date and the Series B Closing Date, the Company shall provide Canaan
with a certificate of the Company's chief financial officer (i) verifying (and
describing in reasonable detail) the use of the proceeds of the sale of the
Preferred Shares, and (ii) certifying compliance by the Company with the
provisions of this Agreement. In addition to any other rights granted
hereunder, the Company shall provide Canaan and the United States Small Business
Administration access to its books and records for the purpose of verifying the
use of the proceeds of the sale of the Preferred Shares and for all other
purposes required by the United States Small Business Administration. Canaan
may exercise such right of access only through an independent accountant that
will agree to hold all information disclosed or observed in confidence and to
disclose to Canaan only whether the Company is in compliance with its
obligations under this Section 6.16(a).
(b) Promptly after the end of each fiscal year (but in any event prior
to March 31 of each year), the Company shall provide to Canaan a written
assessment, in form and substance satisfactory to Canaan, of the economic impact
of the sale of the Preferred Shares on the Company, specifying the full-time
equivalent jobs created or retained, the impact of the financing on the
consolidated revenues and profits of the Business and on taxes paid by the
Company and its employees. (See 13 C.F.R. (S)107.630(e)) .
---
(c) Upon the request of Canaan, the Company will (i) provide to Canaan
such financial statements and other information available to the Company as such
person or entity may from time to time reasonably request for the purpose of
assessing the Company's financial condition, and (ii) furnish to Canaan all
information reasonably requested by Canaan in order for Canaan to prepare and
file SBA Form 468 and any other similar information requested or required by any
governmental regulatory agency asserting jurisdiction over Canaan.
(d) For a period of one year following each of the Series A Closing
Date and the Series B Closing Date, the Company will not, and will cause its
subsidiaries not to, change its
-19-
<PAGE>
business activity if such change would render the Company ineligible to receive
financial assistance from Canaan under the SBIA and the regulations thereunder.
(e) The Company will, and will cause its subsidiaries to, at all times
comply with the non-discrimination requirements of 13 C.F.R. Parts 112, 113 and
117.
7. Negative Covenants of the Company.
---------------------------------
Subject to Section 13, the Company covenants and agrees with each of the
Buyers and its transferees that, without the affirmative approval of the holders
of at least a majority of the Preferred Shares:
7.1 Related Party Transactions. Other than in the ordinary course of
--------------------------
business of the Company on an arms-length basis or in connection with
transactions involving obtaining additional financing for the Company, neither
the Company nor any Subsidiary will engage in any transaction with, nor enter
into any contract, agreement or other arrangement providing for, the employment
of, furnishing of services by, rental of real or personal property from, or
otherwise requiring payments to, any Related Party without the affirmative vote
of a majority of the directors who are not affiliated (as defined by Rule 405
promulgated under the Securities Act) with such persons or entities.
7.2 Business. The Company will only engage in the business of the
--------
research, development, manufacturing, marketing and sale of medical products and
the performance of services related or incidental thereto, and any and all
activities related or incidental thereto.
7.3 Indebtedness; Commitments. The Company will not incur (a)
-------------------------
Indebtedness in excess of $100,000, or (b) Commitments in excess of $50,000 per
individual item or $250,000 in the aggregate other than in connection with (i)
leasing lines of credit, and (ii) loans from any of the holders of the Series A
Preferred Stock and/or Series B Preferred Stock which are approved by vote of
the Board of Directors.
7.4 Guarantees. The Company will not incur any guarantee or similar
----------
contingent obligation in respect of the indebtedness of others, whether or not
classified on the Company's balance sheet as a liability (a "Guarantee"), except
---------
for Guarantees in respect of indebtedness of any wholly-owned Subsidiary of the
Company.
7.5 Conflicting Agreements. The Company will not enter into any agreement
----------------------
which by its terms might restrict the performance of the Company's obligations
pursuant to the terms of this Agreement, the Stockholders Agreement or the
provisions relating to the Preferred Stock included in the Certificate of
Incorporation, including, but not limited to, the redemption, voting or
conversion of the Preferred Stock.
7.6 No Acquisitions. The Company shall not, nor shall it permit any of
---------------
its Subsidiaries to, acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial equity interest in or a substantial portion
of the assets of, or by any other manner, any
-20-
<PAGE>
business or any corporation, partnership, association or other business
organization or division thereof or otherwise acquire or agree to acquire, or
permit any of its Subsidiaries to acquire or agree to acquire, any assets for a
purchase price which is in excess of 10% of the Company's net worth in
accordance with GAAP, based on the Company's most recent regularly prepared
quarterly or annual financial statements ("Net Worth").
---------
7.7 No Dispositions. Other than in the ordinary course of business and
---------------
other than dispositions of obsolete assets, the Company will not, nor shall it
permit any of its Subsidiaries to, sell, lease, encumber or otherwise dispose of
or agree to sell, lease, encumber or otherwise dispose of, in any transaction or
series or related transactions, assets having an aggregate book value in excess
of 10% of the Company's Net Worth.
8. Confidentiality.
---------------
(a) The Buyers agree to keep the information heretofore or hereafter
furnished to the Buyers by the Company or on the Company's behalf (the
"Confidential Material") confidential. Notwithstanding the foregoing, the term
----------------------
Confidential Material does not include information that (i) is or becomes
publicly available other than through breach of this Agreement by the Buyers;
(ii) is already known to the Buyers at the time of disclosure; (iii) is received
by the Buyers from a third party not under an obligation of confidentiality to
the Company; or (iv) is independently developed by the Buyers without reference
to the Confidential Material. The Buyers agree to take reasonable precautions
to safeguard the Confidential Material from disclosure to anyone other than
appropriate employees, officers, directors, partners and representatives,
including auditors and attorneys, of the Buyers, which persons shall agree to
treat such information as confidential. Any holder of Series A Preferred Stock
or Series B Preferred Stock who is entitled to receive information concerning
the Company pursuant to Sections 6.3 and 6.4 shall, as a condition to receipt of
such confidential information, agree to be bound by this Section 8.
(b) A Buyer may provide to any member of its Group (as defined in the
Stockholders Agreement), and each of the Buyers which is acting as a general
partner of a venture capital limited partnership, a trustee, an investment
manager, an investment advisor or in any other similar fiduciary capacity may
furnish to any limited partner, plan sponsor, investment committee or investment
advisory board of or associated with such Buyer, only (i) information about the
Company which falls within the exceptions described in Section 8(a) above, and
(ii) information relating to summary, year-to-date, or annual financial and
other information necessary to describe the general condition of the Company if
concurrently therewith such Buyer informs such member of its Group, limited
partner, plan sponsor, investment committee or investment advisory board in
writing of the confidential nature of such information.
9. Conditions to the Buyers' Obligations.
-------------------------------------
The obligations of the Buyers to effect the Series A Closing shall be
subject to the satisfaction at or prior to the Series A Closing of the
conditions contained in Sections 9.1 through 9.15 below, inclusive, any one or
more of which may be waived by the Buyers. The obligations
-21-
<PAGE>
of the Buyers to effect the Series B Closing shall be subject to the
satisfaction at or prior to the Series B Closing of the conditions contained in
Sections 9.1, 9.2, 9.3, 9.4, 9.5, 9.6, 9.7, 9.8, 9.9, 9.14 and 9.15 below, any
one or more of which may be waived by the Buyers.
9.1 No Injunction. There shall not be in effect any injunction, order or
-------------
decree of a court of competent jurisdiction that prohibits or delays
consummation of any or all of the Contemplated Transactions, and the Buyers
shall have received a certificate to that effect signed by the President of the
Company.
9.2 Representations, Warranties and Agreements. (a) The representations
------------------------------------------
and warranties of the Company set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and as of the
Series A Closing Date or Series B Closing Date, as the case may be, with the
same force and effect as though made at such time (such representations and
warranties not being affected by any updating information furnished pursuant to
any provision of this Agreement), (b) the Company shall have performed and
complied in all material respects with the agreements contained in this
Agreement required to be performed and complied with by it at or prior to the
Series A Closing or Series B Closing, as the case may be, and (c) the Buyers
shall have received a certificate to that effect signed by the President of the
Company.
9.3 Legal Opinion. The Buyers shall have received an opinion from Sills
-------------
Cummis Zuckerman Radin Tischman Epstein & Gross, P.A., counsel to the Company,
dated the Series A Closing Date and in substantially the form of Exhibit 9.3.
9.4 Litigation. No action or proceeding shall be pending or threatened by
----------
or before any Person, court or other Governmental Body to restrain or prohibit
or to recover damages in respect of the consummation of any or all of the
Contemplated Transactions, nor shall there be any other action or proceeding
pending or threatened which action, or other proceeding may, in the reasonable
opinion of the Buyers, result in a decision, ruling or finding that individually
or in the aggregate has or may reasonably be expected to have a material adverse
effect on the validity or enforceability of this Agreement, on the ability of
the Company to perform its obligations under this Agreement or on the Business
and Condition of the Company.
9.5 Regulatory Approvals. All licenses, authorizations, consents, orders
--------------------
and regulatory approvals of Governmental Bodies necessary in the good faith
judgment of the Buyers for the consummation of any or all of the Contemplated
Transactions shall have been obtained on terms reasonably satisfactory to the
Buyers and shall be in full force and effect.
9.6 Other Consents. Consents or waivers from parties other than
--------------
Governmental Bodies that are required in connection with the consummation of any
or all of the Contemplated Transactions shall have been obtained on terms
satisfactory to the Buyers and shall be in full force and effect and signed
copies thereof shall have been delivered to the Buyers.
9.7 Secretary of State Certificates. The Buyers shall have received
-------------------------------
Certificates of the Secretaries of State of the States of Delaware and New
Jersey with respect to the Company, as of
-22-
<PAGE>
a recent date, showing the Company to be validly existing or qualified as a
foreign corporation, as the case may be, and in good standing, and with respect
to the Certificate of the Secretary of State of the State of Delaware, listing
all documents filed.
9.8 Secretary's Certificate of the Company. The Buyers shall have
--------------------------------------
received a Certificate of the Secretary of the Company stating that (i) no
document has been filed relating to or affecting the Certificate of
Incorporation of the Company after the date of the Certificate of the Secretary
of State of the State of Delaware furnished pursuant to Section 9.8, and (ii)
attached to the Certificate is a true and complete copy of By-Laws of the
Company, as in full force and effect at the date of Series A Closing Date or
Series B Closing Date, as the case may be, and an incumbency certificate.
9.9 Resolutions. The Buyers shall have received certified copies of
-----------
resolutions duly adopted by the Company's Board of Directors (and shareholders,
if necessary) authorizing the execution and delivery of this Agreement and the
Stockholders Agreement, the issuance and sale of the Series A Preferred Stock
and Series B Preferred Stock and the issuance and sale of the Common Stock
issuable upon conversion thereof, and the performance of the transactions
contemplated hereby and certifying that such resolutions were duly adopted and
have not been rescinded or amended as of the Series A Closing Date or Series B
Closing Date, as the case may be.
9.10 Stockholders Agreement. The Company, the Buyers and the holders of
----------------------
Shares (as defined therein) shall have executed the Stockholders Agreement.
9.11 Employment Agreement. The Company and Michael Kishbauch shall have
--------------------
executed the Employment Agreement.
9.12 Cyanamid Agreement. The Company and American Cyanamid Company shall
------------------
have executed the Cyanamid Agreement.
9.13 Jernberg Agreement. The Company and Gary R. Jernberg, DDS, MSD, shall
------------------
have executed the Jernberg Agreement.
9.14 Compliance Evidence. The Buyers shall have received such certificates,
-------------------
opinions, documents and information as it may reasonably request in order to
establish satisfaction of the conditions set forth in this Section 9.
9.15 Proceedings Satisfactory. All certificates, opinions and other
------------------------
documents to be delivered by the Company and all other matters to be
accomplished prior to or at the Series A Closing Date or Series B Closing Date,
as the case may be, shall be satisfactory in the reasonable judgment of the
Buyers and their counsel.
10. Conditions to the Company's Obligations.
---------------------------------------
The obligations of the Company to effect the Series A Closing shall be
subject to the satisfaction at or prior to the Series A Closing of the
conditions contained in Sections 10.1
-23-
<PAGE>
through 10.8 below, inclusive, any one or more of which may be waived by the
Company. The obligations of the Company to effect the Series B Closing shall be
subject to the satisfaction at or prior to the Series B Closing of the
conditions contained in Sections 10.1, 10.2, 10.7 and 10.8 below, inclusive, any
one or more of which may be waived by the Company.
10.1 No Injunction. There shall not be in effect any injunction, order or
-------------
decree of a court of competent jurisdiction that prohibits or delays the sale of
the Preferred Shares to the Buyers.
10.2 Representations, Warranties and Agreements. (a) The representations
------------------------------------------
and warranties of the Buyers set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and as of the
Series A Closing Date or Series B Closing Date, as the case may be, as though
made at such time, and (b) the Buyers shall have performed and complied in all
material respects with the agreements contained in this Agreement required to be
performed and complied with by them prior to the Series A Closing Date or Series
B Closing Date, as the case may be.
10.3 Stockholders Agreement. The Company, the Buyers and the holders of
----------------------
Shares (as defined therein) shall have executed the Stockholders Agreement.
10.4 Employment Agreement. The Company and Michael Kishbauch shall have
--------------------
executed the Employment Agreement.
10.5 Cyanamid Agreement. The Company and American Cyanamid Company shall
------------------
have executed the Cyanamid Agreement.
10.6 Jernberg Agreement. The Company and Gary R. Jernberg, DDS, MSD, shall
------------------
have executed the Jernberg Agreement.
10.7 Compliance Evidence. The Company shall have received such
-------------------
certificates, opinions, documents and information as it may reasonably request
in order to establish satisfaction of the conditions set forth in this Section
10.
10.8 Proceedings Satisfactory. All certificates, opinions and other
------------------------
documents to be delivered by the Buyers and all other matters to be accomplished
prior to or at the Series A Closing or Series B Closing, as the case may be,
shall be satisfactory in the reasonable judgment of the Company and its counsel.
11. Expenses. The Company agrees, in the event the transactions
--------
contemplated hereby are consummated, to pay, and save the Buyers harmless
against liability for the payment of, (a) its reasonable out-of-pocket costs,
including those of O'Sullivan Graev & Karabell, LLP, counsel for the Buyers,
arising in connection with the negotiation, execution and consummation of this
Agreement and the transactions contemplated hereby, including, without
limitation, the Buyers' due diligence investigation with respect to the
transactions contemplated hereby, in an aggregate amount not to exceed $25,000.
-24-
<PAGE>
12. Survival of Representations. Except for the warranty contained in
---------------------------
Section 6.16 of this Agreement, all representations and warranties contained in
this Agreement or in any exhibit, schedule or certificate delivered in
connection herewith shall survive the execution, delivery and closing of this
Agreement and any investigation at any time made by the Buyers or on their
behalf for a period of five years from the date hereof.
13. Duration of Covenants. The Company's obligation to perform the
---------------------
covenants and agreements contained in Section 6 and Section 7 shall terminate
upon the consummation of an Initial Public Offering.
14. Miscellaneous.
-------------
14.1 Notices. All notices, consents and other communications under this
-------
Agreement shall be in writing and shall be deemed to have been duly given when
(a) delivered by hand, (b) sent by telex or telecopier (with receipt confirmed),
provided that a copy is mailed by registered mail, return receipt requested, or
(c) one (1) day after sent by the sender, if sent by Express Mail, Federal
Express or other express delivery service (receipt requested), in each case to
the appropriate addresses, telex numbers and telecopier numbers set forth below
(or to such other addresses, telex numbers and telecopier numbers as a party may
designate as to itself by notice to the other parties):
(a) If to Oak Investment Partners VI, Limited Partnership and/or Oak
VI Affiliates Fund, Limited Partnership:
Oak Investment Partners
One Gorham Island
Westport, Connecticut 06880
Telecopier No.: (203) 227-0372
Attention: Eileen M. More
with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Telecopier No.: (212) 408-2420
Attention: Julie M. Allen, Esq.
(b) If to Canaan S.B.I.C., L.P., Canaan Capital Limited Partnership
or Canaan Capital Offshore Limited Partnership C.V.:
Canaan Partners
105 Rowayton Avenue
Rowayton, Connecticut 06853
Telecopier No.: (203) 854-9117
-25-
<PAGE>
Attention: Harold Rein
with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Telecopier No.: (212) 408-2420
Attention: Julie M. Allen, Esq.
(c) If to Frazier Healthcare II, L.P.
Frazier & Company
2 Union Square
601 Union Street, Suite 2110
Seattle, Washington 98101
Telecopier No.: (206) 621-1848
Attention: Jon N. Gilbert
with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Telecopier No.: (212) 408-2420
Attention: Julie M. Allen, Esq.
(d) If to TL Ventures III L.P.:
TL Ventures
800 The Safeguard Building
435 Devon Park Drive
Wayne, Pennsylvania 19087-1945
Telecopier No.: (610) 975-9330
Attention: Christopher Moller, Ph.D.
with a copy to:
TL Ventures
800 The Safeguard Building
435 Devon Park Drive
Wayne, Pennsylvania 19087-1945
Telecopier No.: (610) 975-9330
Attention: Chief Financial Officer
-26-
<PAGE>
(e) If to the Company:
OraPharma, Inc.
1200 Route 22 East
Suite 2000
Bridgewater, New Jersey 08807
Telecopier No.: 908-725-0296
Attention: Michael Kishbauch
with a copy to:
Sills Cummis Zuckerman Radin
Tischman Epstein & Gross, P.A.
One Riverfront Plaza
Newark, New Jersey 07102
Telecopier No.: (201) 643-6500
Attention: Ira A. Rosenberg, Esq.
14.2 Service of Process. Process in any action or proceeding seeking to
------------------
enforce any provision of, or based on any right arising out of, this Agreement
against any of the parties, may be served on any party anywhere in the world,
whether within or without the State of New Jersey, and may also be served upon
any party in the manner provided for giving of notices to it in Section 14.1.
14.3 Expenses. Except as set forth in Section 11, each party shall bear
--------
its own expenses incident to the preparation, negotiation, execution and
delivery of this Agreement and the performance of its obligations hereunder.
14.4 Payment. A wire transfer of other than immediately available funds or
-------
delivery of a check shall not operate to discharge any obligation of payment
under this Agreement and is accepted subject to collection.
14.5 Captions. The captions in this Agreement are for convenience of
--------
reference only and shall not be given any effect in the interpretation of this
Agreement.
14.6 Attorneys' Fees. In any action or proceeding brought by a party to
---------------
enforce any provision of this Agreement, the prevailing party shall be entitled
to recover the reasonable costs and expenses incurred by it in connection with
that action or proceeding (including, but not limited to, attorneys' fees).
14.7 No Waiver. The failure of a party to insist upon strict adherence to
---------
any term of this Agreement on any occasion shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must be in writing.
-27-
<PAGE>
14.8 Exclusive Agreement; Amendment. This Agreement supersedes all prior
------------------------------
agreements among the parties with respect to its subject matter, is intended
(with the documents referred to herein) as a complete and exclusive statement of
the terms of the agreement among the parties with respect thereto and cannot be
changed, terminated or any of the provisions hereof waived, except by a written
instrument executed by a duly authorized representative of the Company and
holders in interest of not less than a majority of the aggregate of the
Preferred Shares (treated as if converted into Common Stock and including any
Common Stock then held by such holders into which the Preferred Shares have been
converted).
14.9 Parties in Interest; Limitation on Assignment. The terms,
---------------------------------------------
representations, warranties and covenants contained in Sections 6 and 7 hereof
shall be binding upon and shall inure to the benefit of and be enforceable by,
the Buyers and their respective successors, transferees and assignees; provided,
--------
that the rights granted to the Buyers by Sections 6.3 and 6.4 may not be
transferred or assigned to, and shall not inure to the benefit of, any such
successor, transferee or assignee of the Buyers that is engaged in any business
which directly competes with the Company in any line of business engaged in, or
planned to be engaged in, by the Company. It is understood and agreed among the
parties hereto that this Agreement and the representations, warranties, and
covenants made herein are made expressly and solely for the benefit of the other
party or parties hereto (or their respective successors or permitted assigns),
and that no other person shall be entitled or be deemed to be a third-party
beneficiary of any party's rights under this Agreement. Notwithstanding
anything contained herein to the contrary, the parties hereto hereby acknowledge
and agree that (a) TL Ventures III L.P. shall be permitted to transfer all or
any portion of its Preferred Shares to its affiliates (either already existing
or to be formed), TL Ventures III Offshore L.P. and TL Ventures III Interfund
L.P., and (b) any of the Buyers may assign any or all of their right to purchase
Series B Preferred Stock hereunder to any of its members, partners or
shareholders, provided that such assignee agrees to purchase such Series B
Preferred Stock having an aggregate purchase price of at least $50,000 and
further agrees to be bound by the provisions of this Agreement and the
Stockholders Agreement
14.10 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be considered an original, but all of which
together shall constitute the same instrument.
14.11 Governing Law. This Agreement and (unless otherwise provided) all
-------------
amendments hereof and waivers and consents hereunder shall be governed by the
internal law of the State of New Jersey, without regard to the conflicts of law
principles thereof.
-28-
<PAGE>
IN WITNESS WHEREOF, the undersigned have signed this Stock Purchase
Agreement as of the day and year first written above.
Witness/Attest: ORAPHARMA, INC.
/s/ Dorinda Alevritis By:/s/ Michael Kishbauch
- ---------------------- ----------------------------------
Michael Kishbauch, President
OAK INVESTMENT PARTNERS VI,
LIMITED PARTNERSHIP
By: Oak Associates VI, L.L.C.
By:/s/ Eileen M. More
- ---------------------- ----------------------------
Eileen M. More, Managing
Member
OAK VI AFFILIATES FUND,
LIMITED PARTNERSHIP
By: Oak VI Affiliates, L.L.C.
By:/s/ Eileen M. More
- ---------------------- ----------------------------
Eileen M. More, Managing
Member
CANAAN S.B.I.C., L.P.
By: Canaan S.B.I.C. Partners, L.P.,
General Partner
By:/s/ Harold Rein
- ---------------------- ----------------------------
CANAAN CAPITAL LIMITED PARTNERSHIP
By: Canaan Capital Management, L.P.,
General Partner
By: Canaan Capital Partners L.P.,
General Partner
By:/s/ Harold Rein
- ---------------------- -----------------------------
-29-
<PAGE>
CANAAN CAPITAL OFFSHORE LIMITED
PARTNERSHIP C.V.
By: Canaan Capital Management L.P.,
General Partner
By: Canaan Capital Partners L.P.,
General Partner
By:/s/ Harold Rein
- ---------------------- -----------------------------
FRAZIER HEALTHCARE II, L.P.
By: FHM, L.L.C., General Partner
By: Frazier Management, L.L.C.,
Member
By: /s/ Jon Gilbert
- ---------------------- --------------------------------
Jon Gilbert, Member
TL VENTURES III L.P.
By: TL Ventures III Management L.P.,
General Partner
By: TL Ventures III LLC,
General Partner
By: /s/ Christopher Moller
- ---------------------- ---------------------------------
Christopher Moller, Ph.D.
-30-
<PAGE>
Exhibit 4.8
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement") dated as of the 1st day of
---------
December, 1998, by and among OraPharma, Inc., a Delaware corporation (the
"Company"), and the entities listed on Schedule 1 attached hereto (the
-------
"Buyers").
------
The Company and the Buyers are desirous of providing for the issuance of
shares of Series C Preferred Stock (as defined herein), as more specifically set
forth herein.
The parties, intending to be legally bound hereby, agree as follows:
1. Definitions.
-----------
As used in this Agreement, the following terms have the meanings specified
or referred to in this Section 1.
"Applicable Environmental Law" shall mean CERCLA, RCRA, the Federal Waste
----------------------------
Pollution Control Act, 33 U.S.C. (S)(S) 1261 et seq., the Clean Air Act, 42
-- ----
U.S.C. (S)(S) 7401 et seq., any similar provisions of state or local law in the
-- ----
jurisdictions where the properties of the Company are located and the
regulations thereunder and any other local, state and/or federal laws or
regulations, whether currently in existence or hereafter enacted, that govern:
(a) the existence, cleanup and/or remedy of contamination on property;
(b) the protection of the environment from spilled, deposited or
otherwise emplaced contamination;
(c) the control of hazardous wastes; or
(d) the use, generation, transport, treatment, storage, disposal,
removal or recovery of Hazardous Materials, including building materials.
"Budget" shall have the meaning set forth in Section 5.3(b).
------
"Business" shall have the meaning set forth in Section 3.17.
--------
"Business and Condition" shall mean the business, operations, financial
----------------------
condition, operating results, liabilities, or assets of the Company.
"Business Day" shall mean any day that is not a Saturday or Sunday or a day
------------
on which banks located in the Commonwealth of Pennsylvania or New York, New York
are authorized or required to be closed.
<PAGE>
"Buyers" shall have the meaning set forth in the first paragraph of this
------
Agreement.
"By-Laws" shall mean the by-laws of the Company.
-------
"CERCLA" shall mean the Comprehensive Environmental Response, Compensation
------
and Liability Act, 42 U.S.C. (S)(S) 6901 et seq.
-- ----
"Certificate of Incorporation" shall mean the Second Amended and Restated
----------------------------
Certificate of Incorporation of the Company, as amended from time to time.
"Closing" shall have the meaning set forth in Section 2.4.
-------
"Closing Dates" shall mean the dates and times of the Closings.
-------------
"Code" shall mean the Internal Revenue Code of 1986, as amended.
----
"Commission" shall mean the Securities and Exchange Commission.
----------
"Commitment" shall mean all obligations of the Company and its
----------
Subsidiaries, contingent or otherwise, pursuant to long-term leases (other than
leases for real property) or similar agreements.
"Common Stock" shall mean the Common Stock, par value $.001 per share, of
------------
the Company.
"Company" shall have the meaning set forth in the first paragraph of this
-------
Agreement.
"Contemplated Transactions" shall have the meaning set forth in Section
-------------------------
4.3.
"Encumbrance" shall mean any security interest, mortgage, lien, charge,
-----------
adverse claim or restriction of any kind, including, but not limited to, any
restriction on the use, voting, transfer, receipt of income or other exercise of
any attributes of ownership.
"Equity Stock" shall have the meaning set forth in Rule 3a11-1 under the
------------
Securities Exchange Act of 1934.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
-----
amended.
"First Closing" shall have the meaning set forth in Section 2.4.
-------------
"GAAP" shall mean generally accepted accounting principles applied within
----
the United States.
"Governmental Body" shall mean any domestic or foreign national, state or
-----------------
municipal or
2
<PAGE>
other local governmental, regulatory or administrative agency or
multi-national body (including, but not limited to, the European Economic
Community), any subdivision, agency, commission or authority thereof, or any
quasi-governmental or private body exercising any regulatory or taxing authority
thereunder.
"Hazardous Materials" shall mean any substance which as of the date of this
-------------------
Agreement shall be identified as "hazardous" or "toxic" or otherwise regulated
under CERCLA or RCRA or which has been or shall be determined at any time by any
agency or court to be a hazardous or toxic substance under Applicable
Environmental Law. The term "Hazardous Material" shall also include, without
limitation, raw materials, building components, the products of any
manufacturing or other activities on the properties, wastes, petroleum, and
source, special nuclear or by-product material as defined by the Atomic Energy
Act of 1954, as amended (42 U.S.C. (S)(S) 3011 et seq., as amended).
-- ----
"Indebtedness" shall mean all liabilities for money borrowed by the Company
------------
and its Subsidiaries.
"Initial Public Offering" shall mean the Company's initial distribution of
-----------------------
New Securities in an underwritten public offering to the general public pursuant
to a registration statement filed with and declared effective by the Commission
pursuant to the Securities Act at a price per New Security of not less than
$4.00 (as adjusted for stock splits, stock combinations or similar
recapitalizations) and resulting in gross proceeds (before underwriting
commissions and offering expenses) to the Company of not less than $15 million.
"Material Contracts" shall have the meaning set forth in Section 3.8.
------------------
"Net Worth" shall have the meaning set forth in Section 6.8.
---------
"New Securities" shall mean any Equity Stock, including, but not limited
--------------
to, shares of Common Stock of the Company, any security which is convertible
into or exercisable or exchangeable for Common Stock, or any right, option or
warrant to acquire any Common Stock of the Company.
"Permits" shall have the meaning set forth in Section 3.19.
-------
"Person" shall mean any individual, corporation, general or limited
------
partnership, limited liability company, firm, joint venture, joint stock
company, enterprise, trust, association, unincorporated organization, other
entity, or Governmental Body.
"Preferred Shares" shall mean the Series C Preferred Stock of the Company
----------------
to be issued to the Buyers hereunder.
"Proprietary Rights" shall mean all patents, patent applications, patent
------------------
licenses, trademarks, trademark applications, trade names, service marks,
service mark applications, brand marks, brand names, copyrights, trade secrets,
inventions, technologies, know-how, formulae,
3
<PAGE>
processes, names and likeness.
"Public Offering" shall mean a distribution of New Securities in an
---------------
underwritten public offering to the general public pursuant to a registration
statement filed with and declared effective by the Commission pursuant to the
Securities Act.
"RCRA" shall mean the Resource Conservation and Recovery Act, 42 U.S.C.
----
(S)(S) 6901 et seq.
-- ----
"Registrable Securities" shall mean any shares of Common Stock issued or to
----------------------
be issued pursuant to conversion of the Preferred Shares (including any shares
issued as a dividend or distribution with respect to, or in exchange for, the
Preferred Shares).
"Related Party" shall mean (a) any individual who is an employee,
-------------
stockholder, consultant, director or officer of the Company; (b) any person who
is an affiliate of the Company, as such term is defined in Rule 405 under the
Securities Act, (c) any Person that owns five percent or more of the outstanding
Equity Stock of any class of the Company; (d) any member of the family (as
defined in Section 267(c)(4) of the Code) of, or any individual who has the same
home as, any individual (or the spouse of any such individual) described in
clause (a), (b) or (c) of this Section; or (e) any trust, estate or partnership
of which an individual described in clause (a), (b), (c) or (d) of this Section
is a grantor, fiduciary, beneficiary or partner.
"SBIA" shall have the meaning set forth in Section 3.18.
----
"Second Closing" shall have the meaning set forth in Section 2.4.
--------------
"Securities Act" shall mean the Securities Act of 1933, as amended.
--------------
"Series A Preferred Stock" shall mean the Series A Convertible Preferred
------------------------
Stock, par value $.001 per share, of the Company.
"Series B Preferred Stock" shall mean the Series B Preferred Stock, par
------------------------
value $.001 per share, of the Company.
"Series C Preferred Stock" shall mean the Series C Convertible Preferred
------------------------
Stock, par value $.001 per share, of the Company.
"Stockholders Agreement" shall mean the Amended and Restated Stockholders
----------------------
Agreement dated as of the date hereof between the Company and the stockholders
of the Company named therein.
"Subsidiary" shall mean with respect to any Person, any corporation of
----------
which securities having the power to elect a majority of that corporation's
Board of Directors (other than securities having that power only upon the
happening of a contingency that has not occurred) are held by such Person or one
or more of its Subsidiaries.
4
<PAGE>
"Taxes" shall mean all taxes, duties, charges, fees, levies, interest,
-----
penalties, additions to tax or other assessments, including, but not limited to,
income, excise, employment, property, sales, use, value added and franchise
taxes and customs duties, imposed by any Governmental Body and any payments with
respect thereto required under any tax-sharing agreement.
2. The Acquisition.
---------------
2.1 Preferred Shares. The Preferred Shares shall have the voting powers,
----------------
liquidation rights, designations, preferences and relative, participating,
optional or other special rights, and the qualifications, limitations and
restrictions thereof as set forth in the Certificate of Incorporation and the
Stockholders Agreement.
2.2 Purchase and Sale. Subject to the terms and conditions of this
-----------------
Agreement, at the Closings to be held as provided in Section 2.4 below, the
Company shall issue and sell to the Buyers an aggregate of 6,584,360 shares of
Series C Preferred Stock, which shall be issuable to each Buyer in the amount
set forth opposite the name of such Buyer listed on Schedule 2.2, free and clear
of all Encumbrances, and each of the Buyers agrees, severally and not jointly,
to purchase from the Company the shares of Series C Preferred Stock listed next
to such Buyer's name on Schedule 2.2.
2.3 Purchase Price. The aggregate purchase price for the shares of Series
--------------
C Preferred Stock to be issued at the Closings shall be $15,999,994.80, and each
Buyer shall pay the amount of the purchase price set forth opposite the name of
such Buyer listed on Schedule 2.2. The purchase price shall be paid by each of
the Buyers to the Company at the applicable Closing in immediately available
funds by wire transfer.
2.4 Place and Time. The closing of the purchase of the Preferred Shares
--------------
(the "First Closing") by all of the Buyers except Biotechnology Investments
-------------
Limited shall take place at the offices of Sills Cummis Radin Tischman Epstein &
Gross, One Riverfront Plaza, Newark, New Jersey 07102-5400 on December 1, 1998
or at such other place, date and time as the parties may agree in writing. The
closing of the purchase of the Preferred Shares (the "Second Closing" and
--------------
collectively with the First Closing, the "Closings") by Biotechnology
--------
Investments Limited shall take place at the offices of Sills Cummis Radin
Tischman Epstein & Gross, One Riverfront Plaza, Newark, New Jersey 07102-5400 on
December 15, 1998 or at such other place, date and time as the parties may agree
in writing.
2.5 Deliveries by the Company. At the Closings, the Company shall deliver
-------------------------
the following to each of the Buyers purchasing Preferred Shares on such date:
(a) Certificates representing the Preferred Shares, duly registered in
the names of the Buyers.
(b) The documents contemplated by Section 8.
(c) The executed Stockholders Agreement.
5
<PAGE>
(d) All other documents, instruments and writings required by this
Agreement to be delivered by the Company at the Closings.
2.6 Deliveries by the Buyers. At the Closings, each of the Buyers
------------------------
purchasing Preferred Shares on such date shall deliver the following to the
Company:
(a) A wire transfer in the amount of the purchase price determined in
accordance with Section 2.3.
(b) The executed Stockholders Agreement.
(c) All other documents, instruments and writings required by this
Agreement to be delivered by the Buyers at the Closing.
3. Representations and Warranties of the Company.
---------------------------------------------
The Company represents and warrants (both as of the date of this Agreement
and as of the Closing Dates) to each of the Buyers as follows:
3.1 Organization of the Company; Authorization.
------------------------------------------
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, with full legal and
corporate power and authority to enter into this Agreement and the Stockholders
Agreement, to sell and issue the Preferred Shares, and to perform all of its
obligations hereunder and thereunder, and to own, lease and operate its assets,
properties and business and to engage in its business as presently conducted or
contemplated. The Company is duly qualified and in good standing as a foreign
corporation under the laws of the State of Pennsylvania and is not required to
qualify as a foreign corporation in any other jurisdiction except where the
failure to be so qualified would not have a material adverse affect on the
Business and Condition of the Company.
(b) The Company has never had, nor does it presently have, any direct
or indirect Subsidiaries, nor has it owned, nor does it presently own, any
capital stock or other proprietary interest, directly or indirectly, in any
corporation, association, trust, partnership, joint venture or other entity.
The Company is not a party to any joint venture or partnership agreement.
(c) The execution, delivery and performance of this Agreement and the
Stockholders Agreement by the Company have been authorized by all necessary
corporate action on the part of the Company and each constitutes a valid and
legally binding obligation of the Company, enforceable against it in accordance
with their terms, except as such enforceability may be limited by bankruptcy
laws, moratorium laws and other laws from time to time in effect affecting
creditors' rights generally.
3.2 Capitalization. (a) The authorized Equity Stock of the Company
--------------
consist of
6
<PAGE>
(i) 17,500,000 shares of Common Stock, 1,913,675 of which are issued and
outstanding immediately prior to consummation of this Agreement, and (ii)
862,500 shares of Series A Preferred Stock, 6,623,658 shares of Series B
Preferred Stock, and 6,584,360 shares of Series C Preferred C Stock, of which
862,500, 6,623,658 and zero, respectively, are issued and outstanding
immediately prior to the consummation of the transactions contemplated by this
Agreement. Of the authorized shares of Common Stock, 862,500, 6,623,658 and
6,584,360 shares are currently reserved for issuance upon conversion of the
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock,
respectively. All of the issued and outstanding shares of capital stock of the
Company are fully paid and non-assessable.
(b) A true and complete list of the holders of record of all issued
and outstanding Equity Stock of the Company, including all outstanding options,
warrants or other rights to purchase Equity Stock, as adjusted to reflect the
consummation of the transactions contemplated by this Agreement including the
number of securities owned by each such holder, is set forth on Schedule 3.2(b)
attached hereto.
(c) The issuance of the Preferred Shares hereunder and the shares of
Common Stock issuable upon conversion of the Preferred Shares have been duly and
validly authorized. No further approval or authorization of the stockholders or
the directors of the Company, of any Governmental Body or of any other Person is
required for the issuance and sale of the Preferred Shares, or the shares of
Common Stock issuable on conversion thereof. When paid for by, and issued to,
the Buyers, the Preferred Shares will be duly and validly issued, fully paid and
non-assessable and will be free and clear of any Encumbrances. The Preferred
Shares will have the designations, preferences and relative, participating,
optional and other special rights as set forth in the Certificate of
Incorporation, By-Laws and the Stockholders Agreement. Subject to the accuracy
of the Buyers' representations and warranties contained in Section 4, the offer,
sale and issuance of the Preferred Shares (and any shares of Common Stock
issuable upon conversion thereof) are exempt from the registration requirements
of the Securities Act and state securities laws.
(d) Except as set forth in Schedule 3.2(b) or with respect to the
preemptive rights and conversion privileges of the Preferred Shares, there are
no options, warrants, conversion privileges, or preemptive or other rights or
agreements presently outstanding to purchase or otherwise acquire any shares of
the capital stock or other securities of the Company. Except as set forth in
Schedule 3.2(b), the Company is not a party to or subject to any agreement or
understanding, that affects or relates to the voting or giving of written
consents with respect to any security, or the voting by a director, of the
Company. To the best knowledge of the Company, no stockholder has granted
options or other rights to purchase any shares of Common Stock or other equity
securities of the Company from such stockholder. The Company holds no shares of
its capital stock in its treasury. Except as contemplated by this Agreement or
as set forth in the Stockholders Agreement or Schedule 3.2(b), there are no
rights outstanding which permit or allow the holder thereof to cause the Company
to file a registration statement or which permit or allow the holder thereof to
include securities of the Company in a registration statement filed by the
Company. Except as contemplated by this Agreement, the Certificate of
Incorporation and the Stockholders Agreement and as set forth in Schedule
3.2(b), none of the
7
<PAGE>
outstanding Equity Stock of the Company was issued in violation of the
Securities Act or other federal or state or other jurisdictions' securities laws
except for the filing of certain notices that may be required under applicable
Federal or state securities laws which filings shall be timely made and the
filing of a Form M-11 with the New York Department of Law (the "NYDL"), which
filing has been accepted by the NYDL. The offer, sale and issuance of the
Preferred Shares and the shares of Common Stock issuable upon conversion of the
Preferred Shares in conformity with the terms of this Agreement constitute
transactions exempt from the registration requirements of Section 5 of the
Securities Act. The Company is not an "investment company" within the meaning of
the Investment Company Act of 1940. The Company has delivered to the Buyers
true, correct and complete copies of the Certificate of Incorporation and By-
Laws (or other governing instrument) of the Company, as currently in effect each
as amended, and all minutes, memoranda, actions, and resolutions of the Board of
Directors and of the Company relating to the transactions contemplated hereby,
each as certified by the Secretary of the Company as being true and correct
copies of the originals.
3.3 No Conflict as to the Company. Except as set forth in Schedule 3.3,
-----------------------------
the Company is not in violation or breach of any term of its Certificate of
Incorporation or By-laws (each as amended through the date hereof), or any
judgment or decree, nor has it received or delivered notice concerning a breach
of any Material Contract (as defined below), and, to the best knowledge of the
Company, it is not in violation of any order, statute, rule, or regulation
applicable to the Company or properties except for those the violation of which
would not have a material adverse effect on the Business and Condition of the
Company. Neither the execution, delivery or performance of this Agreement or
the Stockholders Agreement, the issuance of the Preferred Shares or the Common
Stock issuable upon conversion thereof, or the consummation of the transactions
contemplated hereby and thereby, will (a) violate nor conflict with any
provision of the Certificate of Incorporation or By-Laws of the Company, or (b)
violate, or be in conflict with, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under, or
result in the termination of, or accelerate the performance required by, or
excuse performance by any Person of any of its obligations under, or cause the
acceleration of the maturity of any debt or obligation pursuant to, or result in
the creation or imposition of any Encumbrance upon any property or assets of the
Company under, any material agreement or commitment to which the Company is a
party or by which any of its property or assets is bound, or to which any of the
property or assets of the Company is subject, except where the foregoing would
not have a material adverse affect on the Business and Condition of the Company,
or (c) violate any statute or law or any judgment, decree, order, regulation or
rule of any court or other Governmental Body applicable to the Company, except
where the foregoing would not have a material adverse affect on the Business and
Condition or (d) result in the suspension, revocation, impairment, forfeiture,
or non-renewal of any Permit (as defined below) of the Company, except where the
foregoing would not have a material adverse affect on the Business and
Condition.
3.4 Title to Properties; Encumbrances; Condition. (a) The Company owns no
--------------------------------------------
interests in real properties. The Company has good, valid and legal title to
all other properties (personal and mixed, tangible and intangible) that it
purports to own and a valid leasehold interest in all properties that it has
leased. With respect to property it leases, the Company is in
8
<PAGE>
compliance with such leases in all material respects.
(b) Except as set forth on Schedule 3.4(b), all properties and assets
owned or leased by the Company are owned or leased free and clear of all
Encumbrances.
(c) The properties and assets of the Company include all rights,
properties and other assets necessary to permit the Company to conduct its
business in all material respects in the same manner as presently conducted or
contemplated and as it has been conducted prior to the date of this Agreement.
The equipment of the Company is in good operating condition and repair, normal
wear and tear excepted, and is adequate for its present and contemplated uses to
which it is being, or is contemplated to be, used.
3.5 Litigation. (a) There is no action, suit, inquiry, proceeding or
----------
investigation by or before any court or Governmental Body pending or, to the
best of the Company's knowledge, threatened against the Company or any of its
properties, and (b) to the best of the Company's knowledge, there is no valid
basis for any such action, suit, inquiry, proceeding or investigation. The
Company is not a party to, or to the best knowledge of the Company, named in any
order, writ, injunction, judgment, or decree of any court, Governmental Body or
instrumentality. There is no action, suit or proceeding by the Company
currently pending or that the Company currently intends to initiate.
3.6 Proprietary Rights. The Company owns, or is licensed or otherwise has
------------------
the full and exclusive rights to use, sell and license, all Proprietary Rights
used in or necessary for the conduct of its business as heretofore conducted,
and as presently contemplated to be conducted, all of which are listed on
Schedule 3.6 hereto (the "Requisite Rights"). To the Company's knowledge, each
----------------
of the patents comprising the owned or licensed Requisite Rights is valid and
enforceable. Except as set forth on Schedule 3.6, no royalties, honoraria, fees
or other amounts are payable by the Company to any third party by reason of the
ownership, use, sale or license of the Requisite Rights. Except as set forth on
Schedule 3.6 hereto, to the best of the Company's knowledge, no product, service
or process currently or proposed to be manufactured, marketed, sold or used by
the Company violates any license or infringes any Proprietary Rights of any
third party. There is no pending or, to the best of the Company's knowledge,
threatened claim or litigation against the Company contesting the validity or
right to use any of the Requisite Rights, nor does there exist any basis
therefor.
3.7 Contracts and Commitments. Except as set forth on Schedule 3.7, the
-------------------------
Company does not have any contract, agreement, obligation, lease or commitment,
proposed or executed, written or oral, absolute or contingent, other than (i)
contracts for the purchase of supplies and services that were entered into in
the ordinary course of business and that do not involve more than $50,000, and
do not extend for more than one (1) year beyond the date hereof, (ii) sales
contracts entered into in the ordinary course of business, (iii) agreements that
are terminable at will by the Company on no more than thirty (30) days' notice
without cost or liability to the Company, and that are not material to the
Business and Condition of the Company. For the purpose of this paragraph,
employment and consulting contracts and contracts with labor unions, and license
agreements relating to the acquisition or disposition of the Company's
technology
9
<PAGE>
(other than standard end user license agreements) shall not be considered to be
contracts entered into in the ordinary course of business. Schedule 3.7 contains
a true, complete and accurate list of all such contracts, agreements, leases,
commitments, understandings or other obligations (whether written or oral)
(collectively the "Material Contracts"), true and correct copies of which have
been made available to the Buyers or their counsel.
3.8 Status of Agreements. All contracts, agreements, commitments,
--------------------
obligations, plans, leases, policies and licenses to which the Company is a
party are valid and binding agreements and are in full force and effect; there
are no existing defaults (or events which, with notice or lapse of time or both,
would constitute a default) by the Company or, to the best of the Company's
knowledge, any other party thereunder. The Company is not a party to any
contract, agreement, commitment or other obligation that has or may reasonably
be expected to have individually or in the aggregate with any other contracts,
agreements, commitments or other obligations a material adverse effect on the
Business and Condition of the Company.
3.9 Labor Relations. To the best knowledge of the Company, no officer,
---------------
key employee of or consultant to the Company is or will be in violation of any
judgment, decree, or order, or any term of any employment contract, consulting
agreement, patent disclosure agreement, or other contract or agreement relating
to the relationship of any such officer or consultant with the Company, as the
case may be, or any other party because of the nature of the business conducted
or proposed to be conducted by the Company or the use by the officer, key
employee or consultant of his best efforts with respect to such business. To
the best knowledge of the Company, no officer, key employee or consultant to the
Company intends to terminate his or their employment or other arrangement with
the Company, nor does the Company have a present intention to terminate the
employment of or other arrangement with any of the foregoing, including, but not
limited to, the Chief Executive Officer of the Company. Subject to general
principles related to wrongful termination of employees and to the terms of the
agreements listed on Schedule 3.9, the employment of each officer and employee
of the Company is terminable at will of the Company. Except as set forth in
Schedule 3.9, the Company is not obligated under any employment contract, nor is
it a party to any union, collective bargaining or similar agreement, any profit-
sharing, deferred compensation, bonus, stock option, stock ownership, stock
purchase, pension, consulting, retirement, welfare or incentive plan or
agreement, or any plan providing for "fringe benefits" to its employees,
including, but not limited to, salary continuation, service awards, severance
pay, welfare, medical, hospitalization, disability, life insurance and other
insurance plans or related benefits with respect thereto. The Company is in
compliance in all material respects with all applicable laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours, and the Company is not nor has it been engaged in any unfair
labor practice which is likely to have a material adverse affect on the Business
and Condition of the Company; there is no unfair labor practice complaint
against the Company pending before the National Labor Relations Board; there is
no labor strike, dispute, slowdown or stoppage pending or threatened against or
affecting the Company or any attempt to organize employees of the Company for
union representation; no representation question exists respecting the employees
of the Company; and the Company's relations with its employees are satisfactory.
10
<PAGE>
3.10 Employee Benefit Plans. Except as set forth in Schedule 3.9, the
----------------------
Company does not have, none of its current or former employees are covered by,
and the Company has no obligation with respect to, any employee benefit plan (as
defined in Section 3(3) of ERISA), whether formal or informal.
3.11 Compliance with Law. The operations of the Company have been
-------------------
conducted in all material respects in accordance with all applicable laws,
regulations and other requirements of all Governmental Bodies having
jurisdiction over the Company. The Company has not received any notification of
any asserted present or past failure to comply with any such laws, rules or
regulations. The Company has all material licenses, Permits, orders or
approvals from Governmental Bodies material to the Business and Condition of the
Company and, to the best of the Company's knowledge, it is not in violation of
any such license, Permit, order or approval which violation is likely to have a
material adverse affect on the Business and Condition of the Company.
3.12 Governmental Consent. No consent, approval, or authorization of, or
--------------------
designation, declaration, notification, or filing with any Governmental Body on
the part of the Company is required in connection with the valid execution,
delivery and performance of this Agreement or the Stockholders Agreement, the
offer, sale, or issuance of the Preferred Shares and the Common Stock to be
issued upon the conversion thereof or the consummation of any other transaction
contemplated hereby or by the Stockholders Agreement except the qualification
(or the taking of such action as may be necessary to secure an exemption from
qualification, if available) of the offer and sale of the Preferred Shares or
the Common Stock to be issued upon the conversion thereof under applicable
securities laws, which filings and qualifications, if required, will be
accomplished in a timely manner.
3.13 Environmental Protection. (a) The Company is in compliance with all
------------------------
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in any Applicable Environmental
Laws, or in any plan, order, decree, judgment, notice or demand letter issued,
entered, promulgated or approved thereunder. The Company is not aware of, nor
has the Company received notice of, any past, present or future events,
conditions, circumstances, activities, practices, incidents, actions or plans
which may interfere with or prevent continued compliance, or which may give rise
to any common law or legal liability, or otherwise form the basis of any claim,
action, suit, proceeding, hearing or investigation, based on or related to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling, or the emission, discharge, release or threatened release
into the environment, of any pollutant, contaminant or hazardous or toxic
material or waste.
(b) To the best of the Company's knowledge, no Hazardous Material has
been incorporated in, used on, stored on or under, released from, treated on,
transported to or from, or disposed of on or from any real property leased by
the Company such that, under Applicable Environmental Laws, (i) any such
Hazardous Material would be required to be removed, cleaned-up or remediated
before the property could be altered, renovated, demolished or transferred, or
(ii) the lessee of the property could be subjected to liability for the removal,
clean-up or remediation of such Hazardous Material; and the Company has not
received any
11
<PAGE>
notification from any Governmental Bodies or other third parties relating to
Hazardous Material on or affecting any property owned or leased by the Company
or relating to any potential or known liability under Applicable Environmental
Laws arising from the ownership or leasing of any property.
3.14 Related Party Transactions. (a) Except as set forth in Schedule 3.14
--------------------------
and except for the transactions contemplated to occur at the Closings, (i) there
have been no transactions between the Company and any Related Party or any
payment (however characterized) by the Company to any Related Party or by any
Related Party to the Company, and (ii) there is no lease, agreement or
commitment between the Company and any Related Party. As used in the preceding
sentence, the term "transaction" includes, but is not limited to, any sale or
other transfer of property of assets, the lease or other use of property or
assets, the provision of services and the furnishing of personnel, whether or
not for consideration.
(b) Except as set forth in Schedule 3.14, no Related Party has any
material direct or indirect interest (including financial or ownership) in any
Material Contract, or property of the Company, real or personal, tangible or
intangible, including, without limitation, any Proprietary Rights, used in or
pertaining to the business of the Company, and no Related Party is indebted to
the Company and the Company is not indebted to any Related Party whether
directly or indirectly (including commitments to make loans or extend or
guarantee credit).
3.15 No Brokers or Finders. Neither the Company, nor any of its officers,
---------------------
directors or employees, has employed or will employ any broker or finder or
incurred or will incur, directly or indirectly, any liability for any brokerage
or finder's fees or commissions or similar payments in connection with this
Agreement or the transactions contemplated hereby.
3.16 Insurance. The Company has obtained insurance for its benefit in such
---------
amounts and covering such risks as are customary for businesses comparable to
the business conducted by the Company under policies in effect and issued by
insurers of recognized responsibility.
3.17 Disclosure. No representations or warranties by the Company in this
----------
Agreement and no statement contained in any document (including, without
limitation, financial statements, certificates, projections, business plans or
other writings furnished or to be furnished to the Buyers or any of their
representatives pursuant to the provisions hereof or in connection with the
transactions contemplated hereby), contains any untrue statement of material
fact or omits to state any material fact necessary, in light of the
circumstances under which it was made, in order to make the statements herein or
therein not misleading. Documents delivered to the Buyers pursuant to this
Agreement are true and complete copies of what they purport to be.
3.18 Small Business Matters. (a) The Company, together with its
----------------------
"affiliates" (as that term is defined in Title 13, Code of Federal Regulations,
(S)121.103), is a "small business concern" within the meaning of the Small
Business Investment Act of 1958, as amended (the "SBIA"), and the regulations
----
thereunder, including Title 13, Code of Federal Regulations, (S)121.301(c). The
Company is a "qualified small business," as defined in Section 1202(d) of the
Code. The Company covenants and agrees to execute and deliver to the Buyers,
from time to
12
<PAGE>
time, such forms, documents, schedules and other instruments as may be
reasonably requested thereby to cause the Series C Preferred Stock to qualify as
"qualified small business stock," as defined in Section 1202(c) of the Code.
(b) The proceeds from the sale of the Preferred Shares will be used by
the Company to (i) finance working capital, research and development and other
general corporate needs, and (ii) pay expenses related to the transactions
contemplated by this Agreement, the Stockholders Agreement, and the other
transactions and documents related hereto and thereto. The Company will not
engage in any act or use the proceeds from the sale of the Shares hereunder,
directly or indirectly for any purpose in contravention of the SBIA and the
regulations thereunder. No portion of such proceeds (i) will be used to provide
capital to a corporation licensed under the SBIA, (ii) will be used to acquire
farm land, (iii) will be used to fund production of a single item or defined
limited number of items, generally over a defined production period, that
constitute the majority of the activities of the Company (examples include
motion pictures and electric generating plants), or (iv) will be used for any
purpose contrary to the public interest (including, but not limited to,
activities which are in violation of law or inconsistent with free competitive
enterprise), in each case, within the meaning of 13 C.F.R. (S)107.720.
(c) The primary business activity of the Company does not involve,
directly or indirectly, providing funds to others, purchasing or discounting
debt obligations or factoring or long-term leasing of equipment with no
provision for maintenance or repair. The Company is not classified under Major
Group 65 (Real Estate) of the SIC Manual. The assets of the business of the
Company (the "Business") will not be reduced or consumed, generally without
--------
replacement, as the life of the Business progresses, and the nature of the
Business does not require that a stream of cash payments be made to the
Company's financing sources on a basis associated with the continuing sale of
assets (examples include real estate development projects and oil and gas
wells). (See 13 C.F.R. (S)107.720.)
---
(d) The proceeds from the sale of the Preferred Shares will not be
used substantially for a foreign operation and at the Closings or within one
year thereafter no more than 49% of the employees or tangible assets of the
Company and its subsidiaries will be located outside the United States. This
subsection (d) does not prohibit such proceeds from being used to acquire
foreign materials and equipment or foreign property rights for use or sale in
the United States (unless such use or sale is for a specific domestic purpose).
3.1 Licenses; Authorizations; Permits. The Company owns, possesses, or
---------------------------------
will own, possess, and maintain throughout the term of this Agreement all
franchises, grants, licenses, permits, consents, approvals or authorizations
(the "Permits") of every kind and nature necessary in the conduct of its
business as currently operated except for those Permits the failure of which to
so own, possess and maintain is not reasonably likely to have a material adverse
effect on the Business and Condition of the Company. The Company is not in
violation of, or in default under, any Permits, except where such violation or
default is not reasonably likely to have a material adverse effect on the
Business and condition of the Company.
13
<PAGE>
3.20 Liabilities; Indebtedness. Except as and to the extent disclosed or
-------------------------
reserved against the balance sheet of the Company as of October 31, 1998, a copy
of which has been previously delivered to the Buyers, to the best of the
Company's knowledge, it has no liabilities, absolute or contingent (other than
those incurred after the date thereof in the ordinary course of business), which
are, individually or in the aggregate, material to the Business and Condition of
the Company. Except as set forth in Schedule 6.3, the Company has no
indebtedness for borrowed money that 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.
3.21 Absence of Certain Changes or Events; Operations. Since October 31,
------------------------------------------------
1998 to the best knowledge of the Company there has not been any event,
occurrence or development or any change in the business, financial condition or
results of operations of the Company which, individually or in the aggregate,
has had, or is reasonably likely to have, a material adverse effect on the
Business and Condition of the Company or a material adverse effect on the
Company's ability to consummate the transactions contemplated hereby and by the
Stockholders Agreement.
4. Representations and Warranties of the Buyers.
--------------------------------------------
Each Buyer, severally and not jointly, represents and warrants (both as of
the date of this Agreement and as of the Closing Date on which such Buyer is
purchasing Preferred Shares) to the Company as follows:
4.1 Authorization. Such Buyer has the full power and authority to enter
-------------
into this Agreement and the Stockholders Agreement and to perform all of its
obligations hereunder and thereunder. The execution, delivery and performance
of this Agreement and the Stockholders Agreement by it have been duly authorized
by all necessary action, and this Agreement and the Stockholders Agreement
constitute valid and binding obligations of such Buyer enforceable against such
Buyer in accordance with their respective terms, except, as such enforceability
may be limited by bankruptcy laws, moratorium laws and other laws from time to
time in effect affecting creditors' rights generally. The execution, delivery
and performance of this Agreement and the Stockholders Agreement by such Buyer
does not violate any provision of the governing instrument of Buyer, conflict
with or constitute a default under any material agreement, indenture or
instrument to which such Buyer is a party or by which it is bound or violate any
statute or order of any court or Governmental Body applicable to such Buyer,
except where the foregoing would not have a material adverse affect on the
business and condition of the Buyer.
4.2 Investment Representations. Such Buyer has knowledge and experience
--------------------------
in financial and business matters sufficient to enable it to evaluate the merits
and risks of an investment in the Company. Such Buyer has assets sufficient to
enable it to bear the economic risk of its investment in the Preferred Shares
and is an "accredited investor" as defined in Rule 501 under the Securities Act.
Such Buyer is acquiring the Preferred Shares for its own account, and not with a
present view to, or for sale in connection with, any distribution thereof. Such
Buyer understands that the Preferred Shares and the Common Stock issuable upon
conversion thereof have not been registered under the Securities Act by reason
of their issuance in a
14
<PAGE>
transaction exempt from the registration requirements of the Securities Act
pursuant to the exemption provided in Section 4(2) thereof, that the Preferred
Shares and the Common Stock issuable upon conversion thereof have not been
registered under applicable state securities laws by reason of their issuance in
a transaction exempt from such registration requirements, and that the Preferred
Shares and the Common Stock issuable upon conversion thereof may not be sold or
otherwise disposed of unless registered under the Securities Act and applicable
state securities laws (the Company being under no obligation so to register such
Preferred Shares or the Common Stock issuable on conversion thereof, except as
set forth in Section 8 of the Stockholders Agreement) or exempted from
registration. Such Buyer further understands that the exemption from
registration afforded by Rule 144 promulgated under the Securities Act is not
presently available with respect to the Preferred Shares or the Common Stock
issuable on conversion thereof.
4.3 Buyers' Acknowledgment as to Information. Such Buyer or officers and
----------------------------------------
representatives of such Buyer have received from the Company such information
(including the Schedules and Exhibits to this Agreement and of such documents
referred to herein and therein as they have requested) with respect to the
Company as such Buyer has deemed necessary and relevant in connection with the
transactions contemplated by this Agreement (the "Contemplated Transactions"),
-------------------------
and such Buyer has had the opportunity, directly or through such officers and
representatives, to ask questions of and receive answers from persons acting on
behalf of the Company necessary to verify the information so obtained; provided,
--------
however, that such receipt of information and such opportunity shall not affect
- -------
or otherwise diminish or obviate the representations and warranties of the
Company set forth in this Agreement or such Buyer's reliance thereon.
4.4 No Brokers or Finders. No Buyer nor any of its officers, directors or
---------------------
employees has employed or will employ any broker or finder or incurred or will
incur, directly or indirectly, any liability for any brokerage or finder's fees
or commissions or similar payments in connection with any of the Contemplated
Transactions.
5. Affirmative Covenants of the Company.
------------------------------------
Subject to Section 12, the Company agrees that so long as any shares of
Series C Preferred Stock are outstanding:
5.1 Use of Proceeds. The proceeds of the sale of the Preferred Shares
---------------
shall be used by the Company for working capital, research and development and
other general corporate purposes.
5.2 Consent as to Issuance of Common Stock. The Company will obtain any
--------------------------------------
authorization, consent, approval or other action by or make any filing with any
court or Governmental Body that may be required under applicable federal or
state securities laws in connection with the issuance of any shares of Common
Stock upon conversion of the Preferred Shares.
15
<PAGE>
5.3 Financial Information. Until the consummation of an Initial Public
---------------------
Offering, the Company will deliver to each Buyer: (a) as soon as practicable
and in any event within 90 days after the close of each fiscal year of the
Company, copies of (i) the audited balance sheet of the Company as of the end of
such fiscal year, (ii) audited statements of operations of the Company for such
fiscal year, (iii) audited statements of stockholders' equity for such fiscal
year, and (iv) audited statements of cash flow of the Company for such fiscal
year, setting forth in each case in comparative form the corresponding figures
of the previous annual period, all in reasonable detail, prepared in accordance
with GAAP consistently applied throughout the periods involved and together with
the report of a firm of independent certified public accountants of recognized
national standing;
(b) as soon as practicable, and in any event within 45 days after the
end of each of the first three fiscal quarters of the Company and within 90 days
after the end of the fourth fiscal quarter, a financial reporting package
including (i) an unaudited balance sheet of the Company as at the end of each
such fiscal quarter, and (ii) unaudited statements of operations, stockholders'
equity and cash flow for such fiscal quarter, setting forth in each case in
comparative form corresponding figures for the preceding year's respective
fiscal quarter and the most recent quarterly budget data included in the annual
operating budget for the Company. Each quarterly reporting package will also
contain an analysis of the current business and marketing plans of the Company
and its Subsidiaries, if any, for the period covered by such budget (the
"Budget"), all in reasonable detail, prepared in accordance with GAAP
------
consistently applied throughout the periods involved and certified as being
correct and complete and fairly presenting the results of operations of the
Company for the quarter indicated (subject to normal year-end audit adjustments
and the absence of footnotes), by the principal financial officer of the
Company;
(c) for each calendar month, as soon as practicable and in any event
within 25 days after the close of such month, copies of (i) the balance sheet of
the Company as of the end of such month, (ii) statements of operations of the
Company for such month, and (iii) statements of cash flow of the Company for
such month, all in reasonable detail, prepared in accordance with GAAP
consistently applied throughout the periods involved and certified as being
correct and complete and fairly presenting the results of operations of the
Company for the month indicated (subject to normal recurring year-end audit
adjustments and the absence of footnotes), by the principal financial officer of
the Company;
(d) as soon as practicable and in any event not less than 30 days
prior to the end of each fiscal year of the Company, a Budget, including an
analysis of the current business and marketing plans of the Company and its
Subsidiaries, if any, for the twelve month period covered by such budget,
including but not limited to, a cash flow budget, profit and loss budget and
budgeted balance sheet; and
(e) such other reports and financial and other information, including
but not limited to any letters furnished to the Company by its independent
public accountants which comment on the accounting practices of the Company, as
any Buyer shall reasonably request; and
16
<PAGE>
(f) concurrently with the furnishing of the report pursuant to Section
5.3(a) and (b) hereof, an officer's certificate stating that the Company is not
in default under, and has not breached, any material agreements or obligations,
including, without limitation, this Agreement, or if any such default or breach
exists, specifying the nature thereof and what actions the Company has taken and
proposes to take with respect thereto. If for any period the Company shall have
any Subsidiary or Subsidiaries whose accounts are consolidated with those of the
Company, then the financial statements delivered for such period pursuant to the
foregoing clauses (a), (b) and (c) of this Section 5.3 shall be the consolidated
and consolidating financial statements of the Company and all such consolidated
Subsidiaries and, if such Subsidiary or Subsidiaries are not consolidated with
those of the Company, separate financial statements for such Subsidiary or
Subsidiaries shall be provided.
5.4 Other Reports and Inspection. (a) The Company will, upon reasonable
----------------------------
prior notice, make available to each Buyer or its representatives or designees
during normal business hours (a) all assets, properties and business records of
the Company for inspection and copying, and (b) the directors, officers,
employees and public accountants (and by this provision the Company hereby
authorizes and instructs said accountants to discuss with such holder and such
representatives and designees its affairs, finances and accounts and the
responses of attorneys representing the Company to inquiries made by the Company
on behalf of said accountants in connection with their audit of the financial
affairs of the Company), of the Company for interviews concerning the business,
affairs and finances of the Company.
(b) Promptly (but in any event within ten (10) days) after the
discovery of any material adverse event or circumstance affecting the Company
which event or circumstance has, or with the passage of time is reasonably
likely to, have a material adverse effect on the Business and Condition of the
Company or result in the Company's breach of any material provision of this
Agreement, the Company shall deliver a notice to each Buyer specifying the
nature and period of existence thereof, and the actions of the Company has taken
and/or proposes to take with respect thereto. The Company shall furnish each
Buyer receiving such letter with monthly reports updating and describing any
developments relating to matters described under this Subsection 5.4(b) and will
promptly notify each Buyer of any material developments or changes relating
thereto.
(c) Promptly (but in any event within five days) after transmission
thereof, the Company shall deliver to each Buyer copies of any material
communication from the Company to its shareholders, directors or the financial
community at large, and any reports filed by the Company with any securities
exchange, the National Association of Securities Dealers, Inc., any state
official or agency charged with securities regulation, the Commission, any other
Governmental Body and any material correspondence between the Company and any of
the foregoing (including, without limitation, any correspondence from any of the
foregoing which contains information materially adverse to the Business and
Condition of the Company).
(d) Promptly following the preparation thereof, the Company shall
deliver to each Buyer copies of the minutes of proceedings (or consents) of the
Company's Board of Directors and/or its stockholders.
17
<PAGE>
(e) With reasonable promptness, the Company shall deliver to each
Buyer such other information and data with respect to the Company and its
Subsidiaries (if any) as any Buyer may from time to time reasonably request.
(f) Each of Sentron and Healthcap shall have the right to send one
representative to attend, in a non-voting observer capacity, all meetings of the
Company's Board of Directors, and in this respect, the Company shall give such
representative copies of all notices, minutes, consents and other materials that
it provides to its Directors. Such representative shall have the right to
participate in discussions of matters brought before the Board of Directors.
The provisions of Section 5.3 hereof and this Section 5.4 shall not
be in limitation of any rights which any Buyers may have with respect to the
books and records of the Company and any Subsidiary of the Company, or to
inspect their properties or discuss their affairs, finances and accounts, under
the laws of the jurisdictions in which they are incorporated.
Each Buyer agrees that the information to be provided by the Company
pursuant to Section 5.3 and 5.4 is Confidential Material (as defined in Section
7(a) below).
5.5 Corporate Existence; Properties. The Company will, and will cause
-------------------------------
each of its Subsidiaries to, maintain, preserve and renew its corporate
existence in good standing and to comply with all applicable laws and
regulations of the United States or of any state or states thereof or of any
political subdivision thereof and of any Governmental Body where, in any such
case, the failure to so comply is reasonably likely to have a material adverse
effect on the Business and Condition of the Company. The Company will, and will
cause each of its Subsidiaries to, maintain, preserve and renew all of its
Permits and take all action reasonably necessary or material to obtain,
preserve, defend, renew and extend all Permits and Proprietary Rights
(including, without limitation, the Requisite Rights) which are necessary or
material to the conduct of the business.
5.6 Insurance. The Company will maintain policies of insurance,
---------
including, but not limited to, fire, casualty liability in full force and effect
and workmen's compensation, in such amounts and covering such risks as are
customarily carried by businesses comparable to the business conducted by the
Company, subject to availability at commercially reasonable cost.
5.7 Maintenance of Properties. The Company will, and will cause each of
-------------------------
its Subsidiaries to, maintain and keep its properties, real and personal, in
good repair, working order and condition, normal wear and tear excepted, and
from time to time make all necessary or desirable repairs, renewals and
replacements, so that its businesses may be properly and advantageously
conducted at all times.
5.8 Compliance with Obligations. The Company will, and will cause each
---------------------------
of its Subsidiaries to, comply with the terms and conditions of all Material
Contracts, the Certificate of Incorporation, By-laws, and the Stockholders
Agreement, and all documents and agreements executed or delivered in connection
with the Closings to the extent to which the failure to so comply could
reasonably be expected to have a material adverse effect upon the Business and
18
<PAGE>
Condition of the Company and its Subsidiaries taken as a whole, unless and to
the extent that the same are being contested in good faith and by appropriate
proceedings and adequate reserves (as determined in accordance with GAAP
consistently applied) have been established on its books with respect thereto.
5.9 Taxes. The Company will, and will cause each of its Subsidiaries to,
-----
pay when due (a) all Taxes imposed upon it or any of its properties or income,
other than Taxes which are being contested in good faith and which Taxes in the
aggregate have been reserved against on the books of the Company, and (b) all
claims or demands of materialmen, mechanics, carriers, warehousemen, landlords
and other like persons which, if unpaid, might result in the creation of a lien
upon any of its properties, other than claims or demands which are being
contested in good faith.
5.10 Compliance with Law. The Company will, and will cause each of its
-------------------
Subsidiaries to, comply, with all applicable statutes, rules, regulations and
orders of all Governmental Bodies with respect to the conduct of its business
and the ownership of its properties; provided, that the Company shall not be
--------
deemed to be in violation of this Section 5.10 as a result of any failure to
comply with any provisions of such statutes, rules, regulations and orders, the
noncompliance with which would not result in fines, penalties, injunctive relief
or other civil or criminal liabilities which, in the aggregate, would materially
and adversely affect the Business and Condition of the Company and its
Subsidiaries taken as a whole.
5.11 Environmental Matters. The Company shall promptly advise each Buyer
---------------------
in writing of any pending or threatened claim, demand or action by any
Governmental Body or third party relating to any Hazardous Materials materially
affecting any properties owned or leased by the Company of which it has
knowledge. The Company shall not discharge, place, release, spill or dispose of
any Hazardous Materials or any other pollutants or effluents upon any properties
owned or leased by the Company or elsewhere (including, but not limited to,
underground injection of such substances) other than in compliance with
Applicable Environmental Laws and the Company shall not discharge into the air
any emission which would require a permit under the Clean Air Act or its state
counterparts or any other Environmental Laws without obtaining such permit. The
stockholders of the Company shall have no control over, or authority with
respect to, the waste disposal operations of the Company.
5.12 Accounting System. The Company will maintain a system of accounting
-----------------
and proper books of record and account, in accordance with GAAP, and will set
aside on its books reserves for depreciation, depletion, obsolescence,
amortization, pending and threatened litigation and otherwise as may be
appropriate in conformance with procedures and recommendations of the Company's
independent public accountants.
5.13 Reservation of Common Stock. The Company shall reserve and keep
---------------------------
available out of its authorized but unissued Common Stock the number of shares
of Common Stock required for issuance upon the conversion of all of the Series C
Preferred Stock.
5.14 Proprietary Information and Confidentiality Agreements with Employees
---------------------------------------------------------------------
and
- ---
19
<PAGE>
Consultants. The Company will enter into proprietary information and
- -----------
confidentiality agreements in a form approved by its Board of Directors with all
key employees and consultants of the Company. The Company will avail itself of
all rights and remedies under all existing and future proprietary information
and confidentiality agreements.
5.15 Board of Directors Meetings. The Company shall call, and use its
---------------------------
best efforts to have, regular meetings of the Board of Directors on at least a
quarterly basis. The Company shall pay all reasonable travel expenses and other
out-of-pocket expenses incurred by Directors in connection with attending
meetings of the Board or any committee thereof.
5.16 Material Changes and Litigation. The Company shall promptly notify
-------------------------------
the Buyers of any material adverse change in the Business and Condition of the
Company and its Subsidiaries, if any, taken as a whole, and of any litigation or
governmental proceeding or investigation brought or, to the best of the
Company's knowledge, threatened against the Company, or against any officer,
director, key employee, or principal stockholder of the Company materially
adversely affecting or which, if adversely determined, would materially
adversely effect the Business and Condition of the Company and its Subsidiaries,
if any, taken as a whole.
5.17 Patents, Trademarks and Copyrights. Except where the Company has
----------------------------------
affirmatively determined to the contrary in its reasonable business judgment:
(a) Patent Maintenance. The Company shall take such actions
------------------
(including the payment of all maintenance and other fees related thereto) as are
necessary to cause all Company patents to remain current and will not do any act
or omit to do any act whereby any Company patent will expire prematurely.
(b) Trademark Maintenance. The Company will not do any act or omit
---------------------
to do any act whereby any Company trademark or any trademark licensed by the
Company may become abandoned or rendered invalid and shall take all such actions
necessary to maintain the validity of all such trademarks. The Company will
maintain its trademarks in full force and effect and free from any claim of
abandonment for non-use.
(c) Copyright Maintenance. The Company will place appropriate notice
---------------------
of copyright on all copies embodying Company copyrighted works, if any, which
are publicly distributed and the Company will not do any act or omit to do any
act whereby any Company copyright may become invalidated or dedicated to the
public domain.
(d) Application and Registration Maintenance. The Company will take
----------------------------------------
all steps necessary in the reasonable business judgment of the Company in any
proceeding before the United States Patent and Trademark Office, United States
Register of Copyrights or similar office or agency of the United States or any
office of the Secretary of State (or equivalent) of any state thereof, to
maintain and prosecute each application and registration of Company's patents,
trademarks and copyrights, including, without limitation, filing of renewals,
extensions, affidavits of use and incontestability, and opposition, interference
and cancellation proceedings,
20
<PAGE>
which are material to the business of the Company.
(e) Infringement. In the event that any Company patent, trademark,
------------
or copyright is infringed, misappropriated or diluted by a third party, the
Company shall, unless the Company shall determine in its reasonable business
judgment that such trademark, patent or copyright is of negligible economic
value to the business of the Company, promptly sue for infringement,
misappropriation and/or dilution and to obtain injunctive relief and recover
damages therefore, and shall take such other actions to protect such patent,
trademark, or copyright, all as the Company shall deem appropriate in its
reasonable business judgment under the circumstances.
5.18 Director & Officer Insurance; Indemnification Agreements. The
--------------------------------------------------------
Company shall use its best efforts to obtain, as soon as reasonably practicable,
but in any event within 4 months of the First Closing, obtain a directors &
officers insurance policy in an amount not less than $1 million. The Company
shall maintain such policy in full force and effect, subject to availability at
commercially reasonable cost. The Company shall, as soon as reasonably
practicable, enter into indemnification agreements with each of its directors,
which shall provide that the Company shall indemnify each of its directors to
the fullest extent permitted by the Delaware General Corporation Law.
6. Negative Covenants of the Company.
---------------------------------
Subject to Section 12, the Company covenants and agrees with each of the
Buyers and its transferees that, without the affirmative approval of the holders
of at least a majority of the holders of the then outstanding Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock, voting together as
a single class:
6.1 Related Party Transactions. Other than in the ordinary course of
--------------------------
business of the Company on an arms-length basis or in connection with
transactions involving obtaining additional financing for the Company, neither
the Company nor any Subsidiary will engage in any transaction with, nor enter
into any contract, agreement or other arrangement providing for the employment
of, furnishing of services by, rental of real or personal property from, or
otherwise requiring payments to, any Related Party without the affirmative vote
of a majority of the directors who are not affiliated (as defined by Rule 405
promulgated under the Securities Act) with such persons or entities.
6.2 Business. The Company will only engage in the business of the
--------
research, development, manufacturing, marketing and sale of medical products and
the performance of services related or incidental thereto, and any and all
activities related or incidental thereto.
6.3 Indebtedness; Commitments. Except as set forth on Schedule 6.3, the
-------------------------
Company will not, without the approval of the Board of Directors, incur, assume,
guarantee or otherwise become liable for (a) Indebtedness, or (b) commitments in
excess of $100,000 in the aggregate.
6.4 Guarantees. The Company will not incur any guarantee or similar
----------
contingent
21
<PAGE>
obligation in respect of the indebtedness of others, whether or not classified
on the Company's balance sheet as a liability (a "Guarantee"), except for
---------
Guarantees in respect of indebtedness of any wholly-owned Subsidiary of the
Company.
6.5 Liens. Except with respect to the items set forth on Schedule 6.3,
-----
the Company will not create, incur, assume or suffer to exist any Lien upon any
of its property, assets or revenues, whether now owned or hereafter acquired,
except for:
(a) Liens for taxes not yet due or which are being contested in good
faith by appropriate proceedings, provided that adequate reserves with respect
--------
thereto are maintained on the books of the Company in conformity with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's, landlord's or other like Liens arising in the ordinary course of
business which are not overdue for a period of more than sixty (60) days or
which are being contested in good faith by appropriate proceedings;
(c) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation and deposits
securing liability to insurance carriers under insurance or self-insurance
arrangements;
(d) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature incurred
in the ordinary course of business;
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not in any case materially
detract from the value of the property subject thereto or materially interfere
with the ordinary conduct of the business of the Company;
(f) Liens securing indebtedness of the Company incurred to finance
the acquisition of fixed or capital assets, provided that (i) such Liens shall
--------
be created substantially simultaneously with the acquisition of such fixed or
capital assets, (ii) such Liens do not at any time encumber any property other
than the property financed by such indebtedness, (iii) the amount of
indebtedness secured thereby is not increased and (iv) the principal amount of
indebtedness secured by any such Lien shall at no time exceed 75% of the
original purchase price of such property at the time it was acquired; and
(g) Liens existing as of the date of this Agreement.
6.6 Capital Expenditures. The Company will not make or commit to make
--------------------
(by way of the acquisition of securities of a Person or otherwise) any
expenditure in respect of the purchase or other acquisition of fixed or capital
assets (excluding any such asset acquired in connection with normal replacement
and maintenance programs properly charged to current operations) except for
expenditures in the ordinary course of business not exceeding $100,000 in the
22
<PAGE>
aggregate during any fiscal year of the Company other than those capital
expenditures included in the annual Budget approved by the Board of Directors.
6.7 Conflicting Agreements. The Company will not enter into any
----------------------
agreement or make any amendment to any agreement or take any other action which
by its terms might restrict or materially adversely affect the performance of
the Company's obligations pursuant to the terms of this Agreement, the
Stockholders Agreement or the provisions relating to the Preferred Shares
included in the Certificate of Incorporation, including, but not limited to, the
redemption, voting or conversion of the Series C Preferred Stock.
6.8 No Acquisitions. The Company shall not, nor shall it permit any of
---------------
its Subsidiaries to, acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial equity interest in or a substantial portion
of the assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof or
otherwise acquire or agree to acquire, or permit any of its Subsidiaries to
acquire or agree to acquire, any assets for a purchase price which is in excess
of 10% of the Company's net worth in accordance with GAAP, based on the
Company's most recent regularly prepared quarterly or annual financial
statements ("Net Worth").
---------
6.9 No Dispositions. Other than in the ordinary course of business and
---------------
other than dispositions of obsolete assets, the Company will not, nor shall it
permit any of its Subsidiaries to, sell, lease, encumber or otherwise dispose of
or liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution) or agree to sell, lease, encumber or otherwise dispose of, or
liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution)
in any transaction or series or related transactions, assets having an aggregate
book value in excess of 5% of the Company's Net Worth.
6.10 Subsidiaries. The Company shall not create, own or otherwise acquire
------------
or hold any Subsidiary other than in the ordinary course of the Company's
business.
6.11 Subsequent Offerings. The Company shall not hereafter sell, offer
--------------------
for sale or solicit offers to buy any securities of the Company so as to
jeopardize compliance by the Company under the Securities Act or other
securities laws in respect of future offerings of securities. In connection with
future offerings of securities of the Company, the Company shall comply with all
federal and state securities laws.
7. Confidentiality.
---------------
(a) The Buyers agree to keep the information heretofore or hereafter
furnished to the Buyers by the Company or on the Company's behalf (the
"Confidential Material") confidential. Notwithstanding the foregoing, the term
---------------------
Confidential Material does not include information that (i) is or becomes
publicly available other than through breach of this Agreement by the Buyers;
(ii) is already known to the Buyers at the time of disclosure; (iii) is received
by the Buyers from a third party not under an obligation of confidentiality to
the Company; or (iv) is independently developed by the Buyers without reference
to the Confidential Material. The
23
<PAGE>
Buyers agree to take reasonable precautions to safeguard the Confidential
Material from disclosure to anyone other than appropriate employees, officers,
directors, partners and representatives, including auditors and attorneys, of
the Buyers, which persons shall agree to treat such information as confidential.
Any holder of Series C Preferred Stock who is entitled to receive information
concerning the Company pursuant to Sections 5.3 and 5.4 shall, as a condition to
receipt of such confidential information, agree to be bound by this Section 7.
(b) A Buyer may provide to any member of its Group (as defined in the
Stockholders Agreement), and each of the Buyers which is acting as a general
partner of a venture capital limited partnership, a trustee, an investment
manager, an investment advisor or in any other similar fiduciary capacity may
furnish to any limited partner, plan sponsor, investment committee or investment
advisory board of or associated with such Buyer, only (i) information about the
Company which falls within the exceptions described in Section 7(a) above, and
(ii) information relating to summary, year-to-date, or annual financial and
other information necessary to describe the general condition of the Company if
concurrently therewith such Buyer informs such member of its Group, limited
partner, plan sponsor, investment committee or investment advisory board in
writing of the confidential nature of such information.
8. Conditions to the Buyers' Obligations.
-------------------------------------
The obligations of the Buyers to effect the applicable Closing shall be
subject to the satisfaction at or prior to the applicable Closing of the
conditions contained in Sections 8.1 through 8.13 below, inclusive, any one or
more of which may be waived by the Buyers.
8.1 No Injunction. There shall not be in effect any injunction, order or
-------------
decree of a court of competent jurisdiction that prohibits or delays
consummation of any or all of the Contemplated Transactions, and the Buyers
shall have received a certificate to that effect signed by the President of the
Company.
8.2 Representations, Warranties and Agreements. (a) The representations
------------------------------------------
and warranties of the Company set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and as of the
applicable Closing Date, with the same force and effect as though made at such
time (such representations and warranties not being affected by any updating
information furnished pursuant to any provision of this Agreement), (b) the
Company shall have performed and complied in all material respects with the
agreements contained in this Agreement required to be performed and complied
with by it at or prior to the applicable Closing Date, and (c) the Buyers shall
have received a certificate to that effect signed by the President of the
Company.
8.3 Legal Opinion. The Buyers shall have received an opinion from Sills
-------------
Cummis Zuckerman Radin Tischman Epstein & Gross, P.A., counsel to the Company,
dated the Closing Date and in substantially the form of Exhibit 8.3.
8.4 Litigation. No action, suit or proceeding shall be pending or
----------
threatened by or before any Person, court or other Governmental Body seeking or
threatening to retrain or
24
<PAGE>
prohibit or to recover damages in respect of the consummation of any or all of
the Contemplated Transactions, nor shall there be any other action or proceeding
pending or threatened which action, or other proceeding may, in the opinion of
the Buyers, result in a decision, ruling or finding that individually or in the
aggregate has or may reasonably be expected to have a material adverse effect on
the validity or enforceability of this Agreement, on the ability of the Company
to perform its obligations under this Agreement or on the Business and Condition
of the Company.
8.5 Regulatory Approvals. All licenses, authorizations, consents, orders
--------------------
and regulatory approvals of Governmental Bodies necessary in the good faith
judgment of the Buyers for the consummation of any or all of the Contemplated
Transactions shall have been obtained on terms reasonably satisfactory to the
Buyers and shall be in full force and effect.
8.6 Other Consents. Consents or waivers from parties other than
--------------
Governmental Bodies that are required in connection with the consummation of any
or all of the Contemplated Transactions shall have been obtained on terms
satisfactory to the Buyers and shall be in full force and effect and signed
copies thereof shall have been delivered to the Buyers.
8.7 Secretary of State Certificates. The Buyers shall have received
-------------------------------
Certificates of the Secretaries of State of the States of Delaware and
Pennsylvania with respect to the Company, as of a recent date, showing the
company to be validly existing or qualified as a foreign corporation, as the
case may be, and in good standing, and with respect to the Certificate of the
Secretary of State of the State of Delaware, listing all documents filed.
8.8 Secretary's Certificate of the Company. The Buyers shall have
--------------------------------------
received a Certificate of the Secretary of the Company stating that (i) no
document has been filed relating to or affecting the Certificate of
Incorporation of the Company after the date of the Certificate of the Secretary
of State of the State of Delaware furnished pursuant to Section 8.7, and (ii)
attached to the Certificate is a true and complete copy of the Certificate of
Incorporation and By-Laws of the Company, as in full force and effect at the
Closing Date, and an incumbency certificate identifying and showing the
signature of each officer of the Company executing the documents contemplated
hereby.
8.9 Resolutions. The Buyers shall have received certified copies of
-----------
resolutions duly adopted by the Company's Board of Directors (and stockholders,
if necessary) authorizing the execution and delivery of this Agreement and the
Stockholders Agreement, the issuance and sale of the Preferred Shares and the
reservation, issuance and sale of the Common Stock issuable upon conversion
thereof, and the performance of the transactions contemplated hereby and
certifying that such resolutions were duly adopted and have not been rescinded
or amended as of the Closing Date.
8.10 Stockholders Agreement. The Company, the Buyers and the holders of
----------------------
Shares (as defined therein) shall have executed the Stockholders Agreement.
8.11 Compliance Evidence. The Buyers shall have received such
-------------------
certificates, opinions,
25
<PAGE>
documents and information as it may reasonably request in order to establish
satisfaction of the conditions set forth in this Section 8.
8.12 Proceedings Satisfactory. All certificates, opinions and other
------------------------
documents to be delivered by the Company and all other matters to be
accomplished prior to or at the Closing Date, shall be satisfactory in the
reasonable judgment of the Buyers and their counsel.
8.13 No Material Adverse Change. There shall not have occurred after the
--------------------------
date of the execution of this Agreement any event or circumstance reasonably
likely to have a material adverse effect on the Business and Condition of the
Company.
9. Conditions to the Company's Obligations.
---------------------------------------
The obligations of the Company to effect each of the closings shall be
subject to the satisfaction at or prior to the applicable Closing Date of the
conditions contained in Sections 9.1 through 9.5 below, inclusive, any one or
more of which may be waived by the Company.
9.1 No Iniunction. There shall not be in effect any injunction, order or
-------------
decree of a court of competent jurisdiction that prohibits or delays the sale of
the Preferred Shares to the Buyers.
9.2 Representations, Warranties and Agreements. (a) The representations
------------------------------------------
and warranties of the Buyers set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and as of the
Closing Date, as though made at such time, and (b) the Buyers shall have
performed and complied in all material respects with the agreements contained in
this Agreement required to be performed and complied with by them prior to the
Closing Date.
9.3 Stockholders Agreement. The Company, the Buyers and the holders of
----------------------
Shares (as defined therein) shall have executed the Stockholders Agreement.
9.4 Compliance Evidence. The Company shall have received such
-------------------
certificates, opinions, documents and information as it may reasonably request
in order to establish satisfaction of the conditions set forth in this Section
9.
9.5 Proceedings Satisfactory. All certificates, opinions and other
------------------------
documents to be delivered by the Buyers and all other matters to be accomplished
prior to or at the applicable Closing shall be satisfactory in the reasonable
judgment of the Company and its counsel.
10. Expenses. The Company agrees, in the event the transactions
--------
contemplated hereby are consummated, to pay, and save the Buyers harmless
against liability for the payment of up to $25,000 of legal fees incurred by and
payable to Reboul, MacMurray, Hewitt, Maynard & Kristol, and up to $2,000 of
legal fees payable to O'Sullivan, Graev & Karabell, both firms serving as
counsel for the Buyers, arising in connection with the negotiation, execution
and consummation of this Agreement and the transactions contemplated hereby,
including, without
26
<PAGE>
limitation, the Buyers' due diligence investigation with respect to the
transactions contemplated hereby. The Company shall not be responsible for any
additional legal fees or expenses of Buyers' counsel arising in connection with
the negotiation, execution and consummation of this Agreement and the
transactions contemplated hereby.
11. Survival of Representations. Except for the warranty contained in
---------------------------
Section 5.16 of this Agreement, all representations and warranties contained in
this Agreement or in any exhibit, schedule or certificate delivered in
connection herewith shall survive the execution, delivery and closings of this
Agreement and any investigation at any time made by the Buyers or on their
behalf for a period of five years from the date hereof.
12. Duration of Covenants. The Company's obligation to perform the
---------------------
covenants and agreements contained in Section 5 and Section 6 shall terminate
upon the consummation of an Initial Public Offering.
13. Miscellaneous.
-------------
13.1 Notices. All notices, consents and other communications under this
-------
Agreement shall be in writing and shall be deemed to have been duly given when
(a) delivered by hand, (b) sent by telex or telecopier (with receipt confirmed),
provided that a copy is mailed by registered mail, return receipt requested, or
(c) one (1) day after sent by the sender, if sent by Express Mail, Federal
Express or other express delivery service (receipt requested), in each case to
the appropriate addresses, telex numbers and telecopier numbers set forth below
(or to such other addresses, telex numbers and telecopier numbers as a party may
designate as to itself by notice to the other parties):
(a) If to Oak Investment Partners VI, Limited Partnership and/or Oak
VI Affiliates Fund, Limited Partnership:
Oak Investment Partners
One Gorham Island
Westport, Connecticut 06880
Telecopier No.: (203) 227-0372
Attention: Eileen M. More
with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Telecopier No.: (212) 408-2420
Attention: Julie M. Allen, Esq.
(b) If to Canaan Equity, L.P.:
27
<PAGE>
Canaan Equity Partners LLC
105 Rowayton Avenue
Rowayton, Connecticut 06853
Telecopier No.: (203) 854-9117
Attention: Member/Manager
with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Telecopier No.: (212)408-2420
Attention: Julie M. Allen, Esq.
(c) If to Frazier Healthcare II, L.P.
Frazier & Company
2 Union Square
601 Union Street, Suite 2110
Seattle, Washington 98101
Telecopier No.: (206) 621-1848
Attention: Jon N. Gilbert
with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Telecopier No.: (212) 408-2420
Attention: Julie M. Allen, Esq.
(d) If to TL Ventures III L.P., TL Ventures III Offshore L.P. and/or
TL Ventures III Interfund L.P.:
TL Ventures
800 The Safeguard Building
435 Devon Park Drive
Wayne, Pennsylvania 19087-1945
Telecopier No.: (610) 975-9330
Attention: Christopher Moller, Ph.D.
with a copy to:
TL Ventures
800 The Safeguard Building
28
<PAGE>
435 Devon Park Drive
Wayne, Pennsylvania 19087-1945
Telecopier No.: (610) 975-9330
Attention: Chief Financial Officer
And a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Telecopier No.: (212) 408-2420
Attention: Julie M. Allen, Esq.
(e) If to Domain Partners IV, L.P., DP IV Associates, L.P. or
Biotechnology Investments Limited:
Domain Associates
One Palmer Square
Princeton, New Jersey 08542
Telephone No.: (609) 683-5656
Telecopier No.: (609) 683-9789
Attention: Jesse I. Treu, General Partner
with a copy to:
Reboul, MacMurray, Hewitt, Maynard & Kristol
45 Rockefeller Plaza
New York, NY 10111
Telephone No.: (212) 841-5711
Telecopier No.: (212) 841-5725
Attention: John MacMurray, Esq.
(f) If to HealthCap KB or HealthCap Coinvest & KB:
HealthCap
Sturegatan 34
S-11436 Stockholm
Sweden
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
29
<PAGE>
Telecopier No.: (212) 455-2502
Attention: Richard A. Miller, Esq.
(g) If to Sentron Medical, Inc.:
Sentron Medical, Inc.
4445 Lake Forest Drive
Suite 600
Cincinnati, OH 45242
Telephone No.: (513) 563-3240
Telecopier No.: (513) 563-3261
Attention: Ms. Karen Morgan
(h) If to the Company:
OraPharma, Inc.
732 Louis Drive
Warminster, Pennsylvania 18974
Telecopier No.: (215)443-9531
Attention: Michael Kishbauch
with a copy to:
Sills Cummis Radin Tischman
Epstein & Gross, P.A.
One Riverfront Plaza
Newark, New Jersey 07102
Telecopier No.: (973) 643-6500
Attention: Ira A. Rosenberg, Esq.
13.2 Service of Process. Process in any action or proceeding seeking to
------------------
enforce any provision of, or based on any right arising out of, this Agreement
against any of the parties, may be served on any party anywhere in the world,
whether within or without the State of Pennsylvania, and may also be served upon
any party in the manner provided for giving of notices to it in Section 13.1.
13.3 Expenses. Except as set forth in Section 10, each party shall bear
--------
its own expenses incident to the preparation, negotiation, execution and
delivery of this Agreement and the performance of its obligations hereunder.
13.4 Payment. A wire transfer of other than immediately available funds
-------
or delivery of a check shall not operate to discharge any obligation of payment
under this Agreement and is accepted subject to collection.
13.5 Captions. The captions in this Agreement are for convenience of
--------
reference only
30
<PAGE>
and shall not be given any effect in the interpretation of this Agreement.
13.6 Attorneys' Fees. In any action or proceeding brought by a party to
---------------
enforce any provision of this Agreement, the prevailing party shall be entitled
to recover the reasonable costs and expenses incurred by it in connection with
that action or proceeding (including, but not limited to, attorneys' fees).
13.7 No Waiver. The failure of a party to insist upon strict adherence
---------
to any term of this Agreement on any occasion shall not be considered a waiver
or deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must be in writing.
The holders of a majority of the then outstanding Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock, voting together as a
single class, may waive in writing any right of all such holders.
13.8 Exclusive Agreement; Amendment. This Agreement supersedes all prior
------------------------------
agreements among the parties with respect to its subject matter, is intended
(with the documents referred to herein) as a complete and exclusive statement of
the terms of the agreement among the parties with respect thereto and cannot be
changed, terminated or any of the provisions hereof waived, except by a written
instrument executed by a duly authorized representative of the Company and
holders in interest of not less than a majority of the aggregate of the
Preferred Shares (treated as if converted into Common Stock and including any
Common Stock then held by such holders into which the Preferred Shares have been
converted).
13.9 Parties in Interest; Limitation on Assignment. The terms,
---------------------------------------------
representations, warranties and covenants contained in Sections 5 and 6 hereof
shall be binding upon and shall inure to the benefit of and be enforceable by,
the Buyers and their respective successors, transferees and assignees; provided,
--------
that the rights granted to the Buyers by Sections 5.3 and 5.4 may not be
transferred or assigned to, and shall not inure to the benefit of, any such
successor, transferee or assignee of the Buyers that is engaged in any business
which directly competes with the Company in any line of business engaged in, or
planned to be engaged in, by the Company. It is understood and agreed among the
parties hereto that this Agreement and the representations, warranties, and
covenants made herein are made expressly and solely for the benefit of the other
party or parties hereto (or their respective successors or permitted assigns),
and that no other person shall be entitled or be deemed to be a third-party
beneficiary of any party's rights under this Agreement. Notwithstanding
anything contained herein to the contrary, the parties hereto hereby acknowledge
and agree that any of the Buyers may assign any or all of their right to
purchase Series C Preferred Stock hereunder to any of its members, partners or
stockholders, provided that such assignee agrees to purchase such Series C
Preferred Stock having an aggregate purchase price of at least $50,000 and
further agrees to be bound by the provisions of this Agreement and the
Stockholders Agreement
13.10 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be considered an original, but all of which
together shall constitute the same instrument.
31
<PAGE>
13.11 Governing Law. This Agreement and (unless otherwise provided) all
-------------
amendments hereof and waivers and consents hereunder shall be governed by the
internal law of the State of New Jersey, without regard to the conflicts of law
principles thereof.
32
<PAGE>
IN WITNESS WHEREOF, the undersigned have signed this Stock Purchase
Agreement as of the day and year first written above.
ORAPHARMA, INC.
By: /s/ Michael Kishbauch
-------------------------------------------
Michael Kishbauch, President
OAK INVESTMENT PARTNERS VI, LIMITED
PARTNERSHIP
By: Oak Associates VI, L.L.C.
By:_____________________________________________
Eileen M. More,
Managing Member
OAK VI AFFILIATES FUND, LIMITED
PARTNERSHIP
By: Oak VI Affiliates, L.L.C.
By:_____________________________________________
Eileen M. More,
Managing Member
CANAAN EQUITY, L.P.
By: Canaan Equity Partners L.L.C.,
Member/Manager
By:_____________________________________________
Member/Manager
33
<PAGE>
FRAZIER HEALTHCARE II, L.P.
By: FHM, L.L.C., General Partner
By: Frazier Management, L.L.C., Member
By:_____________________________________________
John Gilbert, Member
TL VENTURES III L.P.
By: TL Ventures III Management L.P., General
Partner
By: TL Ventures III LLC, General Partner
By: /s/ Christopher Moller
--------------------------------------------
Managing Director
TL VENTURES III OFFSHORE L.P.
By: TL Ventures III Offshore Partners, L.P.,
General Partner
By: TL Ventures III Offshore Ltd., General
Partner
By: /s/ Christopher Moller
--------------------------------------------
Name:
Title:
TL VENTURES III INTERFUND L.P.
By: TL Ventures III LLC, General Partner
By: /s/ Christopher Moller
--------------------------------------------
Managing Partner
34
<PAGE>
DOMAIN PARTNERS IV, L.P.
By: One Palmer Square Associates IV, L.L.C.,
General Partner
By:____________________________________________
Managing Member
DP IV ASSOCIATES, L.P.
By: One Palmer Square Associates IV, L.L.C.,
General Partner
By:____________________________________________
Managing Member
35
<PAGE>
Exhibit 4.14
RESTRICTED STOCK PURCHASE AGREEMENT
-----------------------------------
THIS RESTRICTED STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of
---------
the 24th day of February, 1997, by and between OraPharma, Inc., a Delaware
corporation (the "Corporation"), and Scheer Investment Holdings I, L.L.C., a
-----------
Connecticut limited liability company ("Founder").
-------
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Founder wishes to purchase 335,500 shares of the Corporation's
Common Stock, $.001 par value per share (the "Common Stock"); and
------------
WHEREAS, the Corporation has agreed to sell Founder 335,500 shares of
Common Stock at a purchase price of $.001 per share (the "Original Cost Per
-----------------
Share"), subject to the terms and provisions of this Agreement.
- -----
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties do hereby agree as
follows:
SECTION 1. Definitions.
-----------
As used in this Agreement, the following terms shall have the following
respective meanings:
"Common Shares" shall mean the issued and outstanding shares of the
-------------
Corporation's Common Stock, at the applicable time.
"Equity Stock" shall have the meaning set forth in Rule 3a11-1 under the
------------
Securities Exchange Act of 1934, as amended, and any successor statute and the
rules and regulations thereunder, as shall be in effect from time to time.
"Family" shall include any spouse, lineal ancestor or descendant, or
------
sibling, any trust for the exclusive benefit of any of the foregoing, or any
limited partnership or limited liability company majority controlled by any of
the foregoing individuals or trusts.
"Founding Members" shall mean Oak Investment Partners VI, Limited
----------------
Partnership and Oak VI Affiliates Fund, Limited Partnership.
"Group" shall mean as to (a) a partnership, any or all of its general or
-----
limited partners or any "affiliate" thereof (as defined by Rule 405 promulgated
under the Securities Act), (b) a trust, any of the beneficiaries, settlers or
grantors now existing or hereafter arising of, or any Person
<PAGE>
under common control with, such trust, (c) a corporation, any of its
stockholders, any subsidiary of such corporation or any corporation which is
under common control with such corporation, or any directors, officers or
employees of such corporation, and (d) a limited liability company, any of its
members.
"New Securities" shall mean any Equity Stock, including, but not limited
--------------
to, shares of Common Stock, any security which is convertible into or
exercisable or exchangeable for Common Stock, or any right, option or warrant to
acquire any Common Stock of the Corporation.
"Person" shall mean and include a natural person, a corporation, a
------
partnership, a limited liability company, a trust, an unincorporated
organization, an educational institution, a government or any department, agency
or political subdivision thereof, or any other entity.
"Preferred Shares" shall mean the issued and outstanding shares of the
----------------
Corporation's Series A Preferred Stock, $.001 par value per share.
"Public Offering" shall mean a distribution of New Securities in a firm
---------------
commitment underwritten public offering to the general public pursuant to a
registration statement filed with and declared effective by the Securities and
Exchange Commission pursuant to the Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as amended, and any
--------------
successor statute and the rules and regulations of the Securities and Exchange
Commission thereunder, as shall be in effect at the applicable time.
"Shares" shall mean the 335,500 shares of Common Stock purchased by Founder
------
hereunder.
"Transfer" shall include any direct or indirect sale, assignment, transfer,
--------
pledge (but not including a pledge in favor of the Corporation), hypothecation
or other disposition of any Shares or of any legal or beneficial interest
therein.
SECTION 2. Sale to Founder of Common Stock. Subject to the terms and
-------------------------------
conditions contained herein, the Corporation hereby sells, transfers and assigns
to Founder, and Founder hereby purchases from the Corporation, the Shares. The
Corporation hereby acknowledges receipt from Founder of payment of the Original
Cost Per Share (or $335.00 in the aggregate).
SECTION 3. Legend on Shares and Notice of Transfer.
---------------------------------------
3.1 Restrictive Legends. (a) Each certificate evidencing Shares, and
-------------------
each certificate evidencing Shares held by subsequent transferees of any such
certificate, shall (unless otherwise permitted by the provisions of Section 3.2
hereof) be stamped or otherwise imprinted with a legend in substantially the
following form:
2
<PAGE>
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAW. THESE SECURITIES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR ANY
EXEMPTION THEREFROM UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE STATE SECURITIES LAW.
(b) Each certificate evidencing Shares, and each certificate
evidencing Shares held by subsequent transferees of any such certificate, shall
also be stamped or otherwise imprinted with a legend in substantially the
following form:
ADDITIONALLY, THE TRANSFER OF THESE SECURITIES IS SUBJECT
TO THE TERMS AND CONDITIONS OF A RESTRICTED STOCK PURCHASE
AGREEMENT DATED AS OF FEBRUARY __, 1996, AMONG ORAPHARMA,
INC. AND THE HOLDER OF RECORD OF THIS CERTIFICATE AND NO
SALE, ASSIGNMENT, TRANSFER, PLEDGE, HYPOTHECATION OR OTHER
DISPOSITION OF SUCH SECURITIES SHALL BE VALID OR EFFECTIVE
EXCEPT IN ACCORDANCE WITH SUCH AGREEMENT AND UNTIL SUCH
TERMS AND CONDITIONS HAVE BEEN FULFILLED. COPIES OF SUCH
AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST
MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE
SECRETARY OF ORAPHARMA, INC.
3.2 Notice of Transfer. (a) Founder, and any other holder of any
------------------
Shares by acceptance thereof, agrees that, prior to any Transfer of any Shares,
such holder will give written notice to the Corporation of such holder's
intention to effect such Transfer and to comply in all other respects with the
provisions of this Section 3.2. Each such notice shall contain (i) a statement
setting forth the intention of said holder's prospective transferee with respect
to its retention or disposition of said Shares; and (ii) unless waived by the
Corporation, an opinion of counsel for said holder (who may be the inside or
staff counsel employed by said holder), as to the necessity or non-necessity for
registration under the Securities Act and applicable state securities laws in
connection with such Transfer and stating the factual and statutory basis relied
upon by counsel. The following provisions shall then apply:
(i) If the proposed Transfer of Shares may be effected without
registration or qualification under the Securities Act and any applicable
state securities laws, then the registered holder of such Shares shall be
entitled to Transfer such Shares in accordance with Section 4 hereof and
the intended method of disposition specified in the statement delivered by
said holder to the Corporation.
3
<PAGE>
(ii) If the proposed Transfer of such Shares may not be effected
without registration under the Securities Act or registration or
qualification under any applicable state securities laws, the registered
holder of such Shares shall not be entitled to Transfer such Shares
pursuant to Section 4 until the requisite registration or qualification is
effective.
(b) Notwithstanding the provisions of Section 3.2(a), in the case of
a Transfer by a holder to a member of such holder's Family or Group, no such
opinion of counsel shall be necessary; provided, that the transferee agrees in
--------
writing to be subject to Section 3 hereof to the same extent as if such
transferee were originally a signatory to this Agreement.
(c) Each certificate evidencing the Shares issued upon such Transfer
(and each certificate evidencing any untransferred balance of such Shares) shall
bear the legend set forth in Section 3.1(a) hereof unless (i) in the opinion of
counsel (acceptable to the Corporation) addressed to the Corporation the
registration of future Transfers is not required by the applicable provisions of
the Securities Act or applicable state securities laws; (ii) the Corporation
shall have waived the requirement of such legend; or (iii) in the reasonable
opinion of counsel to the Corporation, such Transfer shall have been made in
connection with an effective registration statement filed pursuant to the
Securities Act or in compliance with the requirements of Rule 144 or Rule 144A
(or any similar or successor rule) promulgated under the Securities Act, and in
compliance with applicable state securities laws.
(d) Each certificate evidencing the Shares issued upon such Transfer
(and each certificate evidencing any untransferred balance of such Shares) shall
bear the legend set forth in Section 3.1(b) hereof, for so long as this
Agreement remains in effect. In the event of the termination of this Agreement,
the holder of Shares may request that the Corporation issue a new certificate
not bearing the legend set forth in Section 3.1(b) hereof.
SECTION 4. Covenants of Founder and Corporation.
------------------------------------
4.1 Prohibited Transfers.
--------------------
(a) Founder agrees that it shall not Transfer any of its Shares
without the prior written consent of the holders of a majority of the
outstanding Common Shares held by the Founding Members, except as provided for
in Section 4.2.
(b) Notwithstanding anything to the contrary contained herein,
Founder (and any permitted transferee of Founder) may Transfer all of its, his
or her Shares: (i) if the stockholder is a limited partnership or a trust, to
any member of the Group of which Founder (or such permitted transferee) is a
member; provided, that such transferee shall agree in writing with the Company,
--------
prior to and as a condition precedent to such Transfer, to be bound by all of
the provisions of this Agreement; (ii) if the stockholder is a corporation, to
any member of its Group; provided, that such transferee shall agree in writing
--------
with the Company, prior to and as a condition precedent to such Transfer, to be
bound by all of the provisions of this Agreement; (iii) to any member of the
Family of Founder (or such permitted transferee); provided, that such
--------
4
<PAGE>
transferee shall agree in writing with the Company, prior to and as a condition
precedent to such Transfer, to be bound by all of the provisions of this
Agreement and, provided, further, that the interests in any Family trusts shall
-------- -------
be non-transferable; and (iv) by will or the laws of descent and distribution,
in which event each such transferee shall be bound by all of the provisions of
this Agreement to the same extent as if such transferee were the deceased
Founder (or permitted transferee).
(c) If requested in writing by the managing underwriters, if any, of
any Public Offering, Founder agrees not to offer, sell, contract to sell or
otherwise dispose of any Shares except as part of such Public Offering within
thirty (30) days before or one hundred and eighty (180) days after the effective
date of the registration statement filed with respect to said offering, and the
Corporation hereby also so agrees; provided, however, that this restriction will
--------
not apply to transfers permitted under Section 3.2(b) provided such transferee
agrees to be bound by the restriction contained in this Section 4.1(b).
Notwithstanding the foregoing, in the event that Founder shall have accepted an
offer to purchase Offered Shares (as defined below) which have been offered
pursuant to Section 4.2(a), Founder shall not be prohibited from consummating
such sale, provided, that the purchaser agrees to be bound by the restrictions
--------
contained in this Section 4.1(b).
4.2 Right of First Offer on Dispositions.
------------------------------------
(a) Without limiting Founder's right to Transfer all or any part of
its Shares pursuant to any other provisions of this Agreement, if Founder
desires to Transfer all or any part of its Shares pursuant to this Section 4.2,
Founder shall submit a written offer (the "Offer") to sell such Shares (the
-----
"Offered Shares") to the Founding Members and the Corporation, which Offer shall
--------------
specify the number of Offered Shares proposed to be sold, the total number of
Shares owned by the Founder, and the terms and conditions, including price, at
which the Shares are being offered.
(b) Each of the Founding Members shall have the right to purchase
that number of Offered Shares, on the same terms and conditions specified in the
Offer, as shall be equal to the number of Offered Shares multiplied by a
fraction, the numerator of which shall be the number of Common Shares then owned
by such Founding Members and the denominator of which shall be the aggregate
number of Common Shares then owned by all of the Founding Members (the "Pro Rata
--------
Fraction").
- --------
(c) The Corporation shall have the right to purchase all of the
remaining Offered Shares, on the same terms and conditions specified in the
Offer, in excess of the Offered Shares accepted by the Founding Members.
(d) The Founding Members shall have a right of oversubscription such
that, if any Founding Member fails to accept the Offer as to its full Pro Rata
Fraction, it shall have the right to purchase up to the balance of the Offered
Shares not so purchased. Such right of oversubscription may be exercised by such
Founding Member by accepting the offer as to more than its Pro Rata Fraction.
5
<PAGE>
(e) If a Founding Member desires to purchase all or any part of the
Offered Shares on the same terms and conditions specified in the Offer, such
Founding Member (a "Purchasing Founder") shall communicate in writing to the
------------------
Founder and the Corporation its election to purchase (an "Acceptance"), which
----------
Acceptance shall state the number of Offered Shares the Purchasing Founder
desires to purchase and shall be delivered in person or mailed to the Founder at
the address set forth in the Offer, with a copy to the Corporation and the other
Founding Member, within 20 days of the date the Offer was made by the Founder
pursuant to Section 4.2(a).
(f) If the Corporation desires to purchase all or any part of the
Offered Shares on the same terms and conditions specified in the Offer, the
Corporation shall deliver its Acceptance to the Founder and the Founding
Members, which Acceptance shall state the number of Offered Shares the
Corporation desires to purchase and shall be delivered in person or mailed to
the Founder at the address set forth in the Offer, with a copy to the Founding
Member, within 20 days of the date the Offer was made by the Founder pursuant to
Section 4.2(a).
(g) If the Corporation and Founding Members elect to purchase all of
the Offered Shares, sale of the Offered Shares pursuant to this Section 4.2
shall be made at the offices of the Corporation on the 45th day following the
expiration of the 20-day period described above (or if such 45th day is not a
business day, then on the next succeeding business day). Such sales shall be
effected by the Founder's delivery to each Purchasing Founder or the
Corporation, as the case may be, of a certificate or certificates evidencing the
Offered Shares to be purchased by it, him or her, duly endorsed for transfer to
the Purchasing Founder or the Corporation, as the case may be, which Offered
Shares shall be delivered free and clear of all liens, charges, claims and
encumbrances of any nature whatsoever, against payment to the Founder of the
purchase price therefor by the Corporation or such Purchasing Founder, as the
case may be. Payment for the Offered Shares shall be made as provided in the
Offer or by wire transfer or certified check.
(h) If the Purchasing Founders and the Corporation do not elect to
purchase all of the Offered Shares, then the Offered Shares may be sold by the
Founder at any time within 150 days after the date the Offer was made by the
Founder pursuant to Section 4.2(a). Any such sale shall be upon terms and
conditions, including price, not less favorable to the Founder than those
specified in the Offer. Any Offered Shares not sold within such 150-day period
shall continue to be subject to the requirements of a prior offer pursuant to
this Section 4.2.
SECTION 5. Representations.
---------------
5.1 Representations of Founder. In connection with Founder's
--------------------------
purchase of the Shares, Founder hereby represents and warrants to the
Corporation as follows:
(a) Investment Intent; Capacity to Protect Interests. Founder is
------------------------------------------------
purchasing the Shares solely for its own account for investment and not with a
view to or for sale in connection with any distribution of the Shares or any
portion thereof and not with any present intention of selling, offering to sell
or otherwise disposing of or distributing the Shares or any portion thereof
6
<PAGE>
in any transaction other than a transaction exempt from registration under the
Securities Act. Founder also represents that the entire legal and beneficial
interest of the Shares is being purchased, and will be held, for its account
only, and neither in whole or in part for any other person.
(b) Restricted Securities. Founder understands and acknowledges that
---------------------
the sale of the Shares has not been registered under the Securities Act; that
the Shares must be held indefinitely unless subsequently registered under the
Securities Act or an exemption from such registration is available; and that the
Corporation is under no obligation to register the Shares.
(c) Disposition under Rule 144. Founder understands that the Shares
--------------------------
are restricted securities within the meaning of Rule 144 promulgated under the
Securities Act; that the exemption from registration under Rule 144 will not be
available in any event for at least two years from the date of purchase of any
payment for the Shares, and even then will not be available unless (i) a public
trading market then exists for the Shares, (ii) adequate information concerning
the Corporation is then available to the public, and (iii) other terms and
conditions of Rule 144 are complied with; and that any sale of the Shares may be
made only in limited amounts in accordance with such terms and conditions.
(d) Accredited Investor. Founder is an "accredited investor", as
-------------------
defined in Rule 501 under the Securities Act.
5.2 Representations of the Corporation. The Corporation represents
----------------------------------
to Founder that:
(a) The execution, delivery and performance by the Corporation of
this Agreement and all transactions contemplated by this Agreement have been
duly authorized by all action required by law, its Certificate of Incorporation,
its Bylaws or otherwise.
(b) This Agreement has been duly executed and delivered by the
Corporation and constitutes the legal, valid and binding obligation of the
Corporation enforceable against it in accordance with its terms.
SECTION 6. Withholding. Upon the request of the Corporation, Founder shall
-----------
promptly pay to the Corporation, or make arrangements satisfactory to the
Corporation regarding payment of, any Federal, state or local taxes of any kind
required by law to be withheld with respect to the Shares (or any distributions
of other securities or property (including cash) thereon or issued in
replacement thereof).
SECTION 7. Remedies. In case any one or more of the covenants and/or
--------
agreements set forth in this Agreement shall have been breached by any party
hereto, the party entitled to the benefit of such covenants or agreements may
proceed to protect and enforce its rights either by suit in equity and/or by
action at law, including, but not limited to, (a) an action for damages as a
result of any such breach, (b) an action for specific performance of any such
covenant or agreement contained in this Agreement, and/or (c) a temporary or
permanent injunction, in any
7
<PAGE>
case without showing any actual damage. The rights, power and remedies of the
parties under this Agreement are cumulative and not exclusive of any other
agreement or law. No single or partial assertion or exercise of any right, power
or remedy of a party hereunder shall preclude any other or further assertion or
exercise thereof. Any purported Transfer in violation of the provisions of this
Agreement shall be null and void ab initio.
-- ------
SECTION 8. Successors and Assigns. Except as otherwise expressly provided
----------------------
herein, this Agreement shall bind and inure to the benefit of the Corporation,
Founder, the respective successors or heirs, distributees and personal
representatives and permitted assigns of the Corporation and Founder, and each
other person who shall properly become a registered holder of any Shares that
have not theretofore been sold to the public pursuant to a registration
statement under the Securities Act or Rule 144 or Rule 144A (or any similar or
successor rule).
SECTION 9. Entire Agreement. This Agreement contains the entire agreement
----------------
among the parties with respect to the subject matter hereof and supersedes other
prior and contemporaneous arrangements or understandings with respect thereto.
SECTION 10. Notices. All notices, consents and other communications under
-------
this Agreement shall be in writing and shall be deemed to have been duly given
(a) when delivered by hand, (b) one (1) business day after the business day of
transmission, if sent by telex or telecopier (with receipt confirmed), provided
that a copy is mailed by registered mail, return receipt requested, or (c) one
(1) business day after the business day of deposit with the carrier, if sent by
Express Mail, Federal Express or other express delivery service (receipt
requested), in each case to the appropriate addresses, telex numbers and
telecopier numbers set forth below (or to such other addresses or telecopy
numbers as a party may designate as to itself by notice to the other parties):
(a) If to Founder:
Scheer Investment Holdings, L.L.C.
250 West Main Street
Branford, CT 06405
Attention: Managing Member
Telecopier No.:
(203) 481-4164
(b) If to the Corporation:
OraPharma, Inc.
1200 Route 22 East
Suite 2000
Bridgewater, NJ 08807
Attention: Chief Executive Officer
Telecopier No.: (908) 806-6199
8
<PAGE>
with a copy to:
Sills Cummis Zuckerman Radin
Tischman Epstein & Gross, P.A.
One Riverfront Plaza
Newark, New Jersey 07102
Telecopier No.: (201) 643-6500
Attention: Ira A. Rosenberg, Esq.
SECTION 11. Changes. The terms and provisions of this Agreement may not be
-------
modified or amended, or any of the provisions hereof waived, temporarily or
permanently, without the prior written consent of each of the parties hereto.
SECTION 12. Counterparts. This Agreement may be executed in any number of
------------
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
SECTION 13. Headings. The benefits of the various sections of this
--------
Agreements have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
SECTION 14. Nouns and Pronouns. Whenever the context may require, any
------------------
pronouns used herein shall include the corresponding masculine feminine or
neuter forms, and the singular form of names and pronouns shall include the
plural and vice-versa.
SECTION 15. Severability. Any provision of this Agreement that is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability. Such
prohibition or unenforceability in any one jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
SECTION 16. Governing Law; Jurisdiction. This Agreement and (unless
---------------------------
otherwise provided) all amendments hereof and waivers and consents hereunder
shall be governed by the internal law of the State of New Jersey, without regard
to the conflicts of law principles thereof.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first written above.
WITNESS ORAPHARMA, INC.
/s/ Elaine C. Phillips By: /s/ Michael Kishbauch
- ---------------------- ------------------------------
Michael Kishbauch, President
WITNESS SCHEER INVESTMENT HOLDINGS I, L.L.C.
/s/ Virginia A. Van Norden By: /s/ David Scheer
- -------------------------- -----------------------------
David Scheer, Managing Member
10
<PAGE>
Exhibit 4.15
RESTRICTED STOCK PURCHASE AGREEMENT
-----------------------------------
THIS RESTRICTED STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of
---------
the 26th day of February, 1997, by and between OraPharma, Inc., a Delaware
corporation (the "Corporation") and Oak VI Affiliates Fund, Limited Partnership,
-----------
a Connecticut limited partnership ("Founder").
-------
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Founder wishes to purchase 8,527 shares of the Corporation's
Common Stock, $.001 par value per share (the "Common Stock"); and
------------
WHEREAS, the Corporation has agreed to sell Founder 8,527 shares of Common
Stock at a purchase price of $.001 per share (the "Original Cost Per Share"),
-----------------------
subject to the terms and provisions of this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties do hereby agree as
follows:
SECTION 1. Definitions.
-----------
"Founding Members" shall mean Oak Investment Partners VI, Limited
----------------
Partnership and Scheer Investment Holdings I, L.L.C.
"Person" shall mean and include a natural person, a corporation, a
------
partnership, a limited liability company, a trust, an unincorporated
organization, an educational institution, a government or any department, agency
or political subdivision thereof, or any other entity.
"Securities Act" shall mean the Securities Act of 1933, as amended, and any
--------------
successor statute and the rules and regulations of the Securities and Exchange
Commission thereunder, as shall be in effect at the applicable time.
"Shares" shall mean the 8,527 shares of Common Stock purchased by Founder
------
hereunder.
"Stockholders Agreement" shall mean the Stockholders Agreement dated as of
----------------------
even date herewith by and among the Corporation, Founder, the Founding Members
and the Purchasers.
"Transfer" shall include any direct or indirect sale, assignment, transfer,
--------
pledge (but not including a pledge in favor of the Corporation), hypothecation
or other disposition of any Shares or of any legal or beneficial interest
therein.
<PAGE>
SECTION 2. Sale to Founder of Common Stock. Subject to the terms and
-------------------------------
conditions contained herein, the Corporation hereby sells, transfers and assigns
to Founder, and Founder hereby purchases from the Corporation, the Shares. The
Corporation hereby acknowledges receipt from Founder of payment of the Original
Cost Per Share (or $8.53 in the aggregate).
SECTION 3. Legend on Shares and Notice of Transfer. Founder hereby
---------------------------------------
acknowledges and agrees that the issuance by the Corporation of the Shares
hereunder is subject to the execution by Founder of the Stockholders Agreement.
Founder hereby acknowledges and agrees that the Shares shall be bear such
legends as are required pursuant to the terms of the Stockholders Agreement.
SECTION 4. Restrictions on Transfer. Founder agrees that it shall not
------------------------
Transfer any of its Shares except as provided in the Stockholders Agreement.
SECTION 5. Representations.
---------------
5.1 Representations of Founder. In connection with Founder's purchase of
--------------------------
the Shares, Founder hereby represents and warrants to the Corporation as
follows:
(a) Investment Intent; Capacity to Protect Interests. Founder is
------------------------------------------------
purchasing the Shares solely for its own account for investment and not with a
view to or for sale in connection with any distribution of the Shares or any
portion thereof and not with any present intention of selling, offering to sell
or otherwise disposing of or distributing the Shares or any portion thereof in
any transaction other than a transaction exempt from registration under the
Securities Act. Founder also represents that the entire legal and beneficial
interest of the Shares is being purchased, and will be held, for its account
only, and neither in whole or in part for any other person.
(b) Restricted Securities. Founder understands and acknowledges that
---------------------
the sale of the Shares has not been registered under the Securities Act; that
the Shares must be held indefinitely unless subsequently registered under the
Securities Act or an exemption from such registration is available; and that the
Corporation is under no obligation to register the Shares.
(c) Disposition under Rule 144. Founder understands that the Shares
--------------------------
are restricted securities within the meaning of Rule 144 promulgated under the
Securities Act; that the exemption from registration under Rule 144 will not be
available in any event for at least two years from the date of purchase of any
payment for the Shares, and even then will not be available unless (i) a public
trading market then exists for the Shares, (ii) adequate information concerning
the Corporation is then available to the public, and (iii) other terms and
conditions of Rule 144 are complied with; and that any sale of the Shares may be
made only in limited amounts in accordance with such terms and conditions.
(d) Accredited Investor. Founder is an "accredited investor", as
-------------------
defined in Rule 501 under the Securities Act.
<PAGE>
5.2 Representations of the Corporation. The Corporation represents to
----------------------------------
Founder that:
(a) The execution, delivery and performance by the Corporation of this
Agreement and all transactions contemplated by this Agreement have been duly
authorized by all action required by law, its Certificate of Incorporation, its
Bylaws or otherwise.
(b) This Agreement has been duly executed and delivered by the
Corporation and constitutes the legal, valid and binding obligation of the
Corporation enforceable against it in accordance with its terms.
SECTION 6. Withholding. Upon the request of the Corporation, Founder
-----------
shall promptly pay to the Corporation, or make arrangements satisfactory to the
Corporation regarding payment of, any Federal, state or local taxes of any kind
required by law to be withheld with respect to the Shares (or any distributions
of other securities or property (including cash) thereon or issued in
replacement thereof).
SECTION 7. Remedies. In case any one or more of the covenants and/or
--------
agreements set forth in this Agreement shall have been breached by any party
hereto, the party entitled to the benefit of such covenants or agreements may
proceed to protect and enforce its rights either by suit in equity and/or by
action at law, including, but not limited to, (a) an action for damages as a
result of any such breach, (b) an action for specific performance of any such
covenant or agreement contained in this Agreement, and/or (c) a temporary or
permanent injunction, in any case without showing any actual damage. The
rights, power and remedies of the parties under this Agreement are cumulative
and not exclusive of any other agreement or law. No single or partial assertion
or exercise of any right, power or remedy of a party hereunder shall preclude
any other or further assertion or exercise thereof. Any purported Transfer in
violation of the provisions of this Agreement shall be null and void ab initio.
-- ------
SECTION 8. Successors and Assigns. Except as otherwise expressly
----------------------
provided herein, this Agreement shall bind and inure to the benefit of the
Corporation, Founder, the respective successors or heirs, distributees and
personal representatives and permitted assigns of the Corporation and Founder,
and each other person who shall properly become a
registered holder of any Shares that have not theretofore been sold to the
public pursuant to a registration statement under the Securities Act or Rule 144
or Rule 144A (or any similar or successor rule).
SECTION 9. Entire Agreement. This Agreement contains the entire
----------------
agreement among the parties with respect to the subject matter hereof and
supersedes other prior and contemporaneous arrangements or understandings with
respect thereto.
SECTION 10. Notices. All notices, consents and other communications
-------
under this Agreement shall be in writing and shall be deemed to have been duly
given (a) when delivered by hand, (b) one (1) business day after the business
day of transmission, if sent by telex or telecopier (with receipt confirmed),
provided that a copy is mailed by registered mail, return receipt requested, or
(c) one (1) business day after the business day of deposit with the carrier, if
sent by Express Mail, Federal Express or other express delivery service (receipt
requested), in each case to the appropriate addresses, telex numbers and
telecopier numbers set forth below (or to such other addresses or telecopy
numbers as a party may designate as to itself by notice to the other parties):
(a) If to Founder:
Oak Investment Partners
One Gorham Island
Westport, Connecticut 06880
Telecopier No.: (203) 226-8346
Attention: Eileen M. More
with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Telecopier No.: (212) 408-2420
Attention: Julie M. Allen, Esq.
<PAGE>
(a) If to the Corporation:
OraPharma, Inc.
1200 Route 22 East
Suite 2000
Bridgewater, NJ 08807
Attention: Chief Executive Officer
Telecopier No.: 908-806-6199
with a copy to:
Sills Cummis Zuckerman Radin
Tischman Epstein & Gross, P.A.
One Riverfront Plaza
Newark, New Jersey 07102
Telecopier No.: (201) 643-6500
Attention: Ira A. Rosenberg, Esq.
SECTION 11. Changes. The terms and provisions of this Agreement may
-------
not be modified or amended, or any of the provisions hereof waived, temporarily
or permanently, without the prior written consent of each of the parties hereto.
SECTION 12. Counterparts. This Agreement may be executed in any
------------
number of counterparts, and each such counterpart shall be deemed to be an
original instrument, but all such counterparts together shall constitute but one
agreement.
SECTION 13. Headings. The benefits of the various sections of this
--------
Agreements have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
SECTION 14. Nouns and Pronouns. Whenever the context may require, any
------------------
pronouns used herein shall include the corresponding masculine feminine or
neuter forms, and the singular form of names and pronouns shall include the
plural and vice-versa.
SECTION 15. Severability. Any provision of this Agreement that is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability. Such
prohibition or unenforceability in any one jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
SECTION 16. Governing Law; Jurisdiction. This Agreement and (unless
---------------------------
otherwise provided) all amendments hereof and waivers and consents hereunder
shall be governed by the internal law of the State of New Jersey, without regard
to the conflicts of law principles thereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first written above.
ATTEST: ORAPHARMA, INC.
/s/ Dorinda Alevritis By:/s/ Michael Kishbauch
- ---------------------- ----------------------
ATTEST: OAK VI AFFILIATES FUND, LIMITED
PARTNERSHIP
By: Oak VI Affiliates, L.L.C.
/s/ Elaine C. Phillips By:/s/ Eileen M. More
- ----------------------- -------------------
Eileen M. More, Managing
Member
<PAGE>
Exhibit 4.16
RESTRICTED STOCK PURCHASE AGREEMENT
-----------------------------------
THIS RESTRICTED STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of
---------
the 26th day of February, 1997, by and between OraPharma, Inc., a Delaware
corporation (the "Corporation"), and Oak Investment Partners VI, Limited
-----------
Partnership, a Connecticut limited partnership ("Founder").
-------
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Founder wishes to purchase 365,473 shares of the Corporation's
Common Stock, $.001 par value per share (the "Common Stock"); and
------------
WHEREAS, the Corporation has agreed to sell Founder 365,473 shares of
Common Stock at a purchase price of $.001 per share (the "Original Cost Per
-----------------
Share"), subject to the terms and provisions of this Agreement.
- -----
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties do hereby agree as
follows:
SECTION 1. Definitions.
-----------
As used in this Agreement, the following terms shall have the following
respective meanings:
"Founding Members" shall mean Oak VI Affiliates Fund, Limited Partnership
----------------
and Scheer Investment Holdings I, L.L.C.
"Person" shall mean and include a natural person, a corporation, a
------
partnership, a limited liability company, a trust, an unincorporated
organization, an educational institution, a government or any department, agency
or political subdivision thereof, or any other entity.
"Securities Act" shall mean the Securities Act of 1933, as amended, and any
--------------
successor statute and the rules and regulations of the Securities and Exchange
Commission thereunder, as shall be in effect at the applicable time.
"Shares" shall mean the 365,473 shares of Common Stock purchased by Founder
------
hereunder.
"Stockholders Agreement" shall mean the Stockholders Agreement dated as of
----------------------
even date herewith by and among the Corporation, Founder, the Founding Members
and the Purchasers.
"Transfer" shall include any direct or indirect sale, assignment, transfer,
--------
pledge (but not including a pledge in favor of the Corporation), hypothecation
or other disposition of any Shares or of any legal or beneficial interest
therein.
<PAGE>
SECTION 2. Sale to Founder of Common Stock. Subject to the terms and
-------------------------------
conditions contained herein, the Corporation hereby sells, transfers and assigns
to Founder, and Founder hereby purchases from the Corporation, the Shares. The
Corporation hereby acknowledges receipt from Founder of payment of the Original
Cost Per Share (or $365.47 in the aggregate).
SECTION 3. Legend on Shares and Notice of Transfer. Founder hereby
---------------------------------------
acknowledges and agrees that the issuance by the Corporation of the Shares
hereunder is subject to the execution by Founder of the Stockholders Agreement.
Founder hereby acknowledges and agrees that the Shares shall be bear such
legends as are required pursuant to the terms of the Stockholders Agreement.
SECTION 4. Restrictions on Transfer. Founder agrees that it shall not
------------------------
Transfer any of its Shares except as provided in the Stockholders Agreement.
SECTION 5. Representations.
---------------
5.1 Representations of Founder. In connection with Founder's purchase of
--------------------------
the Shares, Founder hereby represents and warrants to the Corporation as
follows:
(a) Investment Intent; Capacity to Protect Interests. Founder is
------------------------------------------------
purchasing the Shares solely for its own account for investment and not with a
view to or for sale in connection with any distribution of the Shares or any
portion thereof and not with any present intention of selling, offering to sell
or otherwise disposing of or distributing the Shares or any portion thereof in
any transaction other than a transaction exempt from registration under the
Securities Act. Founder also represents that the entire legal and beneficial
interest of the Shares is being purchased, and will be held, for its account
only, and neither in whole or in part for any other person.
(b) Restricted Securities. Founder understands and acknowledges that
---------------------
the sale of the Shares has not been registered under the Securities Act; that
the Shares must be held indefinitely unless subsequently registered under the
Securities Act or an exemption from such registration is available; and that the
Corporation is under no obligation to register the Shares.
(c) Disposition under Rule 144. Founder understands that the Shares
--------------------------
are restricted securities within the meaning of Rule 144 promulgated under the
Securities Act; that the exemption from registration under Rule 144 will not be
available in any event for at least two years from the date of purchase of any
payment for the Shares, and even then will not be available unless (i) a public
trading market then exists for the Shares, (ii) adequate information concerning
the Corporation is then available to the public, and (iii) other terms and
conditions of Rule 144 are complied with; and that any sale of the Shares may be
made only in limited amounts in accordance with such terms and conditions.
(d) Accredited Investor. Founder is an "accredited investor", as
-------------------
defined in Rule 501 under the Securities Act.
-2-
<PAGE>
5.2 Representations of the Corporation. The Corporation represents to
----------------------------------
Founder that:
(a) The execution, delivery and performance by the Corporation of this
Agreement and all transactions contemplated by this Agreement have been duly
authorized by all action required by law, its Certificate of Incorporation, its
Bylaws or otherwise.
(b) This Agreement has been duly executed and delivered by the
Corporation and constitutes the legal, valid and binding obligation of the
Corporation enforceable against it in accordance with its terms.
SECTION 6. Withholding. Upon the request of the Corporation, Founder
-----------
shall promptly pay to the Corporation, or make arrangements satisfactory to the
Corporation regarding payment of, any Federal, state or local taxes of any kind
required by law to be withheld with respect to the Shares (or any distributions
of other securities or property (including cash) thereon or issued in
replacement thereof).
SECTION 7. Remedies. In case any one or more of the covenants and/or
--------
agreements set forth in this Agreement shall have been breached by any party
hereto, the party entitled to the benefit of such covenants or agreements may
proceed to protect and enforce its rights either by suit in equity and/or by
action at law, including, but not limited to, (a) an action for damages as a
result of any such breach, (b) an action for specific performance of any such
covenant or agreement contained in this Agreement, and/or (c) a temporary or
permanent injunction, in any case without showing any actual damage. The
rights, power and remedies of the parties under this Agreement are cumulative
and not exclusive of any other agreement or law. No single or partial assertion
or exercise of any right, power or remedy of a party hereunder shall preclude
any other or further assertion or exercise thereof. Any purported Transfer in
violation of the provisions of this Agreement shall be null and void ab initio.
-- ------
SECTION 8. Successors and Assigns. Except as otherwise expressly
----------------------
provided herein, this Agreement shall bind and inure to the benefit of the
Corporation, Founder, the respective successors or heirs, distributees and
personal representatives and permitted assigns of the Corporation and Founder,
and each other person who shall properly become a registered holder of any
Shares that have not theretofore been sold to the public pursuant to a
registration statement under the Securities Act or Rule 144 or Rule 144A (or any
similar or successor rule).
SECTION 9. Entire Agreement. This Agreement contains the entire
----------------
agreement among the parties with respect to the subject matter hereof and
supersedes other prior and contemporaneous arrangements or understandings with
respect thereto.
SECTION 10. Notices. All notices, consents and other communications
-------
under this Agreement shall be in writing and shall be deemed to have been duly
given (a) when delivered by hand, (b) one (1) business day after the business
day of transmission, if sent by telex or telecopier (with receipt confirmed),
provided that a copy is mailed by registered mail, return receipt requested, or
(c) one (1) business day after the business day of deposit with the carrier, if
-3-
<PAGE>
sent by Express Mail, Federal Express or other express delivery service (receipt
requested), in each case to the appropriate addresses, telex numbers and
telecopier numbers set forth below (or to such other addresses or telecopy
numbers as a party may designate as to itself by notice to the other parties):
(a) If to Founder:
Oak Investment Partners
One Gorham Island
Westport, Connecticut 06880
Telecopier No.: (203) 226-8346
Attention: Eileen M. More
with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Telecopier No.: (212) 408-2420
Attention: Julie M. Allen, Esq.
(b) If to the Corporation:
OraPharma, Inc.
1200 Route 22 East
Suite 2000
Bridgewater, NJ 08807
Attention: Chief Executive Officer
Telecopier No.: 908-806-6199
with a copy to:
Sills Cummis Zuckerman Radin
Tischman Epstein & Gross, P.A.
One Riverfront Plaza
Newark, New Jersey 07102
Telecopier No.: (201) 643-6500
Attention: Ira A. Rosenberg, Esq.
SECTION 11. Changes. The terms and provisions of this Agreement may
-------
not be modified or amended, or any of the provisions hereof waived, temporarily
or permanently, without the prior written consent of each of the parties hereto.
-4-
<PAGE>
SECTION 12. Counterparts. This Agreement may be executed in any
------------
number of counterparts, and each such counterpart shall be deemed to be an
original instrument, but all such counterparts together shall constitute but one
agreement.
SECTION 13. Headings. The benefits of the various sections of this
--------
Agreements have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
SECTION 14. Nouns and Pronouns. Whenever the context may require, any
------------------
pronouns used herein shall include the corresponding masculine feminine or
neuter forms, and the singular form of names and pronouns shall include the
plural and vice-versa.
SECTION 15. Severability. Any provision of this Agreement that is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability. Such
prohibition or unenforceability in any one jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
SECTION 16. Governing Law; Jurisdiction. This Agreement and (unless
---------------------------
otherwise provided) all amendments hereof and waivers and consents hereunder
shall be governed by the internal law of the State of New Jersey, without regard
to the conflicts of law principles thereof.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first written above.
WITNESS ORAPHAMRA, INC.
/s/ Dorinda Alevritis By: /s/ Michael Kishbauch
- ------------------------------ ------------------------------------
WITNESS OAK INVESTMENT PARTNERS VI,
LIMITED PARTNERSHIP
By: Oak Associates VI, L.L.C.
/s/ Elaine C. Phillips By: /s/ Eileen M. More
- ------------------------------ ------------------------------------
Eileen M. More, Managing
Member
-6-
<PAGE>
Exhibit 4.17
RESTRICTED STOCK PURCHASE AGREEMENT
-----------------------------------
THIS RESTRICTED STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of
---------
the 6th day of March, 1997, by and between OraPharma, Inc., a Delaware
corporation (the "Corporation"), and Michael Kishbauch ("Employee").
----------- --------
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Employee is currently the President of the Corporation; and
WHEREAS, Employee wishes to purchase, and the Corporation wishes to sell to
Employee, 672,925 shares of the Corporation's common stock, $.001 par value per
share ("Common Stock") at a price of $.001 per share (the "OCPS"); and
------------ ----
WHEREAS, such shares of Common Stock will be issued to Employee in order to
provide an incentive to Employee to exercise his best efforts on behalf of, and
to remain as an employee of, the Corporation, subject to the terms and
provisions of this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties do hereby agree as
follows:
SECTION 1. Definitions.
-----------
As used in this Agreement, the following terms shall have the following
respective meanings:
"Common Shares" shall mean the issued and outstanding shares of the
-------------
Corporation's Common Stock, at the applicable time.
"Equity Stock" shall have the meaning set forth in Rule 3a11-1 under the
------------
Securities Exchange Act of 1934, as amended, and any successor statute and the
rules and regulations thereunder, as shall be in effect from time to time.
"Family" shall include any spouse, lineal ancestor or descendant, or
------
sibling, any trust for the exclusive benefit of any of the foregoing, or any
corporation, limited partnership, limited liability company or other entity
majority controlled by any of the foregoing individuals or trusts.
"Stockholders" shall mean the Investors and the Founders, both as defined
------------
in that certain Stockholders Agreement dated the date hereof by and among the
Corporation and certain stockholders of the Corporation.
<PAGE>
"Group" shall mean as to (a) a partnership, any or all of its general or
-----
limited partners or any "affiliate" thereof (as defined by Rule 405 promulgated
under the Securities Act), (b) a trust, any of the beneficiaries, settlers or
grantors now existing or hereafter arising of, or any Person under common
control with, such trust, (c) a corporation, any of its stockholders, any
subsidiary of such corporation or any corporation which is under common control
with such corporation, or any directors, officers or employees of such
corporation, and (d) a limited liability company, any of its members.
"New Securities" shall mean any Equity Stock, including, but not limited
--------------
to, shares of Common Stock, any security which is convertible into or
exercisable or exchangeable for Common Stock, or any right, option or warrant to
acquire any Common Stock of the Corporation.
"Person" shall mean and include a natural person, a corporation, a limited
------
liability company, a partnership, a trust, an unincorporated organization and a
government or any department, agency or political subdivision thereof.
"Preferred Shares" shall mean the Corporation's Series A Preferred Stock,
----------------
$.001 par value per share, and Series B Preferred Stock, $.001 par value per
share, issued or to be issued to certain of the Stockholders pursuant to the
Stock Purchase Agreement dated February 26, 1997 among the Corporation and such
Stockholders, as the same may be amended.
"Pro Rata Fraction" shall mean a fraction, the numerator of which shall be
----------------- ---------
the number of shares of Common Stock then owned by such Stockholder and the
denominator of which shall be the aggregate number of shares of Common Stock
- -----------
then owned by all Stockholders. For the purpose of calculating the Pro Rata
Fraction, each Preferred Share shall be deemed to represent the number of shares
of Common Stock into which the Preferred Share is then convertible.
"Public Offering" shall mean a distribution of New Securities in a firm
---------------
commitment underwritten public offering to the general public pursuant to a
registration statement filed with and declared effective by the Securities and
Exchange Commission pursuant to the Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as amended, and any
--------------
successor statute and the rules and regulations of the Securities and Exchange
Commission thereunder, as shall be in effect at the applicable time.
"Shares" shall mean the 672,925 shares of Common Stock purchased by
------
Employee hereunder.
"Termination of Employment" shall mean the termination of the employment
-------------------------
relationship between the Corporation and Employee.
-2-
<PAGE>
"Transfer" shall include any direct or indirect sale, assignment, transfer,
--------
pledge (but not including a pledge in favor of the Corporation), hypothecation
or other disposition of any Shares or of any legal or beneficial interest
therein.
SECTION 2. Sale to Employee of Common Stock. Subject to the terms and
--------------------------------
conditions contained herein, the Corporation hereby sells, transfers and assigns
to Employee, and Employee hereby purchases from the Corporation, the Shares.
The Corporation hereby acknowledges receipt from Employee of payment of the OCPS
(or $672.93 in the aggregate). Employee covenants and agrees to forward to the
Corporation, if, as and when filed, a copy of any forms filed by Employee with
the Internal Revenue Service with respect to the Shares pursuant to Section
83(b) of the Internal Revenue Code of 1986, as amended.
SECTION 3. Termination of Employment. (a) (i) In the event of the
-------------------------
Termination of Employment of Employee for any reason, the Corporation shall have
the right to purchase from Employee, and if the Corporation exercises its option
pursuant to this Section 3, Employee shall sell to the Corporation upon the
exercise of such right, up to the number of Shares (rounded up to the nearest
whole Share) at the OCPS determined in accordance with the following table:
If the Termination of Employment
Occurs On or Prior to the Percentage of Shares
Following Dates Subject to Repurchase
- ---------------------------------- ----------------------
September 9, 1997 100%
December 9, 1997 80%
March 9, 1998 75%
June 9, 1998 70%
September 9, 1998 65%
December 9, 1998 60%
March 9, 1999 55%
June 9, 1999 50%
September 9, 1999 45%
December 9, 1999 40%
March 9, 2000 35%
June 9, 2000 30%
September 9, 2000 25%
December 9, 2000 20%
March 9, 2001 15%
June 9, 2001 10%
September 9, 2001 5%
After September 9, 2001 0%
(ii) The number of Shares subject to purchase pursuant to this Section
3(a) shall be adjusted to give effect to any stock dividend, or other
distribution of stock made on or in respect of such Shares, or any subdivision,
combination or reclassification of the outstanding capital stock of the
Corporation or received in exchange for the Shares.
(b) In order to exercise the option to purchase Employee's Shares under
this Section 3, the Corporation shall deliver a written notice to Employee,
indicating its election to purchase the Shares and specifying the number of
Shares which the Corporation elects to purchase and the purchase price therefor,
within 30 days after Employee's Termination of Employment.
(c) The repurchase of Shares hereunder shall be made on a date within 90
days of the Termination of Employment, by delivery of payment to the Employee,
by check or wire transfer, against receipt of one or more certificates, properly
endorsed, evidencing the Employee's Shares to be so purchased. If the
repurchase is not consummated by such date, the Corporation may deliver to
Employee by check or wire transfer the applicable repurchase price for the
Shares to be repurchased and may cancel the certificates evidencing such Shares
on the books and records of the Corporation.
-3-
<PAGE>
SECTION 4. Legend on Shares and Notice of Transfer.
---------------------------------------
4.1 Restrictive Legends. (a) Each certificate evidencing Shares, and
-------------------
each certificate evidencing Shares held by subsequent transferees of any such
certificate, shall (unless otherwise permitted by the provisions of Section 4.2
hereof) be stamped or otherwise imprinted with a legend in substantially the
following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY STATE SECURITIES LAW. THESE SECURITIES MAY NOT BE SOLD
OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR ANY EXEMPTION
THEREFROM UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE
STATE SECURITIES LAW.
(b) Each certificate evidencing Shares, and each certificate
evidencing Shares held by subsequent transferees of any such certificate, shall
(unless otherwise permitted by the provisions of Section 4.2 hereof) also be
stamped or otherwise imprinted with a legend in substantially the following
form:
ADDITIONALLY, THE TRANSFER OF THESE SECURITIES IS SUBJECT TO THE TERMS AND
CONDITIONS OF A RESTRICTED STOCK PURCHASE AGREEMENT DATED AS OF MARCH 6,
1996, AMONG ORAPHARMA, INC. AND THE HOLDER OF RECORD OF THIS CERTIFICATE
AND NO SALE, ASSIGNMENT, TRANSFER, PLEDGE, HYPOTHECATION OR OTHER
DISPOSITION OF SUCH SECURITIES SHALL BE VALID OR EFFECTIVE EXCEPT IN
ACCORDANCE WITH SUCH AGREEMENT AND UNTIL SUCH TERMS AND CONDITIONS HAVE
BEEN FULFILLED. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY
WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE
SECRETARY OF ORAPHARMA, INC.
4.2 Notice of Transfer. (a) Employee, and any other holder of any
------------------
Shares by acceptance thereof, agrees that, prior to any Transfer of any Shares,
such holder will give written notice to the Corporation of such holder's
intention to effect such Transfer and to comply in all other respects with the
provisions of this Section 4.2. Each such notice shall contain (i) a statement
setting forth the intention of said holder's prospective transferee with respect
to its retention or disposition of said Shares; and (ii) unless waived by the
Corporation, an opinion of counsel for said holder (who may be the inside or
staff counsel employed by said holder), as to the necessity or non-necessity for
registration under the Securities Act and applicable state securities laws in
connection with such Transfer and stating the factual and statutory basis relied
upon by counsel. The following provisions shall then apply:
(i) If the proposed Transfer of Shares may be effected without
registration or qualification under the Securities Act and any applicable
state securities laws, then the registered holder of such Shares shall be
entitled to Transfer such Shares in accordance with Section 5 hereof and
the intended method of disposition specified in the statement delivered by
said holder to the Corporation.
(ii) If the proposed Transfer of such Shares may not be effected
without registration under the Securities Act or registration or
qualification under any applicable state securities laws, the registered
holder of such Shares shall not be entitled to Transfer such Shares
pursuant to Section 5 hereof until the requisite registration or
qualification is effective.
(b) Notwithstanding the provisions of Section 4.2(a), in the case of a
Transfer by a holder to a member of such holder's Family or Group, no such
opinion of counsel shall be necessary; provided, that the transferee agrees in
--------
writing to be subject to this Agreement to the same extent as if such transferee
were originally a signatory to this Agreement.
(c) Each certificate evidencing the Shares issued upon such Transfer
(and each certificate evidencing any untransferred balance of such Shares) shall
bear the legend set forth in Section 4.1(a) hereof unless (i) in the opinion of
counsel (acceptable to the Corporation) addressed to the Corporation the
registration of future Transfers is not required by the applicable provisions of
the Securities Act or applicable state securities laws; (ii) the Corporation
shall have waived the requirement of such legend; or (iii) in the reasonable
opinion of counsel to the Corporation, such Transfer shall have been made in
connection with an effective registration statement filed pursuant to the
Securities Act or in compliance with the requirements of Rule 144 or Rule 144A
(or any similar or successor rule) promulgated under the Securities Act, and in
compliance with applicable state securities laws.
-4-
<PAGE>
(d) Each certificate evidencing the Shares issued upon such Transfer
(and each certificate evidencing any untransferred balance of such Shares) shall
bear the legend set forth in Section 4.1(b) hereof, for so long as this
Agreement remains in effect. In the event of the termination of this Agreement,
the holder of Shares may request that the Corporation issue a new certificate
not bearing the legend set forth in Section 4.1(b) hereof.
SECTION 5. Covenants of Employee and Corporation.
-------------------------------------
5.1 Prohibited Transfers.
--------------------
(a) Employee agrees that he shall not Transfer any of his Shares which
are subject to repurchase pursuant to Section 3 above at any time. Employee
further agrees that he shall not Transfer any of his Shares which are no longer
subject to repurchase pursuant to Section 3 above without the prior written
consent of the holders of a majority of the outstanding Common Shares held by
the Stockholders, except as provided for in Section 5.2.
(b) Notwithstanding anything to the contrary contained herein,
Employee (and any permitted transferee of Employee) may Transfer all of its, his
or her Shares: (i) if the stockholder is a limited partnership or a trust, to
any member of the Group of which Employee (or such permitted transferee) is a
member; provided, that such transferee shall agree in writing with the
--------
Corporation, prior to and as a condition precedent to such Transfer, to be bound
by all of the provisions of this Agreement; (ii) if the stockholder is a
corporation, to any member of its Group; provided, that such transferee shall
--------
agree in writing with the Corporation, prior to and as a condition precedent to
such Transfer, to be bound by all of the provisions of this Agreement; (iii) to
any member of the Family of Employee (or such permitted transferee); provided,
--------
that such transferee shall agree in writing with the Corporation, prior to and
as a condition precedent to such Transfer, to be bound by all of the provisions
of this Agreement and, provided, further, that the interests in any Family
-------- -------
trusts shall be non-transferable; and (iv) by will or the laws of descent and
distribution, in which event each such transferee shall be bound by all of the
provisions of this Agreement to the same extent as if such transferee were the
deceased Employee (or permitted transferee).
(c) If requested in writing by the managing underwriters, if any, of
any Public Offering, Employee agrees not to offer, sell, contract to sell or
otherwise dispose of any Shares except as part of such Public Offering within
thirty (30) days before or one hundred and eighty (180) days after the effective
date of the registration statement filed with respect to said offering, and the
Corporation hereby also so agrees; provided, however, that this restriction will
--------
not apply to transfers permitted under Section 5.1(b) provided such transferee
agrees to be bound by the restriction contained in this Section 5.1(c).
Notwithstanding the foregoing, in the event that Employee shall have accepted an
offer to purchase Offered Shares (as defined below) which have been offered
pursuant to Section 5.2(a), Employee shall not be prohibited from consummating
such sale, provided, that the purchaser agrees to be bound by the restrictions
--------
contained in this Section 5.1(c).
-5-
<PAGE>
5.2 Right of First Offer on Dispositions.
------------------------------------
(a) Except as provided in Section 5.1(b), if Employee desires to
Transfer all or any part of its Shares pursuant to this Section 5.2 and is not
otherwise prohibited from Transferring his Shares pursuant to Section 5.1(a),
Employee shall submit a written offer (the "Offer") to sell such Shares (the
-----
"Offered Shares") to the Stockholders and the Corporation, which Offer shall
--------------
specify the number of Offered Shares proposed to be sold, the total number of
Shares owned by Employee, and the terms and conditions, including price, at
which the Shares are being offered.
(b) Each of the Stockholders shall have the right to purchase its Pro
Rata Fraction of the Offered Shares.
(c) The Corporation shall have the right to purchase all of the
remaining Offered Shares, on the same terms and conditions specified in the
Offer, in excess of the Offered Shares accepted by the Stockholders.
(d) The Stockholders shall have a right of oversubscription such that,
if any Stockholder fails to accept the Offer as to its full Pro Rata Fraction,
it shall have the right to purchase up to the balance of the Offered Shares not
so purchased. Such right of oversubscription may be exercised by such
Stockholder by accepting the offer as to more than its Pro Rata Fraction.
(e) If a Stockholder desires to purchase all or any part of the
Offered Shares on the same terms and conditions specified in the Offer, such
Stockholder (a "Purchasing Stockholder") shall communicate in writing to
----------------------
Employee and the Corporation its election to purchase (an "Acceptance"), which
----------
Acceptance shall state the number of Offered Shares the Purchasing Stockholder
desires to purchase and shall be delivered in person or mailed to Employee at
the address set forth in the Offer, with a copy to the Corporation and the other
Stockholder, within 20 days of the date the Offer was made by Employee pursuant
to Section 5.2(a).
(f) If the Corporation desires to purchase all or any part of the
Offered Shares on the same terms and conditions specified in the Offer, the
Corporation shall deliver its Acceptance to Employee and the Stockholders, which
Acceptance shall state the number of Offered Shares the Corporation desires to
purchase and shall be delivered in person or mailed to Employee at the address
set forth in the Offer, with a copy to the Stockholder, within 20 days of the
date the Offer was made by Employee pursuant to Section 5.2(a).
(g) If the Corporation and the Stockholders elect to purchase all of
the Offered Shares, sale of the Offered Shares pursuant to this Section 5.2
shall be made at the offices of the Corporation on the 45th day following the
expiration of the 20-day period described above (or if such 45th day is not a
business day, then on the next succeeding business day). Such sales shall be
effected by Employee's delivery to each Purchasing Stockholder or the
Corporation, as the case may be, of a certificate or certificates evidencing the
Offered Shares to be purchased by it, him or her, duly endorsed for transfer to
the Purchasing Stockholder or the Corporation, as the case may be, which Offered
Shares shall be delivered free and clear of all liens, charges, claims and
encumbrances of any nature whatsoever, against payment to Employee of the
purchase price therefor by the Corporation or such Purchasing Stockholder, as
the case may be. Payment for the Offered Shares shall be made as provided in
the Offer or by wire transfer or certified check.
(h) If the Purchasing Stockholders and the Corporation do not elect to
purchase all of the Offered Shares, then the Offered Shares may be sold by
Employee at any time within 150 days after the date the Offer was made by
Employee pursuant to Section 5.2(a). Any such sale shall be upon terms and
conditions, including price, not less favorable to Employee than those specified
in the Offer. Any Offered Shares not sold within such 150-day period shall
continue to be subject to the requirements of a prior offer pursuant to this
Section 5.2.
5.3 Drag Along. Subject to Section 5.2 above, anything in this
----------
Agreement to the contrary notwithstanding, in the event that (i) the Board of
Directors of the Corporation by unanimous vote or unanimous written consent
and/or the holders of sixty-six and two-thirds of the then outstanding Common
Shares by vote or written consent approves a transaction pursuant to which any
Person or Persons not affiliated with any of the Stockholders will acquire 50%
or more of the Common Shares of the Corporation (by stock purchase, merger or
otherwise) or all or substantially all of the assets of the Corporation, upon
the written request of the holders of sixty-six and two-thirds of the Common
Shares, Employee agrees to offer to sell all of his Shares, and to sell all of
his Shares, to such Person or Persons or to vote all of his Shares in favor of
the sale of assets, as the case may be, in either case upon the terms and
conditions of the transaction approved by the Board of Directors of the
Corporation and/or the holders of sixty-six and two-thirds of the Common Shares;
provided, however, that Employee's obligation to sell his Shares pursuant to
- -------- -------
this Section 5.3 shall only apply if all of the Shares are to be sold on the
same terms and conditions. For purposes of this Section 5.3, each Preferred
Share shall be deemed to be the number of shares of Common Stock into which the
Preferred Share is then convertible.
-6-
<PAGE>
SECTION 6. Representations.
---------------
6.1 Representations of Employee. In connection with Employee's
---------------------------
purchase of the Shares, Employee hereby represents and warrants to the
Corporation as follows:
(a) Investment Intent; Capacity to Protect Interests. Employee is
------------------------------------------------
purchasing the Shares solely for his own account for investment and not with a
view to or for sale in connection with any distribution of the Shares or any
portion thereof and not with any present intention of selling, offering to sell
or otherwise disposing of or distributing the Shares or any portion thereof in
any transaction other than a transaction exempt from registration under the
Securities Act. Employee also represents that the entire legal and beneficial
interest of the Shares is being purchased, and will be held, for his account
only, and neither in whole or in part for any other person.
(b) Restricted Securities. Employee understands and acknowledges that
---------------------
the sale of the Shares has not been registered under the Securities Act; that
the Shares must be held indefinitely unless subsequently registered under the
Securities Act or an exemption from such registration is available; and that the
Corporation is under no obligation to register the Shares.
(c) Disposition under Rule 144. Employee understands that the Shares
--------------------------
are restricted securities within the meaning of Rule 144 promulgated under the
Securities Act; that the exemption from registration under Rule 144 will not be
available in any event for at least two years from the date of purchase of any
payment for the Shares, and even then will not be available unless (i) a public
trading market then exists for the Shares, (ii) adequate information concerning
the Corporation is then available to the public, and (iii) other terms and
conditions of Rule 144 are complied with; and that any sale of the Shares may be
made only in limited amounts in accordance with such terms and conditions.
(d) Accredited Investor. Employee is an "accredited investor", as
-------------------
defined in Rule 501 under the Securities Act.
6.2 Representations of the Corporation. The Corporation represents
----------------------------------
to Employee that:
(a) The execution, delivery and performance by the Corporation of this
Agreement and all transactions contemplated by this Agreement have been duly
authorized by all action required by law, its Certificate of Incorporation, its
Bylaws or otherwise.
(b) This Agreement has been duly executed and delivered by the
Corporation and constitutes the legal, valid and binding obligation of the
Corporation enforceable against it in accordance with its terms.
SECTION 7. Withholding. Upon the request of the Corporation, Employee
-----------
shall promptly pay to the Corporation, or make arrangements satisfactory to the
Corporation regarding payment of, any Federal, state or local taxes of any kind
required by law to be withheld with respect to the Shares (or any distributions
of other securities or property (including cash) thereon or issued in
replacement thereof).
SECTION 8. Remedies. In case any one or more of the covenants and/or
--------
agreements set forth in this Agreement shall have been breached by any party
hereto, the party entitled to the benefit of such covenants or agreements may
proceed to protect and enforce its rights either by suit in equity and/or by
action at law, including, but not limited to, (a) an action for damages as a
result of any such breach, (b) an action for specific performance of any such
covenant or agreement contained in this Agreement, and/or (c) a temporary or
permanent injunction, in any case without showing any actual damage. The
rights, power and remedies of the parties under this Agreement are cumulative
and not exclusive of any other agreement or law. No single or partial assertion
or exercise of any right, power or remedy of a party hereunder shall preclude
any other or further assertion or exercise thereof. Any purported Transfer in
violation of the provisions of this Agreement shall be null and void ab initio.
-- ------
-7-
<PAGE>
SECTION 9. Successors and Assigns. Except as otherwise expressly
----------------------
provided herein, this Agreement shall bind and inure to the benefit of the
Corporation, Employee, the respective successors or heirs, distributees and
personal representatives and permitted assigns of the Corporation and Employee,
and each other person who shall properly become a registered holder of any
Shares that have not theretofore been sold to the public pursuant to a
registration statement under the Securities Act or Rule 144 or Rule 144A (or any
similar or successor rule).
SECTION 10. Entire Agreement. This Agreement contains the entire
----------------
agreement among the parties with respect to the subject matter hereof and
supersedes other prior and contemporaneous arrangements or understandings with
respect thereto.
SECTION 11. Notices. All notices, consents and other communications
-------
under this Agreement shall be in writing and shall be deemed to have been duly
given (a) when delivered by hand, (b) one (1) business day after the business
day of transmission, if sent by telex or telecopier (with receipt confirmed),
provided that a copy is mailed by registered mail, return receipt requested, or
(c) one (1) business day after the business day of deposit with the carrier, if
sent by Express Mail, Federal Express or other express delivery service (receipt
requested), in each case to the appropriate addresses, telex numbers and
telecopier numbers set forth below (or to such other addresses or telecopy
numbers as a party may designate as to itself by notice to the other parties):
(a) If to Employee:
37 Hancock Court
Flemington, New Jersey 08822
(b) If to the Corporation:
OraPharma, Inc.
1200 Route 22 East
Suite 2000
Bridgewater, NJ 08807
Attention: Chief Executive Officer
Telecopier No.: (908) 806-6199
with a copy to:
Sills Cummis Zuckerman Radin
Tischman Epstein & Gross, P.A.
One Riverfront Plaza
Newark, New Jersey 07102
Telecopier No.: (201) 643-6500
Attention: Ira A. Rosenberg, Esq.
SECTION 12. Changes. The terms and provisions of this Agreement may
-------
not be modified or amended, or any of the provisions hereof waived, temporarily
or permanently, without the prior written consent of each of the parties hereto.
-8-
<PAGE>
SECTION 13. Counterparts. This Agreement may be executed in any
------------
number of counterparts, and each such counterpart shall be deemed to be an
original instrument, but all such counterparts together shall constitute but one
agreement.
SECTION 14. Headings. The benefits of the various sections of this
--------
Agreements have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
SECTION 15. Nouns and Pronouns. Whenever the context may require, any
------------------
pronouns used herein shall include the corresponding masculine feminine or
neuter forms, and the singular form of names and pronouns shall include the
plural and vice-versa.
SECTION 16. Severability. Any provision of this Agreement that is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability. Such
prohibition or unenforceability in any one jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
SECTION 17. Governing Law; Jurisdiction. This Agreement and (unless
---------------------------
otherwise provided) all amendments hereof and waivers and consents hereunder
shall be governed by the internal law of the State of New Jersey, without regard
to the conflicts of law principles thereof.
-9-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first written above.
WITNESS ORAPHARMA, INC.
- ------------------------ By:----------------------------
Michael Kishbauch, President
WITNESS
- -----------------------------------------------------
Michael Kishbauch
-10-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first written above.
WITNESS ORAPHARMA, INC.
/s/ Dorinda Alevritis By: /s/ Michael Kishbauch
- ---------------------- ------------------------------
Michael Kishbauch, President
WITNESS
/s/ Dorinda Alevritis By: /s/ Michael Kishbauch
- ---------------------- -----------------------------
Michael Kishbauch, President
-11-
<PAGE>
AMENDMENT TO RESTRICTED STOCK PURCHASE AGREEMENT
------------------------------------------------
This AMENDMENT TO RESTRICTED STOCK PURCHASE AGREEMENT (this "Amendment") is
---------
dated as of the 3rd day of September, 1999, by and between OraPharma, Inc., a
Delaware corporation (the "Corporation") and Michael D. Kishbauch (the
-----------
"Stockholder").
- ------------
WITNESSETH:
----------
WHEREAS, the Corporation and the Stockholder have previously entered into a
Restricted Stock Purchase Agreement pursuant to which the Stockholder purchased
from the Corporation shares of the Corporation's Common Stock, $.001 par value
per share (the "Agreement"); and
---------
WHEREAS, the parties now desire to amend the Agreement as set forth herein.
NOW, THEREFORE, for full and adequate consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follow:
1. A new Section 3(d) is hereby added to the Agreement to read in its
entirety as follows:
"Notwithstanding anything contained in this Agreement to the contrary,
if in connection with the consummation of a Change of Control the
employment by the Corporation (or its successor) of the Stockholder is
terminated by the Corporation (or such successor) without Cause, the
Corporation's right to repurchase the Shares from the Stockholder
pursuant to this Section 3 shall be terminated, effective immediately
prior to consummation of such Change of Control.
For purposes hereof, a 'Change of Control' shall mean any of the
following:
(i) any person or entity, other than a person or entity who
is a beneficial owner of the Corporation's securities before the
consummation of the transaction, becomes, after such
consummation, the beneficial owner, directly or indirectly, of
securities of the Corporation representing fifty percent (50%) or
more of the combined voting power of the Corporation's then
outstanding securities;
(ii) the Corporation consummates a merger, consolidation or
reorganization the result of which is that the persons or
entities who were stockholders of the Corporation immediately
prior to consummation of such transaction own less than fifty
percent (50%) of the equity of the corporation or entity
surviving or resulting from such transaction;
-12-
<PAGE>
(iii) the sale in one or more series of transactions of all
or substantially all of the assets of the Corporation; or
(iv) the dissolution or liquidation of the Corporation.
For purposes hereof 'Cause' shall mean any of the following:
(i) the Stockholder is convicted of, pleads guilty to or
confesses to (y) a felony, or (z) any act of fraud,
misappropriation, embezzlement, dishonesty or disloyalty which
damages the Corporation (or its successor) in any material
respect;
(ii) substantial and repeated failure by the Stockholder to
follow the direction of the Chief Executive Officer or Board of
Directors of the Corporation (or its successor) and such failure
is not cured within thirty (30) days after the Stockholder
receives notice thereof from the Corporation (or its successor);
(iii) failure by the Stockholder to meet reasonable
performance objectives; or
(iv) gross negligence or willful misconduct of the
Stockholder with respect to the Corporation (or its successor)."
2. This Amendment may be executed in several counterparts, each of which,
when executed and delivered, shall be deemed an original, and all of which
together shall constitute one agreement.
3. This Amendment shall be governed by and construed and interpreted in
accordance with the laws of the Commonwealth of Pennsylvania, without giving
effect to principles of conflicts law.
4. In the event there is a conflict between this Amendment and the
Agreement, the terms of this Amendment shall prevail.
5. Except as amended hereby, the Agreement shall remain in full force and
effect in accordance with its terms.
-13-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered as of the day and year first above written.
ORAPHARMA, INC.
Witnessed By:/s/ James A. Ratigan By:/s/ Michael D. Kishbauch
--------------------- ------------------------
James A. Ratigan Michael D. Kishbauch
Witnessed By:/s/ James A. Ratigan /s/ Michael D. Kishbauch
--------------------- ------------------------
James A. Ratigan Michael D. Kishbauch
-14-
<PAGE>
Exhibit 4.18
RESTRICTED STOCK PURCHASE AGREEMENT
-----------------------------------
THIS RESTRICTED STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of
---------
the 19th day of March, 1997, by and between OraPharma, Inc., a Delaware
corporation (the "Corporation"), and James R. Law ("Employee").
----------- --------
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Employee is currently an employee of the Corporation; and
WHEREAS, Employee wishes to purchase, and the Corporation wishes to sell to
Employee, 178,750 shares of the Corporation's common stock, $.001 par value per
share ("Common Stock") at a price of $.001 per share (the "OCPS"); and
------------ ----
WHEREAS, such shares of Common Stock will be issued to Employee in order to
provide an incentive to Employee to exercise his best efforts on behalf of, and
to remain as an employee of, the Corporation, subject to the terms and
provisions of this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties do hereby agree as
follows:
SECTION 1. Definitions.
-----------
As used in this Agreement, the following terms shall have the following
respective meanings:
"Common Shares" shall mean the issued and outstanding shares of the
-------------
Corporation's Common Stock, at the applicable time.
"Equity Stock" shall have the meaning set forth in Rule 3a11-1 under the
------------
Securities Exchange Act of 1934, as amended, and any successor statute and the
rules and regulations thereunder, as shall be in effect from time to time.
"Family" shall include any spouse, lineal ancestor or descendant, or
------
sibling, any trust for the exclusive benefit of any of the foregoing, or any
corporation, limited partnership, limited liability company or other entity
majority controlled by any of the foregoing individuals or trusts.
"Stockholders" shall mean the Investors and the Founders, both as defined
------------
in that certain Stockholders Agreement dated the date hereof by and among the
Corporation and certain stockholders of the Corporation.
<PAGE>
"Group" shall mean as to (a) a partnership, any or all of its general or
-----
limited partners or any "affiliate" thereof (as defined by Rule 405 promulgated
under the Securities Act), (b) a trust, any of the beneficiaries, settlers or
grantors now existing or hereafter arising of, or any Person under common
control with, such trust, (c) a corporation, any of its stockholders, any
subsidiary of such corporation or any corporation which is under common control
with such corporation, or any directors, officers or employees of such
corporation, and (d) a limited liability company, any of its members.
"New Securities" shall mean any Equity Stock, including, but not limited
--------------
to, shares of Common Stock, any security which is convertible into or
exercisable or exchangeable for Common Stock, or any right, option or warrant to
acquire any Common Stock of the Corporation.
"Person" shall mean and include a natural person, a corporation, a limited
------
liability company, a partnership, a trust, an unincorporated organization and a
government or any department, agency or political subdivision thereof.
"Preferred Shares" shall mean the Corporation's Series A Preferred Stock,
----------------
$.001 par value per share, and Series B Preferred Stock, $.001 par value per
share, issued or to be issued to certain of the Stockholders pursuant to the
Stock Purchase Agreement dated February 26, 1997 among the Corporation and such
Stockholders, as the same may be amended.
"Pro Rata Fraction" shall mean a fraction, the numerator of which shall be
----------------- ---------
the number of shares of Common Stock then owned by such Stockholder and the
denominator of which shall be the aggregate number of shares of Common Stock
- -----------
then owned by all Stockholders. For the purpose of calculating the Pro Rata
Fraction, each Preferred Share shall be deemed to represent the number of shares
of Common Stock into which the Preferred Share is then convertible.
"Public Offering" shall mean a distribution of New Securities in a firm
---------------
commitment underwritten public offering to the general public pursuant to a
registration statement filed with and declared effective by the Securities and
Exchange Commission pursuant to the Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as amended, and any
--------------
successor statute and the rules and regulations of the Securities and Exchange
Commission thereunder, as shall be in effect at the applicable time.
"Shares" shall mean the 178,750 shares of Common Stock purchased by
------
Employee hereunder.
"Termination of Employment" shall mean the termination of the employment
-------------------------
relationship between the Corporation and Employee.
2
<PAGE>
"Transfer" shall include any direct or indirect sale, assignment, transfer,
--------
pledge (but not including a pledge in favor of the Corporation), hypothecation
or other disposition of any Shares or of any legal or beneficial interest
therein.
SECTION 2. Sale to Employee of Common Stock. Subject to the terms and
--------------------------------
conditions contained herein, the Corporation hereby sells, transfers and assigns
to Employee, and Employee hereby purchases from the Corporation, the Shares. The
Corporation hereby acknowledges receipt from Employee of payment of the OCPS (or
178.75 in the aggregate). Employee covenants and agrees to forward to the
Corporation, if, as and when filed, a copy of any forms filed by Employee with
the Internal Revenue Service with respect to the Shares pursuant to Section
83(b) of the Internal Revenue Code of 1986, as amended.
SECTION 3. Termination of Employment. (a) (i) In the event of the
-------------------------
Termination of Employment of Employee for any reason, the Corporation shall have
the right to purchase from Employee, and if the Corporation exercises its option
pursuant to this Section 3, Employee shall sell to the Corporation upon the
exercise of such right, up to the number of Shares (rounded up to the nearest
whole Share) at the OCPS determined in accordance with the following table:
<TABLE>
<CAPTION>
If the Termination of Employment
Occurs On or Prior to the Percentage of Shares
Following Dates Subject to Repurchase
--------------- ---------------------
<S> <C>
June 19, 1997 80%
September 19, 1997 75%
December 19, 1997 70%
March 19, 1998 65%
June 19, 1998 60%
September 19, 1998 55%
December 19, 1998 50%
March 19, 1999 45%
June 19, 1999 40%
September 19, 1999 35%
December 19, 1999 30%
March 19, 2000 25%
June 19, 2000 20%
September 19, 2000 15%
December 19, 2000 10%
March 19, 2001 5%
After March 19, 2001 0%
</TABLE>
(ii) The number of Shares subject to purchase pursuant to this
Section 3(a) shall be adjusted to give effect to any stock dividend, or other
distribution of stock made on or in respect of such Shares, or any subdivision,
combination or reclassification of the outstanding capital stock of the
Corporation or received in exchange for the Shares.
3
<PAGE>
(b) In order to exercise the option to purchase Employee's Shares under
this Section 3, the Corporation shall deliver a written notice to Employee,
indicating its election to purchase the Shares and specifying the number of
Shares which the Corporation elects to purchase and the purchase price therefor,
within 30 days after Employee's Termination of Employment.
(c) The repurchase of Shares hereunder shall be made on a date within 90
days of the Termination of Employment, by delivery of payment to the Employee,
by check or wire transfer, against receipt of one or more certificates, properly
endorsed, evidencing the Employee's Shares to be so purchased. If the repurchase
is not consummated by such date, the Corporation may deliver to Employee by
check or wire transfer the applicable repurchase price for the Shares to be
repurchased and may cancel the certificates evidencing such Shares on the books
and records of the Corporation.
SECTION 4. Legend on Shares and Notice of Transfer.
---------------------------------------
4.1 Restrictive Legends. (a) Each certificate evidencing Shares,
-------------------
and each certificate evidencing Shares held by subsequent transferees of any
such certificate, shall (unless otherwise permitted by the provisions of Section
4.2 hereof) be stamped or otherwise imprinted with a legend in substantially the
following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAW. THESE SECURITIES MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR ANY
EXEMPTION THEREFROM UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY APPLICABLE STATE SECURITIES LAW.
(b) Each certificate evidencing Shares, and each certificate
evidencing Shares held by subsequent transferees of any such certificate, shall
(unless otherwise permitted by the provisions of Section 4.2 hereof) also be
stamped or otherwise imprinted with a legend in substantially the following
form:
ADDITIONALLY, THE TRANSFER OF THESE SECURITIES IS SUBJECT TO THE
TERMS AND CONDITIONS OF A RESTRICTED STOCK PURCHASE AGREEMENT DATED
AS OF MARCH 19, 1997, AMONG ORAPHARMA, INC. AND THE HOLDER OF RECORD
OF THIS CERTIFICATE AND NO SALE, ASSIGNMENT, TRANSFER, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION OF SUCH SECURITIES SHALL BE VALID
OR EFFECTIVE EXCEPT IN ACCORDANCE WITH SUCH AGREEMENT AND UNTIL SUCH
TERMS AND CONDITIONS HAVE BEEN FULFILLED. COPIES OF SUCH AGREEMENT
MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF
RECORD OF THIS CERTIFICATE TO THE SECRETARY OF ORAPHARMA, INC.
4
<PAGE>
4.2 Notice of Transfer. (a) Employee, and any other holder of any
------------------
Shares by acceptance thereof, agrees that, prior to any Transfer of any Shares,
such holder will give written notice to the Corporation of such holder's
intention to effect such Transfer and to comply in all other respects with the
provisions of this Section 4.2. Each such notice shall contain (i) a statement
setting forth the intention of said holder's prospective transferee with respect
to its retention or disposition of said Shares; and (ii) unless waived by the
Corporation, an opinion of counsel for said holder (who may be the inside or
staff counsel employed by said holder), as to the necessity or non-necessity for
registration under the Securities Act and applicable state securities laws in
connection with such Transfer and stating the factual and statutory basis relied
upon by counsel. The following provisions shall then apply:
(i) If the proposed Transfer of Shares may be effected
without registration or qualification under the Securities Act and any
applicable state securities laws, then the registered holder of such Shares
shall be entitled to Transfer such Shares in accordance with Section 5
hereof and the intended method of disposition specified in the statement
delivered by said holder to the Corporation.
(ii) If the proposed Transfer of such Shares may not be
effected without registration under the Securities Act or registration or
qualification under any applicable state securities laws, the registered
holder of such Shares shall not be entitled to Transfer such Shares
pursuant to Section 5 hereof until the requisite registration or
qualification is effective.
(b) Notwithstanding the provisions of Section 4.2(a), in the case
of a Transfer by a holder to a member of such holder's Family or Group, no such
opinion of counsel shall be necessary; provided, that the transferee agrees in
--------
writing to be subject to this Agreement to the same extent as if such transferee
were originally a signatory to this Agreement.
(c) Each certificate evidencing the Shares issued upon such
Transfer (and each certificate evidencing any untransferred balance of such
Shares) shall bear the legend set forth in Section 4.1(a) hereof unless (i) in
the opinion of counsel (acceptable to the Corporation) addressed to the
Corporation the registration of future Transfers is not required by the
applicable provisions of the Securities Act or applicable state securities laws;
(ii) the Corporation shall have waived the requirement of such legend; or (iii)
in the reasonable opinion of counsel to the Corporation, such Transfer shall
have been made in connection with an effective registration statement filed
pursuant to the Securities Act or in compliance with the requirements of Rule
144 or Rule 144A (or any similar or successor rule) promulgated under the
Securities Act, and in compliance with applicable state securities laws.
(d) Each certificate evidencing the Shares issued upon such
Transfer (and each certificate evidencing any untransferred balance of such
Shares) shall bear the legend set forth in Section 4.1(b) hereof, for so long as
this Agreement remains in effect. In the event of the termination of this
Agreement, the holder of Shares may request that the Corporation issue a new
certificate not bearing the legend set forth in Section 4.1(b) hereof.
5
<PAGE>
SECTION 5. Covenants of Employee and Corporation.
-------------------------------------
5.1 Prohibited Transfers.
--------------------
(a) Employee agrees that he shall not Transfer any of his Shares
which are subject to repurchase pursuant to Section 3 above at any time.
Employee further agrees that he shall not Transfer any of his Shares which are
no longer subject to repurchase pursuant to Section 3 above without the prior
written consent of the holders of a majority of the outstanding Common Shares
held by the Stockholders, except as provided for in Section 5.2.
(b) Notwithstanding anything to the contrary contained herein,
Employee (and any permitted transferee of Employee) may Transfer all of its, his
or her Shares: (i) if the stockholder is a limited partnership or a trust, to
any member of the Group of which Employee (or such permitted transferee) is a
member; provided, that such transferee shall agree in writing with the
--------
Corporation, prior to and as a condition precedent to such Transfer, to be bound
by all of the provisions of this Agreement; (ii) if the stockholder is a
corporation, to any member of its Group; provided, that such transferee shall
--------
agree in writing with the Corporation, prior to and as a condition precedent to
such Transfer, to be bound by all of the provisions of this Agreement; (iii) to
any member of the Family of Employee (or such permitted transferee); provided,
--------
that such transferee shall agree in writing with the Corporation, prior to and
as a condition precedent to such Transfer, to be bound by all of the provisions
of this Agreement and, provided, further, that the interests in any Family
-------- -------
trusts shall be non-transferable; and (iv) by will or the laws of descent and
distribution, in which event each such transferee shall be bound by all of the
provisions of this Agreement to the same extent as if such transferee were the
deceased Employee (or permitted transferee).
(c) If requested in writing by the managing underwriters, if any,
of any Public Offering, Employee agrees not to offer, sell, contract to sell or
otherwise dispose of any Shares except as part of such Public Offering within
thirty (30) days before or one hundred and eighty (180) days after the effective
date of the registration statement filed with respect to said offering, and the
Corporation hereby also so agrees; provided, however, that this restriction will
--------
not apply to transfers permitted under Section 5.1(b) provided such transferee
agrees to be bound by the restriction contained in this Section 5.1(c).
Notwithstanding the foregoing, in the event that Employee shall have accepted an
offer to purchase Offered Shares (as defined below) which have been offered
pursuant to Section 5.2(a), Employee shall not be prohibited from consummating
such sale, provided, that the purchaser agrees to be bound by the restrictions
--------
contained in this Section 5.1(c).
5.2 Right of First Offer on Dispositions.
------------------------------------
(a) Except as provided in Section 5.1(b), if Employee desires to
Transfer all or any part of its Shares pursuant to this Section 5.2 and is not
otherwise prohibited from Transferring his Shares pursuant to Section 5.1(a),
Employee shall submit a written offer (the "Offer") to sell such Shares (the
-----
"Offered Shares") to the Stockholders and the Corporation, which Offer shall
- ---------------
specify the number of Offered Shares proposed to be sold, the total number of
6
<PAGE>
Shares owned by Employee, and the terms and conditions, including price, at
which the Shares are being offered.
(b) Each of the Stockholders shall have the right to purchase its
Pro Rata Fraction of the Offered Shares.
(c) The Corporation shall have the right to purchase all of the
remaining Offered Shares, on the same terms and conditions specified in the
Offer, in excess of the Offered Shares accepted by the Stockholders.
(d) The Stockholders shall have a right of oversubscription such
that, if any Stockholder fails to accept the Offer as to its full Pro Rata
Fraction, it shall have the right to purchase up to the balance of the Offered
Shares not so purchased. Such right of oversubscription may be exercised by such
Stockholder by accepting the offer as to more than its Pro Rata Fraction.
(e) If a Stockholder desires to purchase all or any part of the
Offered Shares on the same terms and conditions specified in the Offer, such
Stockholder (a "Purchasing Stockholder") shall communicate in writing to
----------------------
Employee and the Corporation its election to purchase (an "Acceptance"), which
----------
Acceptance shall state the number of Offered Shares the Purchasing Stockholder
desires to purchase and shall be delivered in person or mailed to Employee at
the address set forth in the Offer, with a copy to the Corporation and the other
Stockholder, within 20 days of the date the Offer was made by Employee pursuant
to Section 5.2(a).
(f) If the Corporation desires to purchase all or any part of the
Offered Shares on the same terms and conditions specified in the Offer, the
Corporation shall deliver its Acceptance to Employee and the Stockholders, which
Acceptance shall state the number of Offered Shares the Corporation desires to
purchase and shall be delivered in person or mailed to Employee at the address
set forth in the Offer, with a copy to the Stockholder, within 20 days of the
date the Offer was made by Employee pursuant to Section 5.2(a).
(g) If the Corporation and the Stockholders elect to purchase all
of the Offered Shares, sale of the Offered Shares pursuant to this Section 5.2
shall be made at the offices of the Corporation on the 45th day following the
expiration of the 20-day period described above (or if such 45th day is not a
business day, then on the next succeeding business day). Such sales shall be
effected by Employee's delivery to each Purchasing Stockholder or the
Corporation, as the case may be, of a certificate or certificates evidencing the
Offered Shares to be purchased by it, him or her, duly endorsed for transfer to
the Purchasing Stockholder or the Corporation, as the case may be, which Offered
Shares shall be delivered free and clear of all liens, charges, claims and
encumbrances of any nature whatsoever, against payment to Employee of the
purchase price therefor by the Corporation or such Purchasing Stockholder, as
the case may be. Payment for the Offered Shares shall be made as provided in the
Offer or by wire transfer or certified check.
7
<PAGE>
(h) If the Purchasing Stockholders and the Corporation do not elect
to purchase all of the Offered Shares, then the Offered Shares may be sold by
Employee at any time within 150 days after the date the Offer was made by
Employee pursuant to Section 5.2(a). Any such sale shall be upon terms and
conditions, including price, not less favorable to Employee than those specified
in the Offer. Any Offered Shares not sold within such 150-day period shall
continue to be subject to the requirements of a prior offer pursuant to this
Section 5.2.
5.3 Drag Along. Subject to Section 5.2 above, anything in this
----------
Agreement to the contrary notwithstanding, in the event that (i) the Board of
Directors of the Corporation by unanimous vote or unanimous written consent
and/or the holders of sixty-six and two-thirds of the then outstanding Common
Shares by vote or written consent approves a transaction pursuant to which any
Person or Persons not affiliated with any of the Stockholders will acquire 50%
or more of the Common Shares of the Corporation (by stock purchase, merger or
otherwise) or all or substantially all of the assets of the Corporation, upon
the written request of the holders of sixty-six and two-thirds of the Common
Shares, Employee agrees to offer to sell all of his Shares, and to sell all of
his Shares, to such Person or Persons or to vote all of his Shares in favor of
the sale of assets, as the case may be, in either case upon the terms and
conditions of the transaction approved by the Board of Directors of the
Corporation and/or the holders of sixty-six and two-thirds of the Common Shares;
provided, however, that Employee's obligation to sell his Shares pursuant to
- -------- -------
this Section 5.3 shall only apply if all of the Shares are to be sold on the
same terms and conditions. For purposes of this Section 5.3, each Preferred
Share shall be deemed to be the number of shares of Common Stock into which the
Preferred Share is then convertible.
SECTION 6. Representations.
---------------
6.1 Representations of Employee. In connection with Employee's
---------------------------
purchase of the Shares, Employee hereby represents and warrants to the
Corporation as follows:
(a) Investment Intent; Capacity to Protect Interests. Employee is
------------------------------------------------
purchasing the Shares solely for his own account for investment and not with a
view to or for sale in connection with any distribution of the Shares or any
portion thereof and not with any present intention of selling, offering to sell
or otherwise disposing of or distributing the Shares or any portion thereof in
any transaction other than a transaction exempt from registration under the
Securities Act. Employee also represents that the entire legal and beneficial
interest of the Shares is being purchased, and will be held, for his account
only, and neither in whole or in part for any other person.
(b) Restricted Securities. Employee understands and acknowledges
---------------------
the sale of the Shares has not been registered under the Securities Act; that
the Shares must be held indefinitely unless subsequently registered under the
Securities Act or an exemption from such registration is available; and that the
Corporation is under no obligation to register the Shares.
(c) Disposition under Rule 144. Employee understands that the
--------------------------
Shares are restricted securities within the meaning of Rule 144 promulgated
under the Securities Act; that the exemption from registration under Rule 144
will not be available in any event for at least two
-8-
<PAGE>
years from the date of purchase of any payment for the Shares, and even then
will not be available unless (i) a public trading market then exists for the
Shares, (ii) adequate information concerning the Corporation is then available
to the public, and (iii) other terms and conditions of Rule 144 are complied
with; and that any sale of the Shares may be made only in limited amounts in
accordance with such terms and conditions.
(d) Accredited Investor. Employee is an "accredited investor", as
-------------------
defined in Rule 501 under the Securities Act.
6.2 Representations of the Corporation. The Corporation represents
----------------------------------
to Employee that:
(a) The execution, delivery and performance by the Corporation of
this Agreement and all transactions contemplated by this Agreement have been
duly authorized by all action required by law, its Certificate of Incorporation,
its Bylaws or otherwise.
(b) This Agreement has been duly executed and delivered by the
Corporation and constitutes the legal, valid and binding obligation of the
Corporation enforceable against it in accordance with its terms.
SECTION 7. Withholding. Upon the request of the Corporation, Employee
-----------
shall promptly pay to the Corporation, or make arrangements satisfactory to the
Corporation regarding payment of, any Federal, state or local taxes of any kind
required by law to be withheld with respect to the Shares (or any distributions
of other securities or property (including cash) thereon or issued in
replacement thereof).
SECTION 8. Remedies. In case any one or more of the covenants and/or
--------
agreements set forth in this Agreement shall have been breached by any party
hereto, the party entitled to the benefit of such covenants or agreements may
proceed to protect and enforce its rights either by suit in equity and/or by
action at law, including, but not limited to, (a) an action for damages as a
result of any such breach, (b) an action for specific performance of any such
covenant or agreement contained in this Agreement, and/or (c) a temporary or
permanent injunction, in any case without showing any actual damage. The rights,
power and remedies of the parties under this Agreement are cumulative and not
exclusive of any other agreement or law. No single or partial assertion or
exercise of any right, power or remedy of a party hereunder shall preclude any
other or further assertion or exercise thereof. Any purported Transfer in
violation of the provisions of this Agreement shall be null and void ab initio.
-- ------
SECTION 9. Successors and Assigns. Except as otherwise expressly provided
----------------------
herein, this Agreement shall bind and inure to the benefit of the Corporation,
Employee, the respective successors or heirs, distributees and personal
representatives and permitted assigns of the Corporation and Employee, and each
other person who shall properly become a registered holder of any Shares that
have not theretofore been sold to the public pursuant to a registration
statement under the Securities Act or Rule 144 or Rule 144A (or any similar or
successor rule).
9
<PAGE>
SECTION 10. Entire Agreement. This Agreement contains the entire
----------------
agreement among the parties with respect to the subject matter hereof and
supersedes other prior and contemporaneous arrangements or understandings with
respect thereto.
SECTION 11. Notices. All notices, consents and other communications under
-------
this Agreement shall be in writing and shall be deemed to have been duly given
(a) when delivered by hand, (b) one (1) business day after the business day of
transmission, if sent by telex or telecopier (with receipt confirmed), provided
that a copy is mailed by registered mail, return receipt requested, or (c) one
(1) business day after the business day of deposit with the carrier, if sent by
Express Mail, Federal Express or other express delivery service (receipt
requested), in each case to the appropriate addresses, telex numbers and
telecopier numbers set forth below (or to such other addresses or telecopy
numbers as a party may designate as to itself by notice to the other parties):
(a) If to Employee:
J. Ronald Lawter
28 Gablewing Circle
Newtown, PA 18940
(b) If to the Corporation:
OraPharma, Inc.
1200 Route 22 East
Suite 2000
Bridgewater, NJ 08807
Attention: Chief Executive Officer
Telecopier No.: (908) 806-6199
with a copy to:
Sills Cummis Zuckerman Radin
Tischman Epstein & Gross, P.A.
One Riverfront Plaza
Newark, New Jersey 07102
Telecopier No.: (201) 643-6500
Attention: Ira A. Rosenberg, Esq.
SECTION 12. Changes. The terms and provisions of this Agreement may not
-------
be modified or amended, or any of the provisions hereof waived, temporarily or
permanently, without the prior written consent of each of the parties hereto.
SECTION 13. Counterparts. This Agreement may be executed in any number
------------
of counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
10
<PAGE>
SECTION 14. Headings. The benefits of the various sections of this
--------
Agreements have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
SECTION 15. Nouns and Pronouns. Whenever the context may require, any
------------------
pronouns used herein shall include the corresponding masculine feminine or
neuter forms, and the singular form of names and pronouns shall include the
plural and vice-versa.
SECTION 16. Severability. Any provision of this Agreement that is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability. Such
prohibition or unenforceability in any one jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
SECTION 17. Governing Law; Jurisdiction. This Agreement and (unless
---------------------------
otherwise provided) all amendments hereof and waivers and consents hereunder
shall be governed by the internal law of the State of New Jersey, without regard
to the conflicts of law principles thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first written above.
WITNESS ORAPHARMA, INC.
/s/ [Signature illegible] By: /s/ Michael D. Kishbauch
- ---------------------------- ------------------------------------
Michael D. Kishbauch, President
WITNESS
/s/ Edgar J. Herman /s/ James R. Lawter
- ---------------------------- ------------------------------------
J. Ronald Lawter
11
<PAGE>
AMENDMENT TO RESTRICTED STOCK PURCHASE AGREEMENT
------------------------------------------------
This AMENDMENT TO RESTRICTED STOCK PURCHASE AGREEMENT (this "Amendment") is
---------
dated as of the 3rd day of September, 1999, by and between OraPharma, Inc., a
Delaware corporation (the "Corporation") and James R. Lawter (the
-----------
"Stockholder").
-----------
WITNESSETH:
----------
WHEREAS, the Corporation and the Stockholder have previously entered into a
Restricted Stock Purchase Agreement pursuant to which the Stockholder purchased
from the Corporation shares of the Corporation's Common Stock, $.001 par value
per share (the "Agreement"); and
---------
WHEREAS, the parties now desire to amend the Agreement as set forth herein.
NOW, THEREFORE, for full and adequate consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follow:
1. A new Section 3(d) is hereby added to the Agreement to read in its
entirety as follows:
"Notwithstanding anything contained in this Agreement to the contrary, if
in connection with the consummation of a Change of Control the employment
by the Corporation (or its successor) of the Stockholder is terminated by
the Corporation (or such successor) without Cause, the Corporation's right
to repurchase the Shares from the Stockholder pursuant to this Section 3
shall be terminated, effective immediately prior to consummation of such
Change of Control."
For purposes hereof, a "Change of Control" shall mean any of the
following:
(i) any person or entity, other than a person or entity who is
a beneficial owner of the Corporation's securities before the
consummation of the transaction, becomes, after such consummation, the
beneficial owner, directly or indirectly, of securities of the
Corporation representing fifty percent (50%) or more of the combined
voting power of the Corporation's then outstanding securities;
(ii) the Corporation consummates a merger, consolidation or
reorganization the result of which is that the persons or entities who
were stockholders of the Corporation immediately prior to consummation
of such transaction own less than fifty percent (50%) of the equity of
the corporation or entity surviving or resulting from such
transaction;
(iii) the sale in one or more series of transactions of all or
substantially all of the assets of the Corporation; or
<PAGE>
(iv) the dissolution or liquidation of the Corporation.
For purposes hereof, 'Cause' shall mean any of the following:
(i) the Stockholder is convicted of, pleads guilty to or
confesses to (y) a felony, or (z) any act of fraud, misappropriation,
embezzlement, dishonesty or disloyalty which damages the Corporation
(or its successor) in any material respect;
(ii) substantial and repeated failure by the Stockholder to
follow the direction of the Chief Executive Officer or Board of Directors
of the Corporation (or its successor) and such failure is not cured within
thirty (30) days after the Stockholder receives notice thereof from the
Corporation (or its successor);
(iii) failure by the Stockholder to meet reasonable performance
objectives; or
(iv) gross negligence or wilful misconduct of the Stockholder
with respect to the Corporation (or its successor)."
2. This Amendment may be executed in several counterparts, each of which,
when executed and delivered, shall be deemed an original, and all of which
together shall constitute one agreement.
3. This Amendment shall be governed by and construed and interpreted in
accordance with the laws of the Commonwealth of Pennsylvania, without giving
effect to principles of conflicts law.
4. In the event there is a conflict between this Amendment and the
Agreement, the terms of this Amendment shall prevail.
5. Except as amended hereby, the Agreement shall remain in full force and
effect in accordance with its terms.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered as of the day and year first above written.
ORAPHARMA, INC.
By: /s/ Michael D. Kishbauch
-------------------------------------
Michael D. Kishbauch
/s/ James R. Lawter
----------------------------------------
James R. Lawter
<PAGE>
Exhibit 4.19
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR
STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT OR STATE
SECURITIES LAWS.
No. 1 Right to Purchase Shares of Common Stock of OraPharma, Inc.
ORAPHARMA, INC.
Common Stock Purchase Warrant
This is to certify that, FOR VALUE RECEIVED, Canaan Equity L.P. (the
"Holder"), is entitled to purchase, subject to the provisions of this Warrant,
from OraPharma, Inc., a Delaware corporation (the "Company"), 41,201 fully paid,
validly issued and nonassessable shares of Common Stock, par value $.001 per
share, of the Company (the "Common Stock") at an exercise price of $6.46 per
share. The number of shares of Common Stock to be received upon the exercise of
this Warrant and the price to be paid for each share of Common Stock may be
adjusted from time to time as hereinafter set forth. The shares of Common Stock
deliverable upon such exercise, and as adjusted from time to time, are
hereinafter sometimes referred to as "Warrant Shares" and the exercise price of
a share of Common Stock in effect at any time and as adjusted from time to time
is hereinafter sometimes referred to as the "Exercise Price".
1. EXERCISE OF WARRANT.
-------------------
a. Exercise for Cash. This Warrant may be exercised in whole or in
part at any time or from time to time starting from a period of twelve months
and five days after issue until 5:00 p.m. Eastern Standard Time on December 23,
2006 (the "Exercise Period"). This Warrant may be exercised by presentation and
surrender hereof to the Company at its principal office, or at the office of its
stock transfer agent, if any, with the Purchase Form annexed hereto duly
executed and accompanied by payment of the Exercise Price for the number of
Warrant Shares specified in such form. The Exercise Price may be paid by bank
check, wire transfer or cancellation of indebtedness. As soon as practicable
after each such exercise of this Warrant, but not later than seven (7) days from
the date of such exercise, the Company shall issue and deliver to the Holder a
certificate for the Warrant Shares issuable upon such exercise, registered in
the name of the Holder. If this Warrant should be exercised in part only, the
Company shall, upon surrender of this Warrant for cancellation, execute and
deliver a new Warrant evidencing the rights of the Holder thereof to purchase
the balance of the Warrant Shares purchasable thereunder. Upon receipt by the
Company of this Warrant at its office, or by the stock transfer agent of the
Company at its office, in proper form for exercise, the Holder shall be deemed
to be the holder of record of the shares of Common Stock issuable upon such
exercise, notwithstanding that the stock transfer books of the Company shall
then be closed or that certificates representing such shares of Common Stock
shall not then be physically delivered to the Holder.
<PAGE>
b. Warrant Exchange. At any time during the Exercise Period, the
Holder may, at its option, exchange this Warrant, in whole or in part (a
"Warrant Exchange"), into the number of Warrant Shares determined in accordance
with this Section 1(b), by surrendering this Warrant at the principal office of
the Company or at the office of its stock transfer agent, accompanied by a
notice stating the Holder's intent to effect such exchange, the number of
Warrant Shares to be exchanged and the date on which the Holder requests that
such Warrant Exchange occur (the "Notice of Exchange"). The Warrant Exchange
shall take place on the date specified in the Notice of Exchange or, if later,
the date the Notice of Exchange is received by the Company (the "Exchange
Date"). Certificates for the shares issuable upon such Warrant Exchange and, if
applicable, a new warrant of like tenor evidencing the balance of the shares
remaining subject to this Warrant, shall be issued as of the Exchange Date and
delivered to the Holder within seven (7) days following the Exchange Date. In
connection with any Warrant Exchange, this Warrant shall represent the right to
subscribe for and acquire the number of Warrant Shares equal to (i) the number
of Warrant Shares specified by the Holder in its Notice of Exchange (the "Total
Number") less (ii) the number of Warrant Shares equal to the quotient obtained
by dividing (A) the product of the Total Number and the existing Exercise Price
by (B) the Fair Market Value, provided that any fractional shares determined by
this calculation shall be represented by the issuance of a new Warrant. "Fair
Market Value" shall be determined as follows: (1) if the Common Stock is listed
on a national securities exchange or admitted to unlisted trading privileges on
such exchange or listed for trading on the Nasdaq Stock Market, the Fair Market
Value shall be the average of the last reported sale prices of the Common Stock
on such exchange or system for the twenty (20) business days ending on the last
business day prior to the date for which the determination is being made; or (2)
if the Common Stock is not so listed or admitted to unlisted trading privileges,
the Fair Market Value shall be the average of the last reported bid and asked
prices reported by the National Quotation Bureau, Inc. for the twenty (20)
business days ending on the last business day prior to the date for which the
determination is being made; or (3) if the Common Stock is not so listed or
admitted to unlisted trading privileges and bid and asked prices are not so
reported, the Fair Market Value shall be an amount, not less than book value
thereof as at the end of the most recent fiscal quarter of the Company ending
prior to the Exchange Date, determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
2. RESERVATION OF SHARES. The Company shall at all times reserve for
issuance and/or delivery upon exercise of this Warrant such number of shares of
its Common Stock as shall be required for issuance and delivery upon exercise of
this Warrant.
3. FRACTIONAL SHARES. No fractional shares of Common Stock shall be
issued upon the exercise of this Warrant. With respect to any fraction of a
share called for upon any exercise hereof, the Company shall pay to the Holder
an amount in cash equal to such fraction multiplied by the Fair Market Value of
a share of Common Stock.
4. ANTIDILUTION PROVISIONS. In the event the Common Stock is changed by
reason of a stock split, reverse stock split, stock dividend or recapitalization
or is converted into or exchanged for other securities as a result of a merger,
consolidation or reorganization in which the Company is the surviving
corporation, appropriate adjustments shall be made in the terms of this Warrant,
or additional warrants shall be granted to the Holder as shall be equitable and
appropriate, or an adjustment in the number and class of shares allocated to,
and the Exercise Price of, this Warrant shall likewise be made.
5. CERTAIN EXTRAORDINARY TRANSACTIONS. In the event the Common Stock is
2
<PAGE>
exchanged for securities, cash or other property of any other corporation or
entity as the result of a reorganization, merger or consolidation in which the
Company is not the surviving corporation, the dissolution or liquidation of the
Company, or the sale of all or substantially all the assets of the Company, the
Board of Directors of the Company or the board of directors of any successor
corporation or entity may, in its discretion, as to the unexercised portion of
this Warrant, (a) provide for payment of an amount equal to the excess of the
fair market value of the Warrant Shares, as determined by the Board of Directors
of the Company or such board, over the Exercise Price of such Warrant Shares as
of the date of the transaction, in exchange for the surrender of the right to
exercise this Warrant, or (b) provide for the assumption of this Warrant, or the
substitution therefor of new warrants, by the successor corporation or entity.
6. LOSS OF WARRANT. Upon receipt by the Company of evidence satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant, and (in the
case of loss, theft or destruction) of reasonably satisfactory indemnification,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
will execute and deliver a new warrant of like tenor and date.
7. NO RIGHTS AS STOCKHOLDER. The Holder shall not, as holder of this
Warrant, be entitled to vote, if applicable, or to receive dividends or to be
deemed the holder of Common Stock that may at any time be issuable upon exercise
of this Warrant for any purpose whatsoever, nor shall anything contained herein
be construed to confer upon the Holder, as such, any of the rights of a
stockholder of the Company or, if applicable, any right to vote for the election
of directors or upon any matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate action (whether upon
any recapitalization, issue or reclassification of stock, change of par value or
change of stock to no par value, consolidation, merger or conveyance or
otherwise), or to receive notice of meetings, or to receive dividends or
subscription rights, until such holder shall have exercised the Warrant and been
issued the Warrant Shares in accordance with the provisions hereof.
8. NON-TRANSFERABILITY. Neither this Warrant nor any Warrant Shares
shall be registered under the Securities Act of 1933, as amended, and applicable
state securities laws. Therefore, the Company shall require, as a condition of
allowing the transfer or exchange of this Warrant or such Warrant Shares, that
the Holder of this Warrant or such Warrant Shares, as the case may be, furnish
to the Company an opinion of counsel reasonably acceptable to the Company to the
effect that such transfer or exchange will be exempt from the registration and
prospectus delivery requirements under the Securities Act of 1933, as amended,
and applicable state securities laws. The certificates evidencing the Warrant
Shares shall bear a legend to the effect that the Warrant Shares evidenced by
such certificate have not been registered under the Securities Act of 1933, as
amended, and applicable state securities laws and are, therefore, subject to
restrictions on transfer.
9. INVESTMENT REPRESENTATIONS AND WARRANTIES. The Holder hereby
represents and warrants to the Company that (a) it has knowledge and experience
in financial and business matters sufficient to enable it to evaluate the merits
and risks of an investment in the Company; (b) it has assets sufficient to
enable it to bear the economic risk of its investment in this Warrant and the
Warrant Shares and is an "accredited investor" as defined in Rule 501 under the
Securities Act of 1933, as amended; (c) it is acquiring this Warrant and, upon
exercise, will acquire the Warrant Shares, for its own account, and not with a
view to, or for sale in connection with, any distribution thereof; (d) it or its
representatives have received from the Company such information with respect to
the Company as it has deemed necessary and relevant in connection with this
Warrant and the Warrant Shares and it has had the
3
<PAGE>
opportunity, directly or through such representatives, to ask questions of and
receive answers from persons acting on behalf of the Company necessary to verify
the information so obtained; and (e) it and its officers, directors, employees
and agents have not employed any broker or finder or incurred any liability for
any brokerage or finder's fees or commissions or similar payments in connection
with this Warrant and the Warrant Shares.
10. GOVERNING LAW. This Agreement and all amendments, modifications,
alterations, or supplements hereto shall be construed under and governed by the
laws of the State of New Jersey and the United States of America, without regard
to the principles of conflicts of law thereof.
11. MISCELLANEOUS. Except as provided in Sections 4 and 5 hereof, this
Warrant and any term hereof may be changed, waived, discharged or terminated
only by an instrument in writing signed by the party against which enforcement
of such change, waiver, discharge or termination is sought. The headings in
this Warrant are for purposes of reference only and shall not limit or otherwise
affect any of the terms hereof. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.
12. EXPIRATION. The right to exercise this Warrant shall expire at 5:00
P.M. Eastern Standard Time on December 23, 2006.
This Warrant is executed as of the date and year first written above.
Witness: ORAPHARMA, INC.
By:/s/ Michael Kishbauch
- --------------------------- --------------------------------
Michael Kishbauch, President
4
<PAGE>
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: OraPharma, Inc.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder _______ shares
of Common Stock, $.001 par value per share, of OraPharma, Inc. and herewith
makes payment of $__________ therefor, and requests that the certificates for
such shares be issued in the name of, and delivered to the undersigned at
_____________________________.
Dated: _____________________________________________
(Signature must conform to name of holder as
specified on the face of the Warrant)
__________________________________
(Address)
__________________________________
5
<PAGE>
Exhibit 4.20
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR
STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT OR STATE
SECURITIES LAWS.
No. 2 Right to Purchase Shares of Common Stock of OraPharma, Inc.
ORAPHARMA, INC.
Common Stock Purchase Warrant
This is to certify that, FOR VALUE RECEIVED, Domain Partners IV, L.P. (the
"Holder"), is entitled to purchase, subject to the provisions of this Warrant,
from OraPharma, Inc., a Delaware corporation (the "Company"), 6,914 fully paid,
validly issued and nonassessable shares of Common Stock, par value $.001 per
share, of the Company (the "Common Stock") at an exercise price of $6.46 per
share. The number of shares of Common Stock to be received upon the exercise of
this Warrant and the price to be paid for each share of Common Stock may be
adjusted from time to time as hereinafter set forth. The shares of Common Stock
deliverable upon such exercise, and as adjusted from time to time, are
hereinafter sometimes referred to as "Warrant Shares" and the exercise price of
a share of Common Stock in effect at any time and as adjusted from time to time
is hereinafter sometimes referred to as the "Exercise Price".
1. EXERCISE OF WARRANT.
-------------------
a. Exercise for Cash. This Warrant may be exercised in whole or in
part at any time or from time to time starting from a period of twelve months
and five days after issue until 5:00 p.m. Eastern Standard Time on December 23,
2006 (the "Exercise Period"). This Warrant may be exercised by presentation and
surrender hereof to the Company at its principal office, or at the office of its
stock transfer agent, if any, with the Purchase Form annexed hereto duly
executed and accompanied by payment of the Exercise Price for the number of
Warrant Shares specified in such form. The Exercise Price may be paid by bank
check, wire transfer or cancellation of indebtedness. As soon as practicable
after each such exercise of this Warrant, but not later than seven (7) days from
the date of such exercise, the Company shall issue and deliver to the Holder a
certificate for the Warrant Shares issuable upon such exercise, registered in
the name of the Holder. If this Warrant should be exercised in part only, the
Company shall, upon surrender of this Warrant for cancellation, execute and
deliver a new Warrant evidencing the rights of the Holder thereof to purchase
the balance of the Warrant Shares purchasable thereunder. Upon receipt by the
Company of this Warrant at its office, or by the stock transfer agent of the
Company at its office, in proper form for exercise, the Holder shall be deemed
to be the holder of record of the shares of Common Stock issuable upon such
exercise, notwithstanding that the stock transfer books of the Company shall
then be closed or that certificates representing such shares of Common Stock
shall not then be physically delivered to the Holder.
<PAGE>
b. Warrant Exchange. At any time during the Exercise Period, the
Holder may, at its option, exchange this Warrant, in whole or in part (a
"Warrant Exchange"), into the number of Warrant Shares determined in accordance
with this Section 1(b), by surrendering this Warrant at the principal office of
the Company or at the office of its stock transfer agent, accompanied by a
notice stating the Holder's intent to effect such exchange, the number of
Warrant Shares to be exchanged and the date on which the Holder requests that
such Warrant Exchange occur (the "Notice of Exchange"). The Warrant Exchange
shall take place on the date specified in the Notice of Exchange or, if later,
the date the Notice of Exchange is received by the Company (the "Exchange
Date"). Certificates for the shares issuable upon such Warrant Exchange and, if
applicable, a new warrant of like tenor evidencing the balance of the shares
remaining subject to this Warrant, shall be issued as of the Exchange Date and
delivered to the Holder within seven (7) days following the Exchange Date. In
connection with any Warrant Exchange, this Warrant shall represent the right to
subscribe for and acquire the number of Warrant Shares equal to (i) the number
of Warrant Shares specified by the Holder in its Notice of Exchange (the "Total
Number") less (ii) the number of Warrant Shares equal to the quotient obtained
by dividing (A) the product of the Total Number and the existing Exercise Price
by (B) the Fair Market Value, provided that any fractional shares determined by
this calculation shall be represented by the issuance of a new Warrant. "Fair
Market Value" shall be determined as follows: (1) if the Common Stock is listed
on a national securities exchange or admitted to unlisted trading privileges on
such exchange or listed for trading on the Nasdaq Stock Market, the Fair Market
Value shall be the average of the last reported sale prices of the Common Stock
on such exchange or system for the twenty (20) business days ending on the last
business day prior to the date for which the determination is being made; or (2)
if the Common Stock is not so listed or admitted to unlisted trading privileges,
the Fair Market Value shall be the average of the last reported bid and asked
prices reported by the National Quotation Bureau, Inc. for the twenty (20)
business days ending on the last business day prior to the date for which the
determination is being made; or (3) if the Common Stock is not so listed or
admitted to unlisted trading privileges and bid and asked prices are not so
reported, the Fair Market Value shall be an amount, not less than book value
thereof as at the end of the most recent fiscal quarter of the Company ending
prior to the Exchange Date, determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
2. RESERVATION OF SHARES. The Company shall at all times reserve for
issuance and/or delivery upon exercise of this Warrant such number of shares of
its Common Stock as shall be required for issuance and delivery upon exercise of
this Warrant.
3. FRACTIONAL SHARES. No fractional shares of Common Stock shall be
issued upon the exercise of this Warrant. With respect to any fraction of a
share called for upon any exercise hereof, the Company shall pay to the Holder
an amount in cash equal to such fraction multiplied by the Fair Market Value of
a share of Common Stock.
4. ANTIDILUTION PROVISIONS. In the event the Common Stock is changed by
reason of a stock split, reverse stock split, stock dividend or recapitalization
or is converted into or exchanged for other securities as a result of a merger,
consolidation or reorganization in which the Company is the surviving
corporation, appropriate adjustments shall be made in the terms of this Warrant,
or additional warrants shall be granted to the Holder as shall be equitable and
appropriate, or an adjustment in the number and class of shares allocated to,
and the Exercise Price of, this Warrant shall likewise be made.
5. CERTAIN EXTRAORDINARY TRANSACTIONS. In the event the Common Stock is
2
<PAGE>
exchanged for securities, cash or other property of any other corporation or
entity as the result of a reorganization, merger or consolidation in which the
Company is not the surviving corporation, the dissolution or liquidation of the
Company, or the sale of all or substantially all the assets of the Company, the
Board of Directors of the Company or the board of directors of any successor
corporation or entity may, in its discretion, as to the unexercised portion of
this Warrant, (a) provide for payment of an amount equal to the excess of the
fair market value of the Warrant Shares, as determined by the Board of Directors
of the Company or such board, over the Exercise Price of such Warrant Shares as
of the date of the transaction, in exchange for the surrender of the right to
exercise this Warrant, or (b) provide for the assumption of this Warrant, or the
substitution therefor of new warrants, by the successor corporation or entity.
6. LOSS OF WARRANT. Upon receipt by the Company of evidence satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant, and (in the
case of loss, theft or destruction) of reasonably satisfactory indemnification,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
will execute and deliver a new warrant of like tenor and date.
7. NO RIGHTS AS STOCKHOLDER. The Holder shall not, as holder of this
Warrant, be entitled to vote, if applicable, or to receive dividends or to be
deemed the holder of Common Stock that may at any time be issuable upon exercise
of this Warrant for any purpose whatsoever, nor shall anything contained herein
be construed to confer upon the Holder, as such, any of the rights of a
stockholder of the Company or, if applicable, any right to vote for the election
of directors or upon any matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate action (whether upon
any recapitalization, issue or reclassification of stock, change of par value or
change of stock to no par value, consolidation, merger or conveyance or
otherwise), or to receive notice of meetings, or to receive dividends or
subscription rights, until such holder shall have exercised the Warrant and been
issued the Warrant Shares in accordance with the provisions hereof.
8. NON-TRANSFERABILITY. Neither this Warrant nor any Warrant Shares
shall be registered under the Securities Act of 1933, as amended, and applicable
state securities laws. Therefore, the Company shall require, as a condition of
allowing the transfer or exchange of this Warrant or such Warrant Shares, that
the Holder of this Warrant or such Warrant Shares, as the case may be, furnish
to the Company an opinion of counsel reasonably acceptable to the Company to the
effect that such transfer or exchange will be exempt from the registration and
prospectus delivery requirements under the Securities Act of 1933, as amended,
and applicable state securities laws. The certificates evidencing the Warrant
Shares shall bear a legend to the effect that the Warrant Shares evidenced by
such certificate have not been registered under the Securities Act of 1933, as
amended, and applicable state securities laws and are, therefore, subject to
restrictions on transfer.
9. INVESTMENT REPRESENTATIONS AND WARRANTIES. The Holder hereby
represents and warrants to the Company that (a) it has knowledge and experience
in financial and business matters sufficient to enable it to evaluate the merits
and risks of an investment in the Company; (b) it has assets sufficient to
enable it to bear the economic risk of its investment in this Warrant and the
Warrant Shares and is an "accredited investor" as defined in Rule 501 under the
Securities Act of 1933, as amended; (c) it is acquiring this Warrant and, upon
exercise, will acquire the Warrant Shares, for its own account, and not with a
view to, or for sale in connection with, any distribution thereof; (d) it or its
representatives have received from the Company such information with respect to
the Company as it has deemed necessary and relevant in connection with this
Warrant and the Warrant Shares and it has had the
3
<PAGE>
opportunity, directly or through such representatives, to ask questions of and
receive answers from persons acting on behalf of the Company necessary to verify
the information so obtained; and (e) it and its officers, directors, employees
and agents have not employed any broker or finder or incurred any liability for
any brokerage or finder's fees or commissions or similar payments in connection
with this Warrant and the Warrant Shares.
10. GOVERNING LAW. This Agreement and all amendments, modifications,
alterations, or supplements hereto shall be construed under and governed by the
laws of the State of New Jersey and the United States of America, without regard
to the principles of conflicts of law thereof.
11. MISCELLANEOUS. Except as provided in Sections 4 and 5 hereof, this
Warrant and any term hereof may be changed, waived, discharged or terminated
only by an instrument in writing signed by the party against which enforcement
of such change, waiver, discharge or termination is sought. The headings in
this Warrant are for purposes of reference only and shall not limit or otherwise
affect any of the terms hereof. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.
12. EXPIRATION. The right to exercise this Warrant shall expire at 5:00
P.M. Eastern Standard Time on December 23, 2006.
This Warrant is executed as of the date and year first written above.
Witness: ORAPHARMA, INC.
By:/s/ Michael Kishbauch
- --------------------------- -------------------------------
Michael Kishbauch, President
4
<PAGE>
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: OraPharma, Inc.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder _______ shares
of Common Stock, $.001 par value per share, of OraPharma, Inc. and herewith
makes payment of $__________ therefor, and requests that the certificates for
such shares be issued in the name of, and delivered to the undersigned at
_____________________________.
Dated: _____________________________________________
(Signature must conform to name of holder as
specified on the face of the Warrant)
__________________________________
(Address)
__________________________________
<PAGE>
Exhibit 4.21
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR
STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT OR STATE
SECURITIES LAWS.
No. 3 Right to Purchase Shares of Common Stock of OraPharma, Inc.
ORAPHARMA, INC.
Common Stock Purchase Warrant
This is to certify that, FOR VALUE RECEIVED, DP IV Associates, L.P. (the
"Holder"), is entitled to purchase, subject to the provisions of this Warrant,
from OraPharma, Inc., a Delaware corporation (the "Company"), 166 fully paid,
validly issued and nonassessable shares of Common Stock, par value $.001 per
share, of the Company (the "Common Stock") at an exercise price of $6.46 per
share. The number of shares of Common Stock to be received upon the exercise of
this Warrant and the price to be paid for each share of Common Stock may be
adjusted from time to time as hereinafter set forth. The shares of Common Stock
deliverable upon such exercise, and as adjusted from time to time, are
hereinafter sometimes referred to as "Warrant Shares" and the exercise price of
a share of Common Stock in effect at any time and as adjusted from time to time
is hereinafter sometimes referred to as the "Exercise Price".
1. EXERCISE OF WARRANT.
-------------------
a. Exercise for Cash. This Warrant may be exercised in whole or in
part at any time or from time to time starting from a period of twelve months
and five days after issue until 5:00 p.m. Eastern Standard Time on December 23,
2006 (the "Exercise Period"). This Warrant may be exercised by presentation and
surrender hereof to the Company at its principal office, or at the office of its
stock transfer agent, if any, with the Purchase Form annexed hereto duly
executed and accompanied by payment of the Exercise Price for the number of
Warrant Shares specified in such form. The Exercise Price may be paid by bank
check, wire transfer or cancellation of indebtedness. As soon as practicable
after each such exercise of this Warrant, but not later than seven (7) days from
the date of such exercise, the Company shall issue and deliver to the Holder a
certificate for the Warrant Shares issuable upon such exercise, registered in
the name of the Holder. If this Warrant should be exercised in part only, the
Company shall, upon surrender of this Warrant for cancellation, execute and
deliver a new Warrant evidencing the rights of the Holder thereof to purchase
the balance of the Warrant Shares purchasable thereunder. Upon receipt by the
Company of this Warrant at its office, or by the stock transfer agent of the
Company at its office, in proper form for exercise, the Holder shall be deemed
to be the holder of record of the shares of Common Stock issuable upon such
exercise, notwithstanding that the stock transfer books of the Company shall
then be closed or that certificates representing such shares of Common Stock
shall not then be physically delivered to the Holder.
<PAGE>
b. Warrant Exchange. At any time during the Exercise Period, the
Holder may, at its option, exchange this Warrant, in whole or in part (a
"Warrant Exchange"), into the number of Warrant Shares determined in accordance
with this Section 1(b), by surrendering this Warrant at the principal office of
the Company or at the office of its stock transfer agent, accompanied by a
notice stating the Holder's intent to effect such exchange, the number of
Warrant Shares to be exchanged and the date on which the Holder requests that
such Warrant Exchange occur (the "Notice of Exchange"). The Warrant Exchange
shall take place on the date specified in the Notice of Exchange or, if later,
the date the Notice of Exchange is received by the Company (the "Exchange
Date"). Certificates for the shares issuable upon such Warrant Exchange and, if
applicable, a new warrant of like tenor evidencing the balance of the shares
remaining subject to this Warrant, shall be issued as of the Exchange Date and
delivered to the Holder within seven (7) days following the Exchange Date. In
connection with any Warrant Exchange, this Warrant shall represent the right to
subscribe for and acquire the number of Warrant Shares equal to (i) the number
of Warrant Shares specified by the Holder in its Notice of Exchange (the "Total
Number") less (ii) the number of Warrant Shares equal to the quotient obtained
by dividing (A) the product of the Total Number and the existing Exercise Price
by (B) the Fair Market Value, provided that any fractional shares determined by
this calculation shall be represented by the issuance of a new Warrant. "Fair
Market Value" shall be determined as follows: (1) if the Common Stock is listed
on a national securities exchange or admitted to unlisted trading privileges on
such exchange or listed for trading on the Nasdaq Stock Market, the Fair Market
Value shall be the average of the last reported sale prices of the Common Stock
on such exchange or system for the twenty (20) business days ending on the last
business day prior to the date for which the determination is being made; or (2)
if the Common Stock is not so listed or admitted to unlisted trading privileges,
the Fair Market Value shall be the average of the last reported bid and asked
prices reported by the National Quotation Bureau, Inc. for the twenty (20)
business days ending on the last business day prior to the date for which the
determination is being made; or (3) if the Common Stock is not so listed or
admitted to unlisted trading privileges and bid and asked prices are not so
reported, the Fair Market Value shall be an amount, not less than book value
thereof as at the end of the most recent fiscal quarter of the Company ending
prior to the Exchange Date, determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
2. RESERVATION OF SHARES. The Company shall at all times reserve for
issuance and/or delivery upon exercise of this Warrant such number of shares of
its Common Stock as shall be required for issuance and delivery upon exercise of
this Warrant.
3. FRACTIONAL SHARES. No fractional shares of Common Stock shall be
issued upon the exercise of this Warrant. With respect to any fraction of a
share called for upon any exercise hereof, the Company shall pay to the Holder
an amount in cash equal to such fraction multiplied by the Fair Market Value of
a share of Common Stock.
4. ANTIDILUTION PROVISIONS. In the event the Common Stock is changed by
reason of a stock split, reverse stock split, stock dividend or recapitalization
or is converted into or exchanged for other securities as a result of a merger,
consolidation or reorganization in which the Company is the surviving
corporation, appropriate adjustments shall be made in the terms of this Warrant,
or additional warrants shall be granted to the Holder as shall be equitable and
appropriate, or an adjustment in the number and class of shares allocated to,
and the Exercise Price of, this Warrant shall likewise be made.
5. CERTAIN EXTRAORDINARY TRANSACTIONS. In the event the Common Stock is
2
<PAGE>
exchanged for securities, cash or other property of any other corporation or
entity as the result of a reorganization, merger or consolidation in which the
Company is not the surviving corporation, the dissolution or liquidation of the
Company, or the sale of all or substantially all the assets of the Company, the
Board of Directors of the Company or the board of directors of any successor
corporation or entity may, in its discretion, as to the unexercised portion of
this Warrant, (a) provide for payment of an amount equal to the excess of the
fair market value of the Warrant Shares, as determined by the Board of Directors
of the Company or such board, over the Exercise Price of such Warrant Shares as
of the date of the transaction, in exchange for the surrender of the right to
exercise this Warrant, or (b) provide for the assumption of this Warrant, or the
substitution therefor of new warrants, by the successor corporation or entity.
6. LOSS OF WARRANT. Upon receipt by the Company of evidence satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant, and (in the
case of loss, theft or destruction) of reasonably satisfactory indemnification,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
will execute and deliver a new warrant of like tenor and date.
7. NO RIGHTS AS STOCKHOLDER. The Holder shall not, as holder of this
Warrant, be entitled to vote, if applicable, or to receive dividends or to be
deemed the holder of Common Stock that may at any time be issuable upon exercise
of this Warrant for any purpose whatsoever, nor shall anything contained herein
be construed to confer upon the Holder, as such, any of the rights of a
stockholder of the Company or, if applicable, any right to vote for the election
of directors or upon any matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate action (whether upon
any recapitalization, issue or reclassification of stock, change of par value or
change of stock to no par value, consolidation, merger or conveyance or
otherwise), or to receive notice of meetings, or to receive dividends or
subscription rights, until such holder shall have exercised the Warrant and been
issued the Warrant Shares in accordance with the provisions hereof.
8. NON-TRANSFERABILITY. Neither this Warrant nor any Warrant Shares
shall be registered under the Securities Act of 1933, as amended, and applicable
state securities laws. Therefore, the Company shall require, as a condition of
allowing the transfer or exchange of this Warrant or such Warrant Shares, that
the Holder of this Warrant or such Warrant Shares, as the case may be, furnish
to the Company an opinion of counsel reasonably acceptable to the Company to the
effect that such transfer or exchange will be exempt from the registration and
prospectus delivery requirements under the Securities Act of 1933, as amended,
and applicable state securities laws. The certificates evidencing the Warrant
Shares shall bear a legend to the effect that the Warrant Shares evidenced by
such certificate have not been registered under the Securities Act of 1933, as
amended, and applicable state securities laws and are, therefore, subject to
restrictions on transfer.
9. INVESTMENT REPRESENTATIONS AND WARRANTIES. The Holder hereby
represents and warrants to the Company that (a) it has knowledge and experience
in financial and business matters sufficient to enable it to evaluate the merits
and risks of an investment in the Company; (b) it has assets sufficient to
enable it to bear the economic risk of its investment in this Warrant and the
Warrant Shares and is an "accredited investor" as defined in Rule 501 under the
Securities Act of 1933, as amended; (c) it is acquiring this Warrant and, upon
exercise, will acquire the Warrant Shares, for its own account, and not with a
view to, or for sale in connection with, any distribution thereof; (d) it or its
representatives have received from the Company such information with respect to
the Company as it has deemed necessary and relevant in connection with this
Warrant and the Warrant Shares and it has had the
3
<PAGE>
opportunity, directly or through such representatives, to ask questions of and
receive answers from persons acting on behalf of the Company necessary to verify
the information so obtained; and (e) it and its officers, directors, employees
and agents have not employed any broker or finder or incurred any liability for
any brokerage or finder's fees or commissions or similar payments in connection
with this Warrant and the Warrant Shares.
10. GOVERNING LAW. This Agreement and all amendments, modifications,
alterations, or supplements hereto shall be construed under and governed by the
laws of the State of New Jersey and the United States of America, without regard
to the principles of conflicts of law thereof.
11. MISCELLANEOUS. Except as provided in Sections 4 and 5 hereof, this
Warrant and any term hereof may be changed, waived, discharged or terminated
only by an instrument in writing signed by the party against which enforcement
of such change, waiver, discharge or termination is sought. The headings in
this Warrant are for purposes of reference only and shall not limit or otherwise
affect any of the terms hereof. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.
12. EXPIRATION. The right to exercise this Warrant shall expire at 5:00
P.M. Eastern Standard Time on December 23, 2006.
This Warrant is executed as of the date and year first written above.
Witness: ORAPHARMA, INC.
By:/s/ Michael Kishbauch
- ---------------------------- -------------------------------
Michael Kishbauch, President
4
<PAGE>
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: OraPharma, Inc.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder _______ shares
of Common Stock, $.001 par value per share, of OraPharma, Inc. and herewith
makes payment of $__________ therefor, and requests that the certificates for
such shares be issued in the name of, and delivered to the undersigned at
_____________________________.
Dated: _____________________________________________
(Signature must conform to name of holder as
specified on the face of the Warrant)
__________________________________
(Address)
__________________________________
<PAGE>
Exhibit 4.22
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR
STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT OR STATE
SECURITIES LAWS.
No. 4 Right to Purchase Shares of Common Stock of OraPharma, Inc.
ORAPHARMA, INC.
Common Stock Purchase Warrant
This is to certify that, FOR VALUE RECEIVED, Old Court Limited (the
"Holder"), is entitled to purchase, subject to the provisions of this Warrant,
from OraPharma, Inc., a Delaware corporation (the "Company"), 1,770 fully paid,
validly issued and nonassessable shares of Common Stock, par value $.001 per
share, of the Company (the "Common Stock") at an exercise price of $6.46 per
share. The number of shares of Common Stock to be received upon the exercise of
this Warrant and the price to be paid for each share of Common Stock may be
adjusted from time to time as hereinafter set forth. The shares of Common Stock
deliverable upon such exercise, and as adjusted from time to time, are
hereinafter sometimes referred to as "Warrant Shares" and the exercise price of
a share of Common Stock in effect at any time and as adjusted from time to time
is hereinafter sometimes referred to as the "Exercise Price".
1. EXERCISE OF WARRANT.
a. Exercise for Cash. This Warrant may be exercised in whole or in
part at any time or from time to time starting from a period of twelve months
and five days after issue until 5:00 p.m. Eastern Standard Time on December 23,
2006 (the "Exercise Period"). This Warrant may be exercised by presentation and
surrender hereof to the Company at its principal office, or at the office of its
stock transfer agent, if any, with the Purchase Form annexed hereto duly
executed and accompanied by payment of the Exercise Price for the number of
Warrant Shares specified in such form. The Exercise Price may be paid by bank
check, wire transfer or cancellation of indebtedness. As soon as practicable
after each such exercise of this Warrant, but not later than seven (7) days from
the date of such exercise, the Company shall issue and deliver to the Holder a
certificate for the Warrant Shares issuable upon such exercise, registered in
the name of the Holder. If this Warrant should be exercised in part only, the
Company shall, upon surrender of this Warrant for cancellation, execute and
deliver a new Warrant evidencing the rights of the Holder thereof to purchase
the balance of the Warrant Shares purchasable thereunder. Upon receipt by the
Company of this Warrant at its office, or by the stock transfer agent of the
Company at its office, in proper form for exercise, the Holder shall be deemed
to be the holder of record of the shares of Common Stock issuable upon such
exercise, notwithstanding that the stock transfer books of the Company shall
then be closed or that certificates representing such shares of Common Stock
shall not then be physically delivered to the Holder.
<PAGE>
b. Warrant Exchange. At any time during the Exercise Period, the
Holder may, at its option, exchange this Warrant, in whole or in part (a
"Warrant Exchange"), into the number of Warrant Shares determined in accordance
with this Section 1(b), by surrendering this Warrant at the principal office of
the Company or at the office of its stock transfer agent, accompanied by a
notice stating the Holder's intent to effect such exchange, the number of
Warrant Shares to be exchanged and the date on which the Holder requests that
such Warrant Exchange occur (the "Notice of Exchange"). The Warrant Exchange
shall take place on the date specified in the Notice of Exchange or, if later,
the date the Notice of Exchange is received by the Company (the "Exchange
Date"). Certificates for the shares issuable upon such Warrant Exchange and, if
applicable, a new warrant of like tenor evidencing the balance of the shares
remaining subject to this Warrant, shall be issued as of the Exchange Date and
delivered to the Holder within seven (7) days following the Exchange Date. In
connection with any Warrant Exchange, this Warrant shall represent the right to
subscribe for and acquire the number of Warrant Shares equal to (i) the number
of Warrant Shares specified by the Holder in its Notice of Exchange (the "Total
Number") less (ii) the number of Warrant Shares equal to the quotient obtained
by dividing (A) the product of the Total Number and the existing Exercise Price
by (B) the Fair Market Value, provided that any fractional shares determined by
this calculation shall be represented by the issuance of a new Warrant. "Fair
Market Value" shall be determined as follows: (1) if the Common Stock is listed
on a national securities exchange or admitted to unlisted trading privileges on
such exchange or listed for trading on the Nasdaq Stock Market, the Fair Market
Value shall be the average of the last reported sale prices of the Common Stock
on such exchange or system for the twenty (20) business days ending on the last
business day prior to the date for which the determination is being made; or (2)
if the Common Stock is not so listed or admitted to unlisted trading privileges,
the Fair Market Value shall be the average of the last reported bid and asked
prices reported by the National Quotation Bureau, Inc. for the twenty (20)
business days ending on the last business day prior to the date for which the
determination is being made; or (3) if the Common Stock is not so listed or
admitted to unlisted trading privileges and bid and asked prices are not so
reported, the Fair Market Value shall be an amount, not less than book value
thereof as at the end of the most recent fiscal quarter of the Company ending
prior to the Exchange Date, determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
2. RESERVATION OF SHARES. The Company shall at all times reserve for
issuance and/or delivery upon exercise of this Warrant such number of shares of
its Common Stock as shall be required for issuance and delivery upon exercise of
this Warrant.
3. FRACTIONAL SHARES. No fractional shares of Common Stock shall be
issued upon the exercise of this Warrant. With respect to any fraction of a
share called for upon any exercise hereof, the Company shall pay to the Holder
an amount in cash equal to such fraction multiplied by the Fair Market Value of
a share of Common Stock.
4. ANTIDILUTION PROVISIONS. In the event the Common Stock is changed by
reason of a stock split, reverse stock split, stock dividend or recapitalization
or is converted into or exchanged for other securities as a result of a merger,
consolidation or reorganization in which the Company is the surviving
corporation, appropriate adjustments shall be made in the terms of this Warrant,
or additional warrants shall be granted to the Holder as shall be equitable and
appropriate, or an adjustment in the number and class of shares allocated to,
and the Exercise Price of, this Warrant shall likewise be made.
5. CERTAIN EXTRAORDINARY TRANSACTIONS. In the event the Common Stock is
2
<PAGE>
exchanged for securities, cash or other property of any other corporation or
entity as the result of a reorganization, merger or consolidation in which the
Company is not the surviving corporation, the dissolution or liquidation of the
Company, or the sale of all or substantially all the assets of the Company, the
Board of Directors of the Company or the board of directors of any successor
corporation or entity may, in its discretion, as to the unexercised portion of
this Warrant, (a) provide for payment of an amount equal to the excess of the
fair market value of the Warrant Shares, as determined by the Board of Directors
of the Company or such board, over the Exercise Price of such Warrant Shares as
of the date of the transaction, in exchange for the surrender of the right to
exercise this Warrant, or (b) provide for the assumption of this Warrant, or the
substitution therefor of new warrants, by the successor corporation or entity.
6. LOSS OF WARRANT. Upon receipt by the Company of evidence satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant, and (in the
case of loss, theft or destruction) of reasonably satisfactory indemnification,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
will execute and deliver a new warrant of like tenor and date.
7. NO RIGHTS AS STOCKHOLDER. The Holder shall not, as holder of this
Warrant, be entitled to vote, if applicable, or to receive dividends or to be
deemed the holder of Common Stock that may at any time be issuable upon exercise
of this Warrant for any purpose whatsoever, nor shall anything contained herein
be construed to confer upon the Holder, as such, any of the rights of a
stockholder of the Company or, if applicable, any right to vote for the election
of directors or upon any matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate action (whether upon
any recapitalization, issue or reclassification of stock, change of par value or
change of stock to no par value, consolidation, merger or conveyance or
otherwise), or to receive notice of meetings, or to receive dividends or
subscription rights, until such holder shall have exercised the Warrant and been
issued the Warrant Shares in accordance with the provisions hereof.
8. NON-TRANSFERABILITY. Neither this Warrant nor any Warrant Shares
shall be registered under the Securities Act of 1933, as amended, and applicable
state securities laws. Therefore, the Company shall require, as a condition of
allowing the transfer or exchange of this Warrant or such Warrant Shares, that
the Holder of this Warrant or such Warrant Shares, as the case may be, furnish
to the Company an opinion of counsel reasonably acceptable to the Company to the
effect that such transfer or exchange will be exempt from the registration and
prospectus delivery requirements under the Securities Act of 1933, as amended,
and applicable state securities laws. The certificates evidencing the Warrant
Shares shall bear a legend to the effect that the Warrant Shares evidenced by
such certificate have not been registered under the Securities Act of 1933, as
amended, and applicable state securities laws and are, therefore, subject to
restrictions on transfer.
9. INVESTMENT REPRESENTATIONS AND WARRANTIES. The Holder hereby
represents and warrants to the Company that (a) it has knowledge and experience
in financial and business matters sufficient to enable it to evaluate the merits
and risks of an investment in the Company; (b) it has assets sufficient to
enable it to bear the economic risk of its investment in this Warrant and the
Warrant Shares and is an "accredited investor" as defined in Rule 501 under the
Securities Act of 1933, as amended; (c) it is acquiring this Warrant and, upon
exercise, will acquire the Warrant Shares, for its own account, and not with a
view to, or for sale in connection with, any distribution thereof; (d) it or its
representatives have received from the Company such information with respect to
the Company as it has deemed necessary and relevant in connection with this
Warrant and the Warrant Shares and it has had the
3
<PAGE>
opportunity, directly or through such representatives, to ask questions of and
receive answers from persons acting on behalf of the Company necessary to verify
the information so obtained; and (e) it and its officers, directors, employees
and agents have not employed any broker or finder or incurred any liability for
any brokerage or finder's fees or commissions or similar payments in connection
with this Warrant and the Warrant Shares.
10. GOVERNING LAW. This Agreement and all amendments, modifications,
alterations, or supplements hereto shall be construed under and governed by the
laws of the State of New Jersey and the United States of America, without regard
to the principles of conflicts of law thereof.
11. MISCELLANEOUS. Except as provided in Sections 4 and 5 hereof, this
Warrant and any term hereof may be changed, waived, discharged or terminated
only by an instrument in writing signed by the party against which enforcement
of such change, waiver, discharge or termination is sought. The headings in
this Warrant are for purposes of reference only and shall not limit or otherwise
affect any of the terms hereof. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.
12. EXPIRATION. The right to exercise this Warrant shall expire at 5:00
P.M. Eastern Standard Time on December 23, 2006.
This Warrant is executed as of the date and year first written above.
Witness: ORAPHARMA, INC.
By:/s/ Michael Kishbauch
- --------------------------- -------------------------------
Michael Kishbauch, President
4
<PAGE>
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: OraPharma, Inc.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder _______ shares
of Common Stock, $.001 par value per share, of OraPharma, Inc. and herewith
makes payment of $__________ therefor, and requests that the certificates for
such shares be issued in the name of, and delivered to the undersigned at
_____________________________.
Dated: _____________________________________________
(Signature must conform to name of holder as
specified on the face of the Warrant)
__________________________________
(Address)
__________________________________
<PAGE>
Exhibit 4.23
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR
STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT OR STATE
SECURITIES LAWS.
No. 5 Right to Purchase Shares of Common Stock of OraPharma, Inc.
ORAPHARMA, INC.
Common Stock Purchase Warrant
This is to certify that, FOR VALUE RECEIVED, Frazier Healthcare II, L.P.
(the "Holder"), is entitled to purchase, subject to the provisions of this
Warrant, from OraPharma, Inc., a Delaware corporation (the "Company"), 8,850
fully paid, validly issued and nonassessable shares of Common Stock, par value
$.001 per share, of the Company (the "Common Stock") at an exercise price of
$6.46 per share. The number of shares of Common Stock to be received upon the
exercise of this Warrant and the price to be paid for each share of Common Stock
may be adjusted from time to time as hereinafter set forth. The shares of
Common Stock deliverable upon such exercise, and as adjusted from time to time,
are hereinafter sometimes referred to as "Warrant Shares" and the exercise price
of a share of Common Stock in effect at any time and as adjusted from time to
time is hereinafter sometimes referred to as the "Exercise Price".
1. EXERCISE OF WARRANT.
a. Exercise for Cash. This Warrant may be exercised in whole or in
part at any time or from time to time starting from a period of twelve months
and five days after issue until 5:00 p.m. Eastern Standard Time on December 23,
2006 (the "Exercise Period"). This Warrant may be exercised by presentation and
surrender hereof to the Company at its principal office, or at the office of its
stock transfer agent, if any, with the Purchase Form annexed hereto duly
executed and accompanied by payment of the Exercise Price for the number of
Warrant Shares specified in such form. The Exercise Price may be paid by bank
check, wire transfer or cancellation of indebtedness. As soon as practicable
after each such exercise of this Warrant, but not later than seven (7) days from
the date of such exercise, the Company shall issue and deliver to the Holder a
certificate for the Warrant Shares issuable upon such exercise, registered in
the name of the Holder. If this Warrant should be exercised in part only, the
Company shall, upon surrender of this Warrant for cancellation, execute and
deliver a new Warrant evidencing the rights of the Holder thereof to purchase
the balance of the Warrant Shares purchasable thereunder. Upon receipt by the
Company of this Warrant at its office, or by the stock transfer agent of the
Company at its office, in proper form for exercise, the Holder shall be deemed
to be the holder of record of the shares of Common Stock issuable upon such
exercise, notwithstanding that the stock transfer books of the Company shall
then be closed or that certificates representing such shares of Common Stock
shall not then be physically delivered to the Holder.
<PAGE>
b. Warrant Exchange. At any time during the Exercise Period, the
Holder may, at its option, exchange this Warrant, in whole or in part (a
"Warrant Exchange"), into the number of Warrant Shares determined in accordance
with this Section 1(b), by surrendering this Warrant at the principal office of
the Company or at the office of its stock transfer agent, accompanied by a
notice stating the Holder's intent to effect such exchange, the number of
Warrant Shares to be exchanged and the date on which the Holder requests that
such Warrant Exchange occur (the "Notice of Exchange"). The Warrant Exchange
shall take place on the date specified in the Notice of Exchange or, if later,
the date the Notice of Exchange is received by the Company (the "Exchange
Date"). Certificates for the shares issuable upon such Warrant Exchange and, if
applicable, a new warrant of like tenor evidencing the balance of the shares
remaining subject to this Warrant, shall be issued as of the Exchange Date and
delivered to the Holder within seven (7) days following the Exchange Date. In
connection with any Warrant Exchange, this Warrant shall represent the right to
subscribe for and acquire the number of Warrant Shares equal to (i) the number
of Warrant Shares specified by the Holder in its Notice of Exchange (the "Total
Number") less (ii) the number of Warrant Shares equal to the quotient obtained
by dividing (A) the product of the Total Number and the existing Exercise Price
by (B) the Fair Market Value, provided that any fractional shares determined by
this calculation shall be represented by the issuance of a new Warrant. "Fair
Market Value" shall be determined as follows: (1) if the Common Stock is listed
on a national securities exchange or admitted to unlisted trading privileges on
such exchange or listed for trading on the Nasdaq Stock Market, the Fair Market
Value shall be the average of the last reported sale prices of the Common Stock
on such exchange or system for the twenty (20) business days ending on the last
business day prior to the date for which the determination is being made; or (2)
if the Common Stock is not so listed or admitted to unlisted trading privileges,
the Fair Market Value shall be the average of the last reported bid and asked
prices reported by the National Quotation Bureau, Inc. for the twenty (20)
business days ending on the last business day prior to the date for which the
determination is being made; or (3) if the Common Stock is not so listed or
admitted to unlisted trading privileges and bid and asked prices are not so
reported, the Fair Market Value shall be an amount, not less than book value
thereof as at the end of the most recent fiscal quarter of the Company ending
prior to the Exchange Date, determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
2. RESERVATION OF SHARES. The Company shall at all times reserve for
issuance and/or delivery upon exercise of this Warrant such number of shares of
its Common Stock as shall be required for issuance and delivery upon exercise of
this Warrant.
3. FRACTIONAL SHARES. No fractional shares of Common Stock shall be
issued upon the exercise of this Warrant. With respect to any fraction of a
share called for upon any exercise hereof, the Company shall pay to the Holder
an amount in cash equal to such fraction multiplied by the Fair Market Value of
a share of Common Stock.
4. ANTIDILUTION PROVISIONS. In the event the Common Stock is changed by
reason of a stock split, reverse stock split, stock dividend or recapitalization
or is converted into or exchanged for other securities as a result of a merger,
consolidation or reorganization in which the Company is the surviving
corporation, appropriate adjustments shall be made in the terms of this Warrant,
or additional warrants shall be granted to the Holder as shall be equitable and
appropriate, or an adjustment in the number and class of shares allocated to,
and the Exercise Price of, this Warrant shall likewise be made.
5. CERTAIN EXTRAORDINARY TRANSACTIONS. In the event the Common Stock is
2
<PAGE>
exchanged for securities, cash or other property of any other corporation or
entity as the result of a reorganization, merger or consolidation in which the
Company is not the surviving corporation, the dissolution or liquidation of the
Company, or the sale of all or substantially all the assets of the Company, the
Board of Directors of the Company or the board of directors of any successor
corporation or entity may, in its discretion, as to the unexercised portion of
this Warrant, (a) provide for payment of an amount equal to the excess of the
fair market value of the Warrant Shares, as determined by the Board of Directors
of the Company or such board, over the Exercise Price of such Warrant Shares as
of the date of the transaction, in exchange for the surrender of the right to
exercise this Warrant, or (b) provide for the assumption of this Warrant, or the
substitution therefor of new warrants, by the successor corporation or entity.
6. LOSS OF WARRANT. Upon receipt by the Company of evidence satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant, and (in the
case of loss, theft or destruction) of reasonably satisfactory indemnification,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
will execute and deliver a new warrant of like tenor and date.
7. NO RIGHTS AS STOCKHOLDER. The Holder shall not, as holder of this
Warrant, be entitled to vote, if applicable, or to receive dividends or to be
deemed the holder of Common Stock that may at any time be issuable upon exercise
of this Warrant for any purpose whatsoever, nor shall anything contained herein
be construed to confer upon the Holder, as such, any of the rights of a
stockholder of the Company or, if applicable, any right to vote for the election
of directors or upon any matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate action (whether upon
any recapitalization, issue or reclassification of stock, change of par value or
change of stock to no par value, consolidation, merger or conveyance or
otherwise), or to receive notice of meetings, or to receive dividends or
subscription rights, until such holder shall have exercised the Warrant and been
issued the Warrant Shares in accordance with the provisions hereof.
8. NON-TRANSFERABILITY. Neither this Warrant nor any Warrant Shares
shall be registered under the Securities Act of 1933, as amended, and applicable
state securities laws. Therefore, the Company shall require, as a condition of
allowing the transfer or exchange of this Warrant or such Warrant Shares, that
the Holder of this Warrant or such Warrant Shares, as the case may be, furnish
to the Company an opinion of counsel reasonably acceptable to the Company to the
effect that such transfer or exchange will be exempt from the registration and
prospectus delivery requirements under the Securities Act of 1933, as amended,
and applicable state securities laws. The certificates evidencing the Warrant
Shares shall bear a legend to the effect that the Warrant Shares evidenced by
such certificate have not been registered under the Securities Act of 1933, as
amended, and applicable state securities laws and are, therefore, subject to
restrictions on transfer.
9. INVESTMENT REPRESENTATIONS AND WARRANTIES. The Holder hereby
represents and warrants to the Company that (a) it has knowledge and experience
in financial and business matters sufficient to enable it to evaluate the merits
and risks of an investment in the Company; (b) it has assets sufficient to
enable it to bear the economic risk of its investment in this Warrant and the
Warrant Shares and is an "accredited investor" as defined in Rule 501 under the
Securities Act of 1933, as amended; (c) it is acquiring this Warrant and, upon
exercise, will acquire the Warrant Shares, for its own account, and not with a
view to, or for sale in connection with, any distribution thereof; (d) it or its
representatives have received from the Company such information with respect to
the Company as it has deemed necessary and relevant in connection with this
Warrant and the Warrant Shares and it has had the
3
<PAGE>
opportunity, directly or through such representatives, to ask questions of and
receive answers from persons acting on behalf of the Company necessary to verify
the information so obtained; and (e) it and its officers, directors, employees
and agents have not employed any broker or finder or incurred any liability for
any brokerage or finder's fees or commissions or similar payments in connection
with this Warrant and the Warrant Shares.
10. GOVERNING LAW. This Agreement and all amendments, modifications,
alterations, or supplements hereto shall be construed under and governed by the
laws of the State of New Jersey and the United States of America, without regard
to the principles of conflicts of law thereof.
11. MISCELLANEOUS. Except as provided in Sections 4 and 5 hereof, this
Warrant and any term hereof may be changed, waived, discharged or terminated
only by an instrument in writing signed by the party against which enforcement
of such change, waiver, discharge or termination is sought. The headings in
this Warrant are for purposes of reference only and shall not limit or otherwise
affect any of the terms hereof. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.
12. EXPIRATION. The right to exercise this Warrant shall expire at 5:00
P.M. Eastern Standard Time on December 23, 2006.
This Warrant is executed as of the date and year first written above.
Witness: ORAPHARMA, INC.
By:/s/ Michael Kishbauch
- --------------------------- -------------------------------
Michael Kishbauch, President
4
<PAGE>
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: OraPharma, Inc.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder _______ shares
of Common Stock, $.001 par value per share, of OraPharma, Inc. and herewith
makes payment of $__________ therefor, and requests that the certificates for
such shares be issued in the name of, and delivered to the undersigned at
_____________________________.
Dated: _____________________________________________
(Signature must conform to name of holder as
specified on the face of the Warrant)
__________________________________
(Address)
__________________________________
<PAGE>
Exhibit 4.24
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR
STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT OR STATE
SECURITIES LAWS.
No. 6 Right to Purchase Shares of Common Stock of OraPharma, Inc.
ORAPHARMA, INC.
Common Stock Purchase Warrant
This is to certify that, FOR VALUE RECEIVED, HealthCap KB (the "Holder"),
is entitled to purchase, subject to the provisions of this Warrant, from
OraPharma, Inc., a Delaware corporation (the "Company"), 25,439 fully paid,
validly issued and nonassessable shares of Common Stock, par value $.001 per
share, of the Company (the "Common Stock") at an exercise price of $6.46 per
share. The number of shares of Common Stock to be received upon the exercise of
this Warrant and the price to be paid for each share of Common Stock may be
adjusted from time to time as hereinafter set forth. The shares of Common Stock
deliverable upon such exercise, and as adjusted from time to time, are
hereinafter sometimes referred to as "Warrant Shares" and the exercise price of
a share of Common Stock in effect at any time and as adjusted from time to time
is hereinafter sometimes referred to as the "Exercise Price".
1. EXERCISE OF WARRANT.
-------------------
a. Exercise for Cash. This Warrant may be exercised in whole or in
part at any time or from time to time starting from a period of twelve months
and five days after issue until 5:00 p.m. Eastern Standard Time on December 23,
2006 (the "Exercise Period"). This Warrant may be exercised by presentation and
surrender hereof to the Company at its principal office, or at the office of its
stock transfer agent, if any, with the Purchase Form annexed hereto duly
executed and accompanied by payment of the Exercise Price for the number of
Warrant Shares specified in such form. The Exercise Price may be paid by bank
check, wire transfer or cancellation of indebtedness. As soon as practicable
after each such exercise of this Warrant, but not later than seven (7) days from
the date of such exercise, the Company shall issue and deliver to the Holder a
certificate for the Warrant Shares issuable upon such exercise, registered in
the name of the Holder. If this Warrant should be exercised in part only, the
Company shall, upon surrender of this Warrant for cancellation, execute and
deliver a new Warrant evidencing the rights of the Holder thereof to purchase
the balance of the Warrant Shares purchasable thereunder. Upon receipt by the
Company of this Warrant at its office, or by the stock transfer agent of the
Company at its office, in proper form for exercise, the Holder shall be deemed
to be the holder of record of the shares of Common Stock issuable upon such
exercise, notwithstanding that the stock transfer books of the Company shall
then be closed or that certificates representing such shares of Common Stock
shall not then be physically delivered to the Holder.
<PAGE>
b. Warrant Exchange. At any time during the Exercise Period, the
Holder may, at its option, exchange this Warrant, in whole or in part (a
"Warrant Exchange"), into the number of Warrant Shares determined in accordance
with this Section 1(b), by surrendering this Warrant at the principal office of
the Company or at the office of its stock transfer agent, accompanied by a
notice stating the Holder's intent to effect such exchange, the number of
Warrant Shares to be exchanged and the date on which the Holder requests that
such Warrant Exchange occur (the "Notice of Exchange"). The Warrant Exchange
shall take place on the date specified in the Notice of Exchange or, if later,
the date the Notice of Exchange is received by the Company (the "Exchange
Date"). Certificates for the shares issuable upon such Warrant Exchange and, if
applicable, a new warrant of like tenor evidencing the balance of the shares
remaining subject to this Warrant, shall be issued as of the Exchange Date and
delivered to the Holder within seven (7) days following the Exchange Date. In
connection with any Warrant Exchange, this Warrant shall represent the right to
subscribe for and acquire the number of Warrant Shares equal to (i) the number
of Warrant Shares specified by the Holder in its Notice of Exchange (the "Total
Number") less (ii) the number of Warrant Shares equal to the quotient obtained
by dividing (A) the product of the Total Number and the existing Exercise Price
by (B) the Fair Market Value, provided that any fractional shares determined by
this calculation shall be represented by the issuance of a new Warrant. "Fair
Market Value" shall be determined as follows: (1) if the Common Stock is listed
on a national securities exchange or admitted to unlisted trading privileges on
such exchange or listed for trading on the Nasdaq Stock Market, the Fair Market
Value shall be the average of the last reported sale prices of the Common Stock
on such exchange or system for the twenty (20) business days ending on the last
business day prior to the date for which the determination is being made; or (2)
if the Common Stock is not so listed or admitted to unlisted trading privileges,
the Fair Market Value shall be the average of the last reported bid and asked
prices reported by the National Quotation Bureau, Inc. for the twenty (20)
business days ending on the last business day prior to the date for which the
determination is being made; or (3) if the Common Stock is not so listed or
admitted to unlisted trading privileges and bid and asked prices are not so
reported, the Fair Market Value shall be an amount, not less than book value
thereof as at the end of the most recent fiscal quarter of the Company ending
prior to the Exchange Date, determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
2. RESERVATION OF SHARES. The Company shall at all times reserve for
issuance and/or delivery upon exercise of this Warrant such number of shares of
its Common Stock as shall be required for issuance and delivery upon exercise of
this Warrant.
3. FRACTIONAL SHARES. No fractional shares of Common Stock shall be
issued upon the exercise of this Warrant. With respect to any fraction of a
share called for upon any exercise hereof, the Company shall pay to the Holder
an amount in cash equal to such fraction multiplied by the Fair Market Value of
a share of Common Stock.
4. ANTIDILUTION PROVISIONS. In the event the Common Stock is changed by
reason of a stock split, reverse stock split, stock dividend or recapitalization
or is converted into or exchanged for other securities as a result of a merger,
consolidation or reorganization in which the Company is the surviving
corporation, appropriate adjustments shall be made in the terms of this Warrant,
or additional warrants shall be granted to the Holder as shall be equitable and
appropriate, or an adjustment in the number and class of shares allocated to,
and the Exercise Price of, this Warrant shall likewise be made.
5. CERTAIN EXTRAORDINARY TRANSACTIONS. In the event the Common Stock is
2
<PAGE>
exchanged for securities, cash or other property of any other corporation or
entity as the result of a reorganization, merger or consolidation in which the
Company is not the surviving corporation, the dissolution or liquidation of the
Company, or the sale of all or substantially all the assets of the Company, the
Board of Directors of the Company or the board of directors of any successor
corporation or entity may, in its discretion, as to the unexercised portion of
this Warrant, (a) provide for payment of an amount equal to the excess of the
fair market value of the Warrant Shares, as determined by the Board of Directors
of the Company or such board, over the Exercise Price of such Warrant Shares as
of the date of the transaction, in exchange for the surrender of the right to
exercise this Warrant, or (b) provide for the assumption of this Warrant, or the
substitution therefor of new warrants, by the successor corporation or entity.
6. LOSS OF WARRANT. Upon receipt by the Company of evidence satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant, and (in the
case of loss, theft or destruction) of reasonably satisfactory indemnification,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
will execute and deliver a new warrant of like tenor and date.
7. NO RIGHTS AS STOCKHOLDER. The Holder shall not, as holder of this
Warrant, be entitled to vote, if applicable, or to receive dividends or to be
deemed the holder of Common Stock that may at any time be issuable upon exercise
of this Warrant for any purpose whatsoever, nor shall anything contained herein
be construed to confer upon the Holder, as such, any of the rights of a
stockholder of the Company or, if applicable, any right to vote for the election
of directors or upon any matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate action (whether upon
any recapitalization, issue or reclassification of stock, change of par value or
change of stock to no par value, consolidation, merger or conveyance or
otherwise), or to receive notice of meetings, or to receive dividends or
subscription rights, until such holder shall have exercised the Warrant and been
issued the Warrant Shares in accordance with the provisions hereof.
8. NON-TRANSFERABILITY. Neither this Warrant nor any Warrant Shares
shall be registered under the Securities Act of 1933, as amended, and applicable
state securities laws. Therefore, the Company shall require, as a condition of
allowing the transfer or exchange of this Warrant or such Warrant Shares, that
the Holder of this Warrant or such Warrant Shares, as the case may be, furnish
to the Company an opinion of counsel reasonably acceptable to the Company to the
effect that such transfer or exchange will be exempt from the registration and
prospectus delivery requirements under the Securities Act of 1933, as amended,
and applicable state securities laws. The certificates evidencing the Warrant
Shares shall bear a legend to the effect that the Warrant Shares evidenced by
such certificate have not been registered under the Securities Act of 1933, as
amended, and applicable state securities laws and are, therefore, subject to
restrictions on transfer.
9. INVESTMENT REPRESENTATIONS AND WARRANTIES. The Holder hereby
represents and warrants to the Company that (a) it has knowledge and experience
in financial and business matters sufficient to enable it to evaluate the merits
and risks of an investment in the Company; (b) it has assets sufficient to
enable it to bear the economic risk of its investment in this Warrant and the
Warrant Shares and is an "accredited investor" as defined in Rule 501 under the
Securities Act of 1933, as amended; (c) it is acquiring this Warrant and, upon
exercise, will acquire the Warrant Shares, for its own account, and not with a
view to, or for sale in connection with, any distribution thereof; (d) it or its
representatives have received from the Company such information with respect to
the Company as it has deemed necessary and relevant in connection with this
Warrant and the Warrant Shares and it has had the
3
<PAGE>
opportunity, directly or through such representatives, to ask questions of and
receive answers from persons acting on behalf of the Company necessary to verify
the information so obtained; and (e) it and its officers, directors, employees
and agents have not employed any broker or finder or incurred any liability for
any brokerage or finder's fees or commissions or similar payments in connection
with this Warrant and the Warrant Shares.
10. GOVERNING LAW. This Agreement and all amendments, modifications,
alterations, or supplements hereto shall be construed under and governed by the
laws of the State of New Jersey and the United States of America, without regard
to the principles of conflicts of law thereof.
11. MISCELLANEOUS. Except as provided in Sections 4 and 5 hereof, this
Warrant and any term hereof may be changed, waived, discharged or terminated
only by an instrument in writing signed by the party against which enforcement
of such change, waiver, discharge or termination is sought. The headings in
this Warrant are for purposes of reference only and shall not limit or otherwise
affect any of the terms hereof. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.
12. EXPIRATION. The right to exercise this Warrant shall expire at 5:00
P.M. Eastern Standard Time on December 23, 2006.
This Warrant is executed as of the date and year first written above.
Witness: ORAPHARMA, INC.
By:/s/ Michael Kishbauch
- --------------------------- -------------------------------
Michael Kishbauch, President
4
<PAGE>
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: OraPharma, Inc.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder _______ shares
of Common Stock, $.001 par value per share, of OraPharma, Inc. and herewith
makes payment of $__________ therefor, and requests that the certificates for
such shares be issued in the name of, and delivered to the undersigned at
_____________________________.
Dated: _____________________________________________
(Signature must conform to name of holder as
specified on the face of the Warrant)
__________________________________
(Address)
__________________________________
<PAGE>
Exhibit 4.25
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR
STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT OR STATE
SECURITIES LAWS.
No. 7 Right to Purchase Shares of Common Stock of OraPharma, Inc.
ORAPHARMA, INC.
Common Stock Purchase Warrant
This is to certify that, FOR VALUE RECEIVED, HealthCap CoInvest KB (the
"Holder"), is entitled to purchase, subject to the provisions of this Warrant,
from OraPharma, Inc., a Delaware corporation (the "Company"), 35,130 fully paid,
validly issued and nonassessable shares of Common Stock, par value $.001 per
share, of the Company (the "Common Stock") at an exercise price of $6.46 per
share. The number of shares of Common Stock to be received upon the exercise of
this Warrant and the price to be paid for each share of Common Stock may be
adjusted from time to time as hereinafter set forth. The shares of Common Stock
deliverable upon such exercise, and as adjusted from time to time, are
hereinafter sometimes referred to as "Warrant Shares" and the exercise price of
a share of Common Stock in effect at any time and as adjusted from time to time
is hereinafter sometimes referred to as the "Exercise Price".
1. EXERCISE OF WARRANT.
-------------------
a. Exercise for Cash. This Warrant may be exercised in whole or in
part at any time or from time to time starting from a period of twelve months
and five days after issue until 5:00 p.m. Eastern Standard Time on December 23,
2006 (the "Exercise Period"). This Warrant may be exercised by presentation and
surrender hereof to the Company at its principal office, or at the office of its
stock transfer agent, if any, with the Purchase Form annexed hereto duly
executed and accompanied by payment of the Exercise Price for the number of
Warrant Shares specified in such form. The Exercise Price may be paid by bank
check, wire transfer or cancellation of indebtedness. As soon as practicable
after each such exercise of this Warrant, but not later than seven (7) days from
the date of such exercise, the Company shall issue and deliver to the Holder a
certificate for the Warrant Shares issuable upon such exercise, registered in
the name of the Holder. If this Warrant should be exercised in part only, the
Company shall, upon surrender of this Warrant for cancellation, execute and
deliver a new Warrant evidencing the rights of the Holder thereof to purchase
the balance of the Warrant Shares purchasable thereunder. Upon receipt by the
Company of this Warrant at its office, or by the stock transfer agent of the
Company at its office, in proper form for exercise, the Holder shall be deemed
to be the holder of record of the shares of Common Stock issuable upon such
exercise, notwithstanding that the stock transfer books of the Company shall
then be closed or that certificates representing such shares of Common Stock
shall not then be physically delivered to the Holder.
<PAGE>
b. Warrant Exchange. At any time during the Exercise Period, the
Holder may, at its option, exchange this Warrant, in whole or in part (a
"Warrant Exchange"), into the number of Warrant Shares determined in accordance
with this Section 1(b), by surrendering this Warrant at the principal office of
the Company or at the office of its stock transfer agent, accompanied by a
notice stating the Holder's intent to effect such exchange, the number of
Warrant Shares to be exchanged and the date on which the Holder requests that
such Warrant Exchange occur (the "Notice of Exchange"). The Warrant Exchange
shall take place on the date specified in the Notice of Exchange or, if later,
the date the Notice of Exchange is received by the Company (the "Exchange
Date"). Certificates for the shares issuable upon such Warrant Exchange and, if
applicable, a new warrant of like tenor evidencing the balance of the shares
remaining subject to this Warrant, shall be issued as of the Exchange Date and
delivered to the Holder within seven (7) days following the Exchange Date. In
connection with any Warrant Exchange, this Warrant shall represent the right to
subscribe for and acquire the number of Warrant Shares equal to (i) the number
of Warrant Shares specified by the Holder in its Notice of Exchange (the "Total
Number") less (ii) the number of Warrant Shares equal to the quotient obtained
by dividing (A) the product of the Total Number and the existing Exercise Price
by (B) the Fair Market Value, provided that any fractional shares determined by
this calculation shall be represented by the issuance of a new Warrant. "Fair
Market Value" shall be determined as follows: (1) if the Common Stock is listed
on a national securities exchange or admitted to unlisted trading privileges on
such exchange or listed for trading on the Nasdaq Stock Market, the Fair Market
Value shall be the average of the last reported sale prices of the Common Stock
on such exchange or system for the twenty (20) business days ending on the last
business day prior to the date for which the determination is being made; or (2)
if the Common Stock is not so listed or admitted to unlisted trading privileges,
the Fair Market Value shall be the average of the last reported bid and asked
prices reported by the National Quotation Bureau, Inc. for the twenty (20)
business days ending on the last business day prior to the date for which the
determination is being made; or (3) if the Common Stock is not so listed or
admitted to unlisted trading privileges and bid and asked prices are not so
reported, the Fair Market Value shall be an amount, not less than book value
thereof as at the end of the most recent fiscal quarter of the Company ending
prior to the Exchange Date, determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
2. RESERVATION OF SHARES. The Company shall at all times reserve for
issuance and/or delivery upon exercise of this Warrant such number of shares of
its Common Stock as shall be required for issuance and delivery upon exercise of
this Warrant.
3. FRACTIONAL SHARES. No fractional shares of Common Stock shall be
issued upon the exercise of this Warrant. With respect to any fraction of a
share called for upon any exercise hereof, the Company shall pay to the Holder
an amount in cash equal to such fraction multiplied by the Fair Market Value of
a share of Common Stock.
4. ANTIDILUTION PROVISIONS. In the event the Common Stock is changed by
reason of a stock split, reverse stock split, stock dividend or recapitalization
or is converted into or exchanged for other securities as a result of a merger,
consolidation or reorganization in which the Company is the surviving
corporation, appropriate adjustments shall be made in the terms of this Warrant,
or additional warrants shall be granted to the Holder as shall be equitable and
appropriate, or an adjustment in the number and class of shares allocated to,
and the Exercise Price of, this Warrant shall likewise be made.
5. CERTAIN EXTRAORDINARY TRANSACTIONS. In the event the Common Stock is
2
<PAGE>
exchanged for securities, cash or other property of any other corporation or
entity as the result of a reorganization, merger or consolidation in which the
Company is not the surviving corporation, the dissolution or liquidation of the
Company, or the sale of all or substantially all the assets of the Company, the
Board of Directors of the Company or the board of directors of any successor
corporation or entity may, in its discretion, as to the unexercised portion of
this Warrant, (a) provide for payment of an amount equal to the excess of the
fair market value of the Warrant Shares, as determined by the Board of Directors
of the Company or such board, over the Exercise Price of such Warrant Shares as
of the date of the transaction, in exchange for the surrender of the right to
exercise this Warrant, or (b) provide for the assumption of this Warrant, or the
substitution therefor of new warrants, by the successor corporation or entity.
6. LOSS OF WARRANT. Upon receipt by the Company of evidence satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant, and (in the
case of loss, theft or destruction) of reasonably satisfactory indemnification,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
will execute and deliver a new warrant of like tenor and date.
7. NO RIGHTS AS STOCKHOLDER. The Holder shall not, as holder of this
Warrant, be entitled to vote, if applicable, or to receive dividends or to be
deemed the holder of Common Stock that may at any time be issuable upon exercise
of this Warrant for any purpose whatsoever, nor shall anything contained herein
be construed to confer upon the Holder, as such, any of the rights of a
stockholder of the Company or, if applicable, any right to vote for the election
of directors or upon any matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate action (whether upon
any recapitalization, issue or reclassification of stock, change of par value or
change of stock to no par value, consolidation, merger or conveyance or
otherwise), or to receive notice of meetings, or to receive dividends or
subscription rights, until such holder shall have exercised the Warrant and been
issued the Warrant Shares in accordance with the provisions hereof.
8. NON-TRANSFERABILITY. Neither this Warrant nor any Warrant Shares
shall be registered under the Securities Act of 1933, as amended, and applicable
state securities laws. Therefore, the Company shall require, as a condition of
allowing the transfer or exchange of this Warrant or such Warrant Shares, that
the Holder of this Warrant or such Warrant Shares, as the case may be, furnish
to the Company an opinion of counsel reasonably acceptable to the Company to the
effect that such transfer or exchange will be exempt from the registration and
prospectus delivery requirements under the Securities Act of 1933, as amended,
and applicable state securities laws. The certificates evidencing the Warrant
Shares shall bear a legend to the effect that the Warrant Shares evidenced by
such certificate have not been registered under the Securities Act of 1933, as
amended, and applicable state securities laws and are, therefore, subject to
restrictions on transfer.
9. INVESTMENT REPRESENTATIONS AND WARRANTIES. The Holder hereby
represents and warrants to the Company that (a) it has knowledge and experience
in financial and business matters sufficient to enable it to evaluate the merits
and risks of an investment in the Company; (b) it has assets sufficient to
enable it to bear the economic risk of its investment in this Warrant and the
Warrant Shares and is an "accredited investor" as defined in Rule 501 under the
Securities Act of 1933, as amended; (c) it is acquiring this Warrant and, upon
exercise, will acquire the Warrant Shares, for its own account, and not with a
view to, or for sale in connection with, any distribution thereof; (d) it or its
representatives have received from the Company such information with respect to
the Company as it has deemed necessary and relevant in connection with this
Warrant and the Warrant Shares and it has had the
3
<PAGE>
opportunity, directly or through such representatives, to ask questions of and
receive answers from persons acting on behalf of the Company necessary to verify
the information so obtained; and (e) it and its officers, directors, employees
and agents have not employed any broker or finder or incurred any liability for
any brokerage or finder's fees or commissions or similar payments in connection
with this Warrant and the Warrant Shares.
10. GOVERNING LAW. This Agreement and all amendments, modifications,
alterations, or supplements hereto shall be construed under and governed by the
laws of the State of New Jersey and the United States of America, without regard
to the principles of conflicts of law thereof.
11. MISCELLANEOUS. Except as provided in Sections 4 and 5 hereof, this
Warrant and any term hereof may be changed, waived, discharged or terminated
only by an instrument in writing signed by the party against which enforcement
of such change, waiver, discharge or termination is sought. The headings in
this Warrant are for purposes of reference only and shall not limit or otherwise
affect any of the terms hereof. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.
12. EXPIRATION. The right to exercise this Warrant shall expire at 5:00
P.M. Eastern Standard Time on December 23, 2006.
This Warrant is executed as of the date and year first written above.
Witness: ORAPHARMA, INC.
By: /s/ Michael Kishbauch
- --------------------------- ----------------------------
Michael Kishbauch, President
4
<PAGE>
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: OraPharma, Inc.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder _______ shares
of Common Stock, $.001 par value per share, of OraPharma, Inc. and herewith
makes payment of $__________ therefor, and requests that the certificates for
such shares be issued in the name of, and delivered to the undersigned at
_____________________________.
Dated: _____________________________________________
(Signature must conform to name of holder as
specified on the face of the Warrant)
__________________________________
(Address)
__________________________________
<PAGE>
Exhibit 4.26
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR
STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT OR STATE
SECURITIES LAWS.
No. 8 Right to Purchase Shares of Common Stock of OraPharma, Inc.
ORAPHARMA, INC.
Common Stock Purchase Warrant
This is to certify that, FOR VALUE RECEIVED, Oak Investment Partners VI,
Limited Partnership (the "Holder"), is entitled to purchase, subject to the
provisions of this Warrant, from OraPharma, Inc., a Delaware corporation (the
"Company"), 51,886 fully paid, validly issued and nonassessable shares of Common
Stock, par value $.001 per share, of the Company (the "Common Stock") at an
exercise price of $6.46 per share. The number of shares of Common Stock to be
received upon the exercise of this Warrant and the price to be paid for each
share of Common Stock may be adjusted from time to time as hereinafter set
forth. The shares of Common Stock deliverable upon such exercise, and as
adjusted from time to time, are hereinafter sometimes referred to as "Warrant
Shares" and the exercise price of a share of Common Stock in effect at any time
and as adjusted from time to time is hereinafter sometimes referred to as the
"Exercise Price".
1. EXERCISE OF WARRANT.
-------------------
a. Exercise for Cash. This Warrant may be exercised in whole or in
part at any time or from time to time starting from a period of twelve months
and five days after issue until 5:00 p.m. Eastern Standard Time on December 23,
2006 (the "Exercise Period"). This Warrant may be exercised by presentation and
surrender hereof to the Company at its principal office, or at the office of its
stock transfer agent, if any, with the Purchase Form annexed hereto duly
executed and accompanied by payment of the Exercise Price for the number of
Warrant Shares specified in such form. The Exercise Price may be paid by bank
check, wire transfer or cancellation of indebtedness. As soon as practicable
after each such exercise of this Warrant, but not later than seven (7) days from
the date of such exercise, the Company shall issue and deliver to the Holder a
certificate for the Warrant Shares issuable upon such exercise, registered in
the name of the Holder. If this Warrant should be exercised in part only, the
Company shall, upon surrender of this Warrant for cancellation, execute and
deliver a new Warrant evidencing the rights of the Holder thereof to purchase
the balance of the Warrant Shares purchasable thereunder. Upon receipt by the
Company of this Warrant at its office, or by the stock transfer agent of the
Company at its office, in proper form for exercise, the Holder shall be deemed
to be the holder of record of the shares of Common Stock issuable upon such
exercise, notwithstanding that the stock transfer books of the Company shall
then be closed or that certificates representing such shares of Common Stock
shall not then be physically delivered to the Holder.
<PAGE>
b. Warrant Exchange. At any time during the Exercise Period, the
Holder may, at its option, exchange this Warrant, in whole or in part (a
"Warrant Exchange"), into the number of Warrant Shares determined in accordance
with this Section 1(b), by surrendering this Warrant at the principal office of
the Company or at the office of its stock transfer agent, accompanied by a
notice stating the Holder's intent to effect such exchange, the number of
Warrant Shares to be exchanged and the date on which the Holder requests that
such Warrant Exchange occur (the "Notice of Exchange"). The Warrant Exchange
shall take place on the date specified in the Notice of Exchange or, if later,
the date the Notice of Exchange is received by the Company (the "Exchange
Date"). Certificates for the shares issuable upon such Warrant Exchange and, if
applicable, a new warrant of like tenor evidencing the balance of the shares
remaining subject to this Warrant, shall be issued as of the Exchange Date and
delivered to the Holder within seven (7) days following the Exchange Date. In
connection with any Warrant Exchange, this Warrant shall represent the right to
subscribe for and acquire the number of Warrant Shares equal to (i) the number
of Warrant Shares specified by the Holder in its Notice of Exchange (the "Total
Number") less (ii) the number of Warrant Shares equal to the quotient obtained
by dividing (A) the product of the Total Number and the existing Exercise Price
by (B) the Fair Market Value, provided that any fractional shares determined by
this calculation shall be represented by the issuance of a new Warrant. "Fair
Market Value" shall be determined as follows: (1) if the Common Stock is listed
on a national securities exchange or admitted to unlisted trading privileges on
such exchange or listed for trading on the Nasdaq Stock Market, the Fair Market
Value shall be the average of the last reported sale prices of the Common Stock
on such exchange or system for the twenty (20) business days ending on the last
business day prior to the date for which the determination is being made; or (2)
if the Common Stock is not so listed or admitted to unlisted trading privileges,
the Fair Market Value shall be the average of the last reported bid and asked
prices reported by the National Quotation Bureau, Inc. for the twenty (20)
business days ending on the last business day prior to the date for which the
determination is being made; or (3) if the Common Stock is not so listed or
admitted to unlisted trading privileges and bid and asked prices are not so
reported, the Fair Market Value shall be an amount, not less than book value
thereof as at the end of the most recent fiscal quarter of the Company ending
prior to the Exchange Date, determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
2. RESERVATION OF SHARES. The Company shall at all times reserve for
issuance and/or delivery upon exercise of this Warrant such number of shares of
its Common Stock as shall be required for issuance and delivery upon exercise of
this Warrant.
3. FRACTIONAL SHARES. No fractional shares of Common Stock shall be
issued upon the exercise of this Warrant. With respect to any fraction of a
share called for upon any exercise hereof, the Company shall pay to the Holder
an amount in cash equal to such fraction multiplied by the Fair Market Value of
a share of Common Stock.
4. ANTIDILUTION PROVISIONS. In the event the Common Stock is changed by
reason of a stock split, reverse stock split, stock dividend or recapitalization
or is converted into or exchanged for other securities as a result of a merger,
consolidation or reorganization in which the Company is the surviving
corporation, appropriate adjustments shall be made in the terms of this Warrant,
or additional warrants shall be granted to the Holder as shall be equitable and
appropriate, or an adjustment in the number and class of shares allocated to,
and the Exercise Price of, this Warrant shall likewise be made.
5. CERTAIN EXTRAORDINARY TRANSACTIONS. In the event the Common Stock is
2
<PAGE>
exchanged for securities, cash or other property of any other corporation or
entity as the result of a reorganization, merger or consolidation in which the
Company is not the surviving corporation, the dissolution or liquidation of the
Company, or the sale of all or substantially all the assets of the Company, the
Board of Directors of the Company or the board of directors of any successor
corporation or entity may, in its discretion, as to the unexercised portion of
this Warrant, (a) provide for payment of an amount equal to the excess of the
fair market value of the Warrant Shares, as determined by the Board of Directors
of the Company or such board, over the Exercise Price of such Warrant Shares as
of the date of the transaction, in exchange for the surrender of the right to
exercise this Warrant, or (b) provide for the assumption of this Warrant, or the
substitution therefor of new warrants, by the successor corporation or entity.
6. LOSS OF WARRANT. Upon receipt by the Company of evidence satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant, and (in the
case of loss, theft or destruction) of reasonably satisfactory indemnification,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
will execute and deliver a new warrant of like tenor and date.
7. NO RIGHTS AS STOCKHOLDER. The Holder shall not, as holder of this
Warrant, be entitled to vote, if applicable, or to receive dividends or to be
deemed the holder of Common Stock that may at any time be issuable upon exercise
of this Warrant for any purpose whatsoever, nor shall anything contained herein
be construed to confer upon the Holder, as such, any of the rights of a
stockholder of the Company or, if applicable, any right to vote for the election
of directors or upon any matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate action (whether upon
any recapitalization, issue or reclassification of stock, change of par value or
change of stock to no par value, consolidation, merger or conveyance or
otherwise), or to receive notice of meetings, or to receive dividends or
subscription rights, until such holder shall have exercised the Warrant and been
issued the Warrant Shares in accordance with the provisions hereof.
8. NON-TRANSFERABILITY. Neither this Warrant nor any Warrant Shares
shall be registered under the Securities Act of 1933, as amended, and applicable
state securities laws. Therefore, the Company shall require, as a condition of
allowing the transfer or exchange of this Warrant or such Warrant Shares, that
the Holder of this Warrant or such Warrant Shares, as the case may be, furnish
to the Company an opinion of counsel reasonably acceptable to the Company to the
effect that such transfer or exchange will be exempt from the registration and
prospectus delivery requirements under the Securities Act of 1933, as amended,
and applicable state securities laws. The certificates evidencing the Warrant
Shares shall bear a legend to the effect that the Warrant Shares evidenced by
such certificate have not been registered under the Securities Act of 1933, as
amended, and applicable state securities laws and are, therefore, subject to
restrictions on transfer.
9. INVESTMENT REPRESENTATIONS AND WARRANTIES. The Holder hereby
represents and warrants to the Company that (a) it has knowledge and experience
in financial and business matters sufficient to enable it to evaluate the merits
and risks of an investment in the Company; (b) it has assets sufficient to
enable it to bear the economic risk of its investment in this Warrant and the
Warrant Shares and is an "accredited investor" as defined in Rule 501 under the
Securities Act of 1933, as amended; (c) it is acquiring this Warrant and, upon
exercise, will acquire the Warrant Shares, for its own account, and not with a
view to, or for sale in connection with, any distribution thereof; (d) it or its
representatives have received from the Company such information with respect to
the Company as it has deemed necessary and relevant in connection with this
Warrant and the Warrant Shares and it has had the
3
<PAGE>
opportunity, directly or through such representatives, to ask questions of and
receive answers from persons acting on behalf of the Company necessary to verify
the information so obtained; and (e) it and its officers, directors, employees
and agents have not employed any broker or finder or incurred any liability for
any brokerage or finder's fees or commissions or similar payments in connection
with this Warrant and the Warrant Shares.
10. GOVERNING LAW. This Agreement and all amendments, modifications,
alterations, or supplements hereto shall be construed under and governed by the
laws of the State of New Jersey and the United States of America, without regard
to the principles of conflicts of law thereof.
11. MISCELLANEOUS. Except as provided in Sections 4 and 5 hereof, this
Warrant and any term hereof may be changed, waived, discharged or terminated
only by an instrument in writing signed by the party against which enforcement
of such change, waiver, discharge or termination is sought. The headings in
this Warrant are for purposes of reference only and shall not limit or otherwise
affect any of the terms hereof. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.
12. EXPIRATION. The right to exercise this Warrant shall expire at 5:00
P.M. Eastern Standard Time on December 23, 2006.
This Warrant is executed as of the date and year first written above.
Witness: ORAPHARMA, INC.
By: /s/ Michael Kishbauch
- --------------------------- ----------------------------
Michael Kishbauch, President
4
<PAGE>
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: OraPharma, Inc.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder _______ shares
of Common Stock, $.001 par value per share, of OraPharma, Inc. and herewith
makes payment of $__________ therefor, and requests that the certificates for
such shares be issued in the name of, and delivered to the undersigned at
_____________________________.
Dated: _____________________________________________
(Signature must conform to name of holder as
specified on the face of the Warrant)
__________________________________
(Address)
__________________________________
5
<PAGE>
Exhibit 4.27
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR
STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT OR STATE
SECURITIES LAWS.
No. 9 Right to Purchase Shares of Common Stock of OraPharma, Inc.
ORAPHARMA, INC.
Common Stock Purchase Warrant
This is to certify that, FOR VALUE RECEIVED, Oak VI Affiliates Fund,
Limited Partnership (the "Holder"), is entitled to purchase, subject to the
provisions of this Warrant, from OraPharma, Inc., a Delaware corporation (the
"Company"), 1,211 fully paid, validly issued and nonassessable shares of Common
Stock, par value $.001 per share, of the Company (the "Common Stock") at an
exercise price of $6.46 per share. The number of shares of Common Stock to be
received upon the exercise of this Warrant and the price to be paid for each
share of Common Stock may be adjusted from time to time as hereinafter set
forth. The shares of Common Stock deliverable upon such exercise, and as
adjusted from time to time, are hereinafter sometimes referred to as "Warrant
Shares" and the exercise price of a share of Common Stock in effect at any time
and as adjusted from time to time is hereinafter sometimes referred to as the
"Exercise Price".
1. EXERCISE OF WARRANT.
-------------------
a. Exercise for Cash. This Warrant may be exercised in whole or in
part at any time or from time to time starting from a period of twelve months
and five days after issue until 5:00 p.m. Eastern Standard Time on December 23,
2006 (the "Exercise Period"). This Warrant may be exercised by presentation and
surrender hereof to the Company at its principal office, or at the office of its
stock transfer agent, if any, with the Purchase Form annexed hereto duly
executed and accompanied by payment of the Exercise Price for the number of
Warrant Shares specified in such form. The Exercise Price may be paid by bank
check, wire transfer or cancellation of indebtedness. As soon as practicable
after each such exercise of this Warrant, but not later than seven (7) days from
the date of such exercise, the Company shall issue and deliver to the Holder a
certificate for the Warrant Shares issuable upon such exercise, registered in
the name of the Holder. If this Warrant should be exercised in part only, the
Company shall, upon surrender of this Warrant for cancellation, execute and
deliver a new Warrant evidencing the rights of the Holder thereof to purchase
the balance of the Warrant Shares purchasable thereunder. Upon receipt by the
Company of this Warrant at its office, or by the stock transfer agent of the
Company at its office, in proper form for exercise, the Holder shall be deemed
to be the holder of record of the shares of Common Stock issuable upon such
exercise, notwithstanding that the stock transfer books of the Company shall
then be closed or that certificates representing such shares of Common Stock
shall not then be physically delivered to the Holder.
<PAGE>
b. Warrant Exchange. At any time during the Exercise Period, the
Holder may, at its option, exchange this Warrant, in whole or in part (a
"Warrant Exchange"), into the number of Warrant Shares determined in accordance
with this Section 1(b), by surrendering this Warrant at the principal office of
the Company or at the office of its stock transfer agent, accompanied by a
notice stating the Holder's intent to effect such exchange, the number of
Warrant Shares to be exchanged and the date on which the Holder requests that
such Warrant Exchange occur (the "Notice of Exchange"). The Warrant Exchange
shall take place on the date specified in the Notice of Exchange or, if later,
the date the Notice of Exchange is received by the Company (the "Exchange
Date"). Certificates for the shares issuable upon such Warrant Exchange and, if
applicable, a new warrant of like tenor evidencing the balance of the shares
remaining subject to this Warrant, shall be issued as of the Exchange Date and
delivered to the Holder within seven (7) days following the Exchange Date. In
connection with any Warrant Exchange, this Warrant shall represent the right to
subscribe for and acquire the number of Warrant Shares equal to (i) the number
of Warrant Shares specified by the Holder in its Notice of Exchange (the "Total
Number") less (ii) the number of Warrant Shares equal to the quotient obtained
by dividing (A) the product of the Total Number and the existing Exercise Price
by (B) the Fair Market Value, provided that any fractional shares determined by
this calculation shall be represented by the issuance of a new Warrant. "Fair
Market Value" shall be determined as follows: (1) if the Common Stock is listed
on a national securities exchange or admitted to unlisted trading privileges on
such exchange or listed for trading on the Nasdaq Stock Market, the Fair Market
Value shall be the average of the last reported sale prices of the Common Stock
on such exchange or system for the twenty (20) business days ending on the last
business day prior to the date for which the determination is being made; or (2)
if the Common Stock is not so listed or admitted to unlisted trading privileges,
the Fair Market Value shall be the average of the last reported bid and asked
prices reported by the National Quotation Bureau, Inc. for the twenty (20)
business days ending on the last business day prior to the date for which the
determination is being made; or (3) if the Common Stock is not so listed or
admitted to unlisted trading privileges and bid and asked prices are not so
reported, the Fair Market Value shall be an amount, not less than book value
thereof as at the end of the most recent fiscal quarter of the Company ending
prior to the Exchange Date, determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
2. RESERVATION OF SHARES. The Company shall at all times reserve for
issuance and/or delivery upon exercise of this Warrant such number of shares of
its Common Stock as shall be required for issuance and delivery upon exercise of
this Warrant.
3. FRACTIONAL SHARES. No fractional shares of Common Stock shall be
issued upon the exercise of this Warrant. With respect to any fraction of a
share called for upon any exercise hereof, the Company shall pay to the Holder
an amount in cash equal to such fraction multiplied by the Fair Market Value of
a share of Common Stock.
4. ANTIDILUTION PROVISIONS. In the event the Common Stock is changed by
reason of a stock split, reverse stock split, stock dividend or recapitalization
or is converted into or exchanged for other securities as a result of a merger,
consolidation or reorganization in which the Company is the surviving
corporation, appropriate adjustments shall be made in the terms of this Warrant,
or additional warrants shall be granted to the Holder as shall be equitable and
appropriate, or an adjustment in the number and class of shares allocated to,
and the Exercise Price of, this Warrant shall likewise be made.
5. CERTAIN EXTRAORDINARY TRANSACTIONS. In the event the Common Stock is
2
<PAGE>
exchanged for securities, cash or other property of any other corporation or
entity as the result of a reorganization, merger or consolidation in which the
Company is not the surviving corporation, the dissolution or liquidation of the
Company, or the sale of all or substantially all the assets of the Company, the
Board of Directors of the Company or the board of directors of any successor
corporation or entity may, in its discretion, as to the unexercised portion of
this Warrant, (a) provide for payment of an amount equal to the excess of the
fair market value of the Warrant Shares, as determined by the Board of Directors
of the Company or such board, over the Exercise Price of such Warrant Shares as
of the date of the transaction, in exchange for the surrender of the right to
exercise this Warrant, or (b) provide for the assumption of this Warrant, or the
substitution therefor of new warrants, by the successor corporation or entity.
6. LOSS OF WARRANT. Upon receipt by the Company of evidence satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant, and (in the
case of loss, theft or destruction) of reasonably satisfactory indemnification,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
will execute and deliver a new warrant of like tenor and date.
7. NO RIGHTS AS STOCKHOLDER. The Holder shall not, as holder of this
Warrant, be entitled to vote, if applicable, or to receive dividends or to be
deemed the holder of Common Stock that may at any time be issuable upon exercise
of this Warrant for any purpose whatsoever, nor shall anything contained herein
be construed to confer upon the Holder, as such, any of the rights of a
stockholder of the Company or, if applicable, any right to vote for the election
of directors or upon any matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate action (whether upon
any recapitalization, issue or reclassification of stock, change of par value or
change of stock to no par value, consolidation, merger or conveyance or
otherwise), or to receive notice of meetings, or to receive dividends or
subscription rights, until such holder shall have exercised the Warrant and been
issued the Warrant Shares in accordance with the provisions hereof.
8. NON-TRANSFERABILITY. Neither this Warrant nor any Warrant Shares
shall be registered under the Securities Act of 1933, as amended, and applicable
state securities laws. Therefore, the Company shall require, as a condition of
allowing the transfer or exchange of this Warrant or such Warrant Shares, that
the Holder of this Warrant or such Warrant Shares, as the case may be, furnish
to the Company an opinion of counsel reasonably acceptable to the Company to the
effect that such transfer or exchange will be exempt from the registration and
prospectus delivery requirements under the Securities Act of 1933, as amended,
and applicable state securities laws. The certificates evidencing the Warrant
Shares shall bear a legend to the effect that the Warrant Shares evidenced by
such certificate have not been registered under the Securities Act of 1933, as
amended, and applicable state securities laws and are, therefore, subject to
restrictions on transfer.
9. INVESTMENT REPRESENTATIONS AND WARRANTIES. The Holder hereby
represents and warrants to the Company that (a) it has knowledge and experience
in financial and business matters sufficient to enable it to evaluate the merits
and risks of an investment in the Company; (b) it has assets sufficient to
enable it to bear the economic risk of its investment in this Warrant and the
Warrant Shares and is an "accredited investor" as defined in Rule 501 under the
Securities Act of 1933, as amended; (c) it is acquiring this Warrant and, upon
exercise, will acquire the Warrant Shares, for its own account, and not with a
view to, or for sale in connection with, any distribution thereof; (d) it or its
representatives have received from the Company such information with respect to
the Company as it has deemed necessary and relevant in connection with this
Warrant and the Warrant Shares and it has had the
3
<PAGE>
opportunity, directly or through such representatives, to ask questions of and
receive answers from persons acting on behalf of the Company necessary to verify
the information so obtained; and (e) it and its officers, directors, employees
and agents have not employed any broker or finder or incurred any liability for
any brokerage or finder's fees or commissions or similar payments in connection
with this Warrant and the Warrant Shares.
10. GOVERNING LAW. This Agreement and all amendments, modifications,
alterations, or supplements hereto shall be construed under and governed by the
laws of the State of New Jersey and the United States of America, without regard
to the principles of conflicts of law thereof.
11. MISCELLANEOUS. Except as provided in Sections 4 and 5 hereof, this
Warrant and any term hereof may be changed, waived, discharged or terminated
only by an instrument in writing signed by the party against which enforcement
of such change, waiver, discharge or termination is sought. The headings in
this Warrant are for purposes of reference only and shall not limit or otherwise
affect any of the terms hereof. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.
12. EXPIRATION. The right to exercise this Warrant shall expire at 5:00
P.M. Eastern Standard Time on December 23, 2006.
This Warrant is executed as of the date and year first written above.
Witness: ORAPHARMA, INC.
By: /s/ Michael Kishbauch
- --------------------------- -----------------------------
Michael Kishbauch, President
4
<PAGE>
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: OraPharma, Inc.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder _______ shares
of Common Stock, $.001 par value per share, of OraPharma, Inc. and herewith
makes payment of $__________ therefor, and requests that the certificates for
such shares be issued in the name of, and delivered to the undersigned at
_____________________________.
Dated: _____________________________________________
(Signature must conform to name of holder as
specified on the face of the Warrant)
__________________________________
(Address)
__________________________________
<PAGE>
Exhibit 4.28
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR
STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT OR STATE
SECURITIES LAWS.
No. 10 Right to Purchase Shares of Common Stock of OraPharma, Inc.
ORAPHARMA, INC.
Common Stock Purchase Warrant
This is to certify that, FOR VALUE RECEIVED, Sentron Medical, Inc. (the
"Holder"), is entitled to purchase, subject to the provisions of this Warrant,
from OraPharma, Inc., a Delaware corporation (the "Company"), 26,549 fully paid,
validly issued and nonassessable shares of Common Stock, par value $.001 per
share, of the Company (the "Common Stock") at an exercise price of $6.46 per
share. The number of shares of Common Stock to be received upon the exercise of
this Warrant and the price to be paid for each share of Common Stock may be
adjusted from time to time as hereinafter set forth. The shares of Common Stock
deliverable upon such exercise, and as adjusted from time to time, are
hereinafter sometimes referred to as "Warrant Shares" and the exercise price of
a share of Common Stock in effect at any time and as adjusted from time to time
is hereinafter sometimes referred to as the "Exercise Price".
1. EXERCISE OF WARRANT.
-------------------
a. Exercise for Cash. This Warrant may be exercised in whole or in
part at any time or from time to time starting from a period of twelve months
and five days after issue until 5:00 p.m. Eastern Standard Time on December 23,
2006 (the "Exercise Period"). This Warrant may be exercised by presentation and
surrender hereof to the Company at its principal office, or at the office of its
stock transfer agent, if any, with the Purchase Form annexed hereto duly
executed and accompanied by payment of the Exercise Price for the number of
Warrant Shares specified in such form. The Exercise Price may be paid by bank
check, wire transfer or cancellation of indebtedness. As soon as practicable
after each such exercise of this Warrant, but not later than seven (7) days from
the date of such exercise, the Company shall issue and deliver to the Holder a
certificate for the Warrant Shares issuable upon such exercise, registered in
the name of the Holder. If this Warrant should be exercised in part only, the
Company shall, upon surrender of this Warrant for cancellation, execute and
deliver a new Warrant evidencing the rights of the Holder thereof to purchase
the balance of the Warrant Shares purchasable thereunder. Upon receipt by the
Company of this Warrant at its office, or by the stock transfer agent of the
Company at its office, in proper form for exercise, the Holder shall be deemed
to be the holder of record of the shares of Common Stock issuable upon such
exercise, notwithstanding that the stock transfer books of the Company shall
then be closed or that certificates representing such shares of Common Stock
shall not then be physically delivered to the Holder.
<PAGE>
b. Warrant Exchange. At any time during the Exercise Period, the
Holder may, at its option, exchange this Warrant, in whole or in part (a
"Warrant Exchange"), into the number of Warrant Shares determined in accordance
with this Section 1(b), by surrendering this Warrant at the principal office of
the Company or at the office of its stock transfer agent, accompanied by a
notice stating the Holder's intent to effect such exchange, the number of
Warrant Shares to be exchanged and the date on which the Holder requests that
such Warrant Exchange occur (the "Notice of Exchange"). The Warrant Exchange
shall take place on the date specified in the Notice of Exchange or, if later,
the date the Notice of Exchange is received by the Company (the "Exchange
Date"). Certificates for the shares issuable upon such Warrant Exchange and, if
applicable, a new warrant of like tenor evidencing the balance of the shares
remaining subject to this Warrant, shall be issued as of the Exchange Date and
delivered to the Holder within seven (7) days following the Exchange Date. In
connection with any Warrant Exchange, this Warrant shall represent the right to
subscribe for and acquire the number of Warrant Shares equal to (i) the number
of Warrant Shares specified by the Holder in its Notice of Exchange (the "Total
Number") less (ii) the number of Warrant Shares equal to the quotient obtained
by dividing (A) the product of the Total Number and the existing Exercise Price
by (B) the Fair Market Value, provided that any fractional shares determined by
this calculation shall be represented by the issuance of a new Warrant. "Fair
Market Value" shall be determined as follows: (1) if the Common Stock is listed
on a national securities exchange or admitted to unlisted trading privileges on
such exchange or listed for trading on the Nasdaq Stock Market, the Fair Market
Value shall be the average of the last reported sale prices of the Common Stock
on such exchange or system for the twenty (20) business days ending on the last
business day prior to the date for which the determination is being made; or (2)
if the Common Stock is not so listed or admitted to unlisted trading privileges,
the Fair Market Value shall be the average of the last reported bid and asked
prices reported by the National Quotation Bureau, Inc. for the twenty (20)
business days ending on the last business day prior to the date for which the
determination is being made; or (3) if the Common Stock is not so listed or
admitted to unlisted trading privileges and bid and asked prices are not so
reported, the Fair Market Value shall be an amount, not less than book value
thereof as at the end of the most recent fiscal quarter of the Company ending
prior to the Exchange Date, determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
2. RESERVATION OF SHARES. The Company shall at all times reserve for
issuance and/or delivery upon exercise of this Warrant such number of shares of
its Common Stock as shall be required for issuance and delivery upon exercise of
this Warrant.
3. FRACTIONAL SHARES. No fractional shares of Common Stock shall be
issued upon the exercise of this Warrant. With respect to any fraction of a
share called for upon any exercise hereof, the Company shall pay to the Holder
an amount in cash equal to such fraction multiplied by the Fair Market Value of
a share of Common Stock.
4. ANTIDILUTION PROVISIONS. In the event the Common Stock is changed by
reason of a stock split, reverse stock split, stock dividend or recapitalization
or is converted into or exchanged for other securities as a result of a merger,
consolidation or reorganization in which the Company is the surviving
corporation, appropriate adjustments shall be made in the terms of this Warrant,
or additional warrants shall be granted to the Holder as shall be equitable and
appropriate, or an adjustment in the number and class of shares allocated to,
and the Exercise Price of, this Warrant shall likewise be made.
5. CERTAIN EXTRAORDINARY TRANSACTIONS. In the event the Common Stock is
2
<PAGE>
exchanged for securities, cash or other property of any other corporation or
entity as the result of a reorganization, merger or consolidation in which the
Company is not the surviving corporation, the dissolution or liquidation of the
Company, or the sale of all or substantially all the assets of the Company, the
Board of Directors of the Company or the board of directors of any successor
corporation or entity may, in its discretion, as to the unexercised portion of
this Warrant, (a) provide for payment of an amount equal to the excess of the
fair market value of the Warrant Shares, as determined by the Board of Directors
of the Company or such board, over the Exercise Price of such Warrant Shares as
of the date of the transaction, in exchange for the surrender of the right to
exercise this Warrant, or (b) provide for the assumption of this Warrant, or the
substitution therefor of new warrants, by the successor corporation or entity.
6. LOSS OF WARRANT. Upon receipt by the Company of evidence satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant, and (in the
case of loss, theft or destruction) of reasonably satisfactory indemnification,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
will execute and deliver a new warrant of like tenor and date.
7. NO RIGHTS AS STOCKHOLDER. The Holder shall not, as holder of this
Warrant, be entitled to vote, if applicable, or to receive dividends or to be
deemed the holder of Common Stock that may at any time be issuable upon exercise
of this Warrant for any purpose whatsoever, nor shall anything contained herein
be construed to confer upon the Holder, as such, any of the rights of a
stockholder of the Company or, if applicable, any right to vote for the election
of directors or upon any matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate action (whether upon
any recapitalization, issue or reclassification of stock, change of par value or
change of stock to no par value, consolidation, merger or conveyance or
otherwise), or to receive notice of meetings, or to receive dividends or
subscription rights, until such holder shall have exercised the Warrant and been
issued the Warrant Shares in accordance with the provisions hereof.
8. NON-TRANSFERABILITY. Neither this Warrant nor any Warrant Shares
shall be registered under the Securities Act of 1933, as amended, and applicable
state securities laws. Therefore, the Company shall require, as a condition of
allowing the transfer or exchange of this Warrant or such Warrant Shares, that
the Holder of this Warrant or such Warrant Shares, as the case may be, furnish
to the Company an opinion of counsel reasonably acceptable to the Company to the
effect that such transfer or exchange will be exempt from the registration and
prospectus delivery requirements under the Securities Act of 1933, as amended,
and applicable state securities laws. The certificates evidencing the Warrant
Shares shall bear a legend to the effect that the Warrant Shares evidenced by
such certificate have not been registered under the Securities Act of 1933, as
amended, and applicable state securities laws and are, therefore, subject to
restrictions on transfer.
9. INVESTMENT REPRESENTATIONS AND WARRANTIES. The Holder hereby
represents and warrants to the Company that (a) it has knowledge and experience
in financial and business matters sufficient to enable it to evaluate the merits
and risks of an investment in the Company; (b) it has assets sufficient to
enable it to bear the economic risk of its investment in this Warrant and the
Warrant Shares and is an "accredited investor" as defined in Rule 501 under the
Securities Act of 1933, as amended; (c) it is acquiring this Warrant and, upon
exercise, will acquire the Warrant Shares, for its own account, and not with a
view to, or for sale in connection with, any distribution thereof; (d) it or its
representatives have received from the Company such information with respect to
the Company as it has deemed necessary and relevant in connection with this
Warrant and the Warrant Shares and it has had the
3
<PAGE>
opportunity, directly or through such representatives, to ask questions of and
receive answers from persons acting on behalf of the Company necessary to verify
the information so obtained; and (e) it and its officers, directors, employees
and agents have not employed any broker or finder or incurred any liability for
any brokerage or finder's fees or commissions or similar payments in connection
with this Warrant and the Warrant Shares.
10. GOVERNING LAW. This Agreement and all amendments, modifications,
alterations, or supplements hereto shall be construed under and governed by the
laws of the State of New Jersey and the United States of America, without regard
to the principles of conflicts of law thereof.
11. MISCELLANEOUS. Except as provided in Sections 4 and 5 hereof, this
Warrant and any term hereof may be changed, waived, discharged or terminated
only by an instrument in writing signed by the party against which enforcement
of such change, waiver, discharge or termination is sought. The headings in
this Warrant are for purposes of reference only and shall not limit or otherwise
affect any of the terms hereof. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.
12. EXPIRATION. The right to exercise this Warrant shall expire at 5:00
P.M. Eastern Standard Time on December 23, 2006.
This Warrant is executed as of the date and year first written above.
Witness: ORAPHARMA, INC.
By: /s/ Michael Kishbauch
- --------------------------- ----------------------------
Michael Kishbauch, President
4
<PAGE>
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: OraPharma, Inc.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder _______ shares
of Common Stock, $.001 par value per share, of OraPharma, Inc. and herewith
makes payment of $__________ therefor, and requests that the certificates for
such shares be issued in the name of, and delivered to the undersigned at
_____________________________.
Dated: _____________________________________________
(Signature must conform to name of holder as
specified on the face of the Warrant)
__________________________________
(Address)
__________________________________
<PAGE>
Exhibit 4.29
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR
STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT OR STATE
SECURITIES LAWS.
No. 11 Right to Purchase Shares of Common Stock of OraPharma, Inc.
ORAPHARMA, INC.
Common Stock Purchase Warrant
This is to certify that, FOR VALUE RECEIVED, TL Ventures III L.P. (the
"Holder"), is entitled to purchase, subject to the provisions of this Warrant,
from OraPharma, Inc., a Delaware corporation (the "Company"), 17,814 fully paid,
validly issued and nonassessable shares of Common Stock, par value $.001 per
share, of the Company (the "Common Stock") at an exercise price of $6.46 per
share. The number of shares of Common Stock to be received upon the exercise of
this Warrant and the price to be paid for each share of Common Stock may be
adjusted from time to time as hereinafter set forth. The shares of Common Stock
deliverable upon such exercise, and as adjusted from time to time, are
hereinafter sometimes referred to as "Warrant Shares" and the exercise price of
a share of Common Stock in effect at any time and as adjusted from time to time
is hereinafter sometimes referred to as the "Exercise Price".
1. EXERCISE OF WARRANT.
-------------------
a. Exercise for Cash. This Warrant may be exercised in whole or in
part at any time or from time to time starting from a period of twelve months
and five days after issue until 5:00 p.m. Eastern Standard Time on December 23,
2006 (the "Exercise Period"). This Warrant may be exercised by presentation and
surrender hereof to the Company at its principal office, or at the office of its
stock transfer agent, if any, with the Purchase Form annexed hereto duly
executed and accompanied by payment of the Exercise Price for the number of
Warrant Shares specified in such form. The Exercise Price may be paid by bank
check, wire transfer or cancellation of indebtedness. As soon as practicable
after each such exercise of this Warrant, but not later than seven (7) days from
the date of such exercise, the Company shall issue and deliver to the Holder a
certificate for the Warrant Shares issuable upon such exercise, registered in
the name of the Holder. If this Warrant should be exercised in part only, the
Company shall, upon surrender of this Warrant for cancellation, execute and
deliver a new Warrant evidencing the rights of the Holder thereof to purchase
the balance of the Warrant Shares purchasable thereunder. Upon receipt by the
Company of this Warrant at its office, or by the stock transfer agent of the
Company at its office, in proper form for exercise, the Holder shall be deemed
to be the holder of record of the shares of Common Stock issuable upon such
exercise, notwithstanding that the stock transfer books of the Company shall
then be closed or that certificates representing such shares of Common Stock
shall not then be physically delivered to the Holder.
<PAGE>
b. Warrant Exchange. At any time during the Exercise Period, the
Holder may, at its option, exchange this Warrant, in whole or in part (a
"Warrant Exchange"), into the number of Warrant Shares determined in accordance
with this Section 1(b), by surrendering this Warrant at the principal office of
the Company or at the office of its stock transfer agent, accompanied by a
notice stating the Holder's intent to effect such exchange, the number of
Warrant Shares to be exchanged and the date on which the Holder requests that
such Warrant Exchange occur (the "Notice of Exchange"). The Warrant Exchange
shall take place on the date specified in the Notice of Exchange or, if later,
the date the Notice of Exchange is received by the Company (the "Exchange
Date"). Certificates for the shares issuable upon such Warrant Exchange and, if
applicable, a new warrant of like tenor evidencing the balance of the shares
remaining subject to this Warrant, shall be issued as of the Exchange Date and
delivered to the Holder within seven (7) days following the Exchange Date. In
connection with any Warrant Exchange, this Warrant shall represent the right to
subscribe for and acquire the number of Warrant Shares equal to (i) the number
of Warrant Shares specified by the Holder in its Notice of Exchange (the "Total
Number") less (ii) the number of Warrant Shares equal to the quotient obtained
by dividing (A) the product of the Total Number and the existing Exercise Price
by (B) the Fair Market Value, provided that any fractional shares determined by
this calculation shall be represented by the issuance of a new Warrant. "Fair
Market Value" shall be determined as follows: (1) if the Common Stock is listed
on a national securities exchange or admitted to unlisted trading privileges on
such exchange or listed for trading on the Nasdaq Stock Market, the Fair Market
Value shall be the average of the last reported sale prices of the Common Stock
on such exchange or system for the twenty (20) business days ending on the last
business day prior to the date for which the determination is being made; or (2)
if the Common Stock is not so listed or admitted to unlisted trading privileges,
the Fair Market Value shall be the average of the last reported bid and asked
prices reported by the National Quotation Bureau, Inc. for the twenty (20)
business days ending on the last business day prior to the date for which the
determination is being made; or (3) if the Common Stock is not so listed or
admitted to unlisted trading privileges and bid and asked prices are not so
reported, the Fair Market Value shall be an amount, not less than book value
thereof as at the end of the most recent fiscal quarter of the Company ending
prior to the Exchange Date, determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
2. RESERVATION OF SHARES. The Company shall at all times reserve for
issuance and/or delivery upon exercise of this Warrant such number of shares of
its Common Stock as shall be required for issuance and delivery upon exercise of
this Warrant.
3. FRACTIONAL SHARES. No fractional shares of Common Stock shall be
issued upon the exercise of this Warrant. With respect to any fraction of a
share called for upon any exercise hereof, the Company shall pay to the Holder
an amount in cash equal to such fraction multiplied by the Fair Market Value of
a share of Common Stock.
4. ANTIDILUTION PROVISIONS. In the event the Common Stock is changed by
reason of a stock split, reverse stock split, stock dividend or recapitalization
or is converted into or exchanged for other securities as a result of a merger,
consolidation or reorganization in which the Company is the surviving
corporation, appropriate adjustments shall be made in the terms of this Warrant,
or additional warrants shall be granted to the Holder as shall be equitable and
appropriate, or an adjustment in the number and class of shares allocated to,
and the Exercise Price of, this Warrant shall likewise be made.
5. CERTAIN EXTRAORDINARY TRANSACTIONS. In the event the Common Stock is
2
<PAGE>
exchanged for securities, cash or other property of any other corporation or
entity as the result of a reorganization, merger or consolidation in which the
Company is not the surviving corporation, the dissolution or liquidation of the
Company, or the sale of all or substantially all the assets of the Company, the
Board of Directors of the Company or the board of directors of any successor
corporation or entity may, in its discretion, as to the unexercised portion of
this Warrant, (a) provide for payment of an amount equal to the excess of the
fair market value of the Warrant Shares, as determined by the Board of Directors
of the Company or such board, over the Exercise Price of such Warrant Shares as
of the date of the transaction, in exchange for the surrender of the right to
exercise this Warrant, or (b) provide for the assumption of this Warrant, or the
substitution therefor of new warrants, by the successor corporation or entity.
6. LOSS OF WARRANT. Upon receipt by the Company of evidence satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant, and (in the
case of loss, theft or destruction) of reasonably satisfactory indemnification,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
will execute and deliver a new warrant of like tenor and date.
7. NO RIGHTS AS STOCKHOLDER. The Holder shall not, as holder of this
Warrant, be entitled to vote, if applicable, or to receive dividends or to be
deemed the holder of Common Stock that may at any time be issuable upon exercise
of this Warrant for any purpose whatsoever, nor shall anything contained herein
be construed to confer upon the Holder, as such, any of the rights of a
stockholder of the Company or, if applicable, any right to vote for the election
of directors or upon any matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate action (whether upon
any recapitalization, issue or reclassification of stock, change of par value or
change of stock to no par value, consolidation, merger or conveyance or
otherwise), or to receive notice of meetings, or to receive dividends or
subscription rights, until such holder shall have exercised the Warrant and been
issued the Warrant Shares in accordance with the provisions hereof.
8. NON-TRANSFERABILITY. Neither this Warrant nor any Warrant Shares
shall be registered under the Securities Act of 1933, as amended, and applicable
state securities laws. Therefore, the Company shall require, as a condition of
allowing the transfer or exchange of this Warrant or such Warrant Shares, that
the Holder of this Warrant or such Warrant Shares, as the case may be, furnish
to the Company an opinion of counsel reasonably acceptable to the Company to the
effect that such transfer or exchange will be exempt from the registration and
prospectus delivery requirements under the Securities Act of 1933, as amended,
and applicable state securities laws. The certificates evidencing the Warrant
Shares shall bear a legend to the effect that the Warrant Shares evidenced by
such certificate have not been registered under the Securities Act of 1933, as
amended, and applicable state securities laws and are, therefore, subject to
restrictions on transfer.
9. INVESTMENT REPRESENTATIONS AND WARRANTIES. The Holder hereby
represents and warrants to the Company that (a) it has knowledge and experience
in financial and business matters sufficient to enable it to evaluate the merits
and risks of an investment in the Company; (b) it has assets sufficient to
enable it to bear the economic risk of its investment in this Warrant and the
Warrant Shares and is an "accredited investor" as defined in Rule 501 under the
Securities Act of 1933, as amended; (c) it is acquiring this Warrant and, upon
exercise, will acquire the Warrant Shares, for its own account, and not with a
view to, or for sale in connection with, any distribution thereof; (d) it or its
representatives have received from the Company such information with respect to
the Company as it has deemed necessary and relevant in connection with this
Warrant and the Warrant Shares and it has had the
3
<PAGE>
opportunity, directly or through such representatives, to ask questions of and
receive answers from persons acting on behalf of the Company necessary to verify
the information so obtained; and (e) it and its officers, directors, employees
and agents have not employed any broker or finder or incurred any liability for
any brokerage or finder's fees or commissions or similar payments in connection
with this Warrant and the Warrant Shares.
10. GOVERNING LAW. This Agreement and all amendments, modifications,
alterations, or supplements hereto shall be construed under and governed by the
laws of the State of New Jersey and the United States of America, without regard
to the principles of conflicts of law thereof.
11. MISCELLANEOUS. Except as provided in Sections 4 and 5 hereof, this
Warrant and any term hereof may be changed, waived, discharged or terminated
only by an instrument in writing signed by the party against which enforcement
of such change, waiver, discharge or termination is sought. The headings in
this Warrant are for purposes of reference only and shall not limit or otherwise
affect any of the terms hereof. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.
12. EXPIRATION. The right to exercise this Warrant shall expire at 5:00
P.M. Eastern Standard Time on December 23, 2006.
This Warrant is executed as of the date and year first written above.
Witness: ORAPHARMA, INC.
By:/s/ Michael Kishbauch
- --------------------------- -------------------------------
Michael Kishbauch, President
4
<PAGE>
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: OraPharma, Inc.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder _______ shares
of Common Stock, $.001 par value per share, of OraPharma, Inc. and herewith
makes payment of $__________ therefor, and requests that the certificates for
such shares be issued in the name of, and delivered to the undersigned at
_____________________________.
Dated: _____________________________________________
(Signature must conform to name of holder as
specified on the face of the Warrant)
__________________________________
(Address)
__________________________________
<PAGE>
Exhibit 4.30
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR
STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT OR STATE
SECURITIES LAWS.
No. 12 Right to Purchase Shares of Common Stock of OraPharma, Inc.
ORAPHARMA, INC.
Common Stock Purchase Warrant
This is to certify that, FOR VALUE RECEIVED, TL Ventures III Interfund L.P.
(the "Holder"), is entitled to purchase, subject to the provisions of this
Warrant, from OraPharma, Inc., a Delaware corporation (the "Company"), 581 fully
paid, validly issued and nonassessable shares of Common Stock, par value $.001
per share, of the Company (the "Common Stock") at an exercise price of $6.46 per
share. The number of shares of Common Stock to be received upon the exercise of
this Warrant and the price to be paid for each share of Common Stock may be
adjusted from time to time as hereinafter set forth. The shares of Common Stock
deliverable upon such exercise, and as adjusted from time to time, are
hereinafter sometimes referred to as "Warrant Shares" and the exercise price of
a share of Common Stock in effect at any time and as adjusted from time to time
is hereinafter sometimes referred to as the "Exercise Price".
1. EXERCISE OF WARRANT.
-------------------
a. Exercise for Cash. This Warrant may be exercised in whole or in
part at any time or from time to time starting from a period of twelve months
and five days after issue until 5:00 p.m. Eastern Standard Time on December 23,
2006 (the "Exercise Period"). This Warrant may be exercised by presentation and
surrender hereof to the Company at its principal office, or at the office of its
stock transfer agent, if any, with the Purchase Form annexed hereto duly
executed and accompanied by payment of the Exercise Price for the number of
Warrant Shares specified in such form. The Exercise Price may be paid by bank
check, wire transfer or cancellation of indebtedness. As soon as practicable
after each such exercise of this Warrant, but not later than seven (7) days from
the date of such exercise, the Company shall issue and deliver to the Holder a
certificate for the Warrant Shares issuable upon such exercise, registered in
the name of the Holder. If this Warrant should be exercised in part only, the
Company shall, upon surrender of this Warrant for cancellation, execute and
deliver a new Warrant evidencing the rights of the Holder thereof to purchase
the balance of the Warrant Shares purchasable thereunder. Upon receipt by the
Company of this Warrant at its office, or by the stock transfer agent of the
Company at its office, in proper form for exercise, the Holder shall be deemed
to be the holder of record of the shares of Common Stock issuable upon such
exercise, notwithstanding that the stock transfer books of the Company shall
then be closed or that certificates representing such shares of Common Stock
shall not then be physically delivered to the Holder.
<PAGE>
b. Warrant Exchange. At any time during the Exercise Period, the
Holder may, at its option, exchange this Warrant, in whole or in part (a
"Warrant Exchange"), into the number of Warrant Shares determined in accordance
with this Section 1(b), by surrendering this Warrant at the principal office of
the Company or at the office of its stock transfer agent, accompanied by a
notice stating the Holder's intent to effect such exchange, the number of
Warrant Shares to be exchanged and the date on which the Holder requests that
such Warrant Exchange occur (the "Notice of Exchange"). The Warrant Exchange
shall take place on the date specified in the Notice of Exchange or, if later,
the date the Notice of Exchange is received by the Company (the "Exchange
Date"). Certificates for the shares issuable upon such Warrant Exchange and, if
applicable, a new warrant of like tenor evidencing the balance of the shares
remaining subject to this Warrant, shall be issued as of the Exchange Date and
delivered to the Holder within seven (7) days following the Exchange Date. In
connection with any Warrant Exchange, this Warrant shall represent the right to
subscribe for and acquire the number of Warrant Shares equal to (i) the number
of Warrant Shares specified by the Holder in its Notice of Exchange (the "Total
Number") less (ii) the number of Warrant Shares equal to the quotient obtained
by dividing (A) the product of the Total Number and the existing Exercise Price
by (B) the Fair Market Value, provided that any fractional shares determined by
this calculation shall be represented by the issuance of a new Warrant. "Fair
Market Value" shall be determined as follows: (1) if the Common Stock is listed
on a national securities exchange or admitted to unlisted trading privileges on
such exchange or listed for trading on the Nasdaq Stock Market, the Fair Market
Value shall be the average of the last reported sale prices of the Common Stock
on such exchange or system for the twenty (20) business days ending on the last
business day prior to the date for which the determination is being made; or (2)
if the Common Stock is not so listed or admitted to unlisted trading privileges,
the Fair Market Value shall be the average of the last reported bid and asked
prices reported by the National Quotation Bureau, Inc. for the twenty (20)
business days ending on the last business day prior to the date for which the
determination is being made; or (3) if the Common Stock is not so listed or
admitted to unlisted trading privileges and bid and asked prices are not so
reported, the Fair Market Value shall be an amount, not less than book value
thereof as at the end of the most recent fiscal quarter of the Company ending
prior to the Exchange Date, determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
2. RESERVATION OF SHARES. The Company shall at all times reserve for
issuance and/or delivery upon exercise of this Warrant such number of shares of
its Common Stock as shall be required for issuance and delivery upon exercise of
this Warrant.
3. FRACTIONAL SHARES. No fractional shares of Common Stock shall be
issued upon the exercise of this Warrant. With respect to any fraction of a
share called for upon any exercise hereof, the Company shall pay to the Holder
an amount in cash equal to such fraction multiplied by the Fair Market Value of
a share of Common Stock.
4. ANTIDILUTION PROVISIONS. In the event the Common Stock is changed by
reason of a stock split, reverse stock split, stock dividend or recapitalization
or is converted into or exchanged for other securities as a result of a merger,
consolidation or reorganization in which the Company is the surviving
corporation, appropriate adjustments shall be made in the terms of this Warrant,
or additional warrants shall be granted to the Holder as shall be equitable and
appropriate, or an adjustment in the number and class of shares allocated to,
and the Exercise Price of, this Warrant shall likewise be made.
5. CERTAIN EXTRAORDINARY TRANSACTIONS. In the event the Common Stock is
2
<PAGE>
exchanged for securities, cash or other property of any other corporation or
entity as the result of a reorganization, merger or consolidation in which the
Company is not the surviving corporation, the dissolution or liquidation of the
Company, or the sale of all or substantially all the assets of the Company, the
Board of Directors of the Company or the board of directors of any successor
corporation or entity may, in its discretion, as to the unexercised portion of
this Warrant, (a) provide for payment of an amount equal to the excess of the
fair market value of the Warrant Shares, as determined by the Board of Directors
of the Company or such board, over the Exercise Price of such Warrant Shares as
of the date of the transaction, in exchange for the surrender of the right to
exercise this Warrant, or (b) provide for the assumption of this Warrant, or the
substitution therefor of new warrants, by the successor corporation or entity.
6. LOSS OF WARRANT. Upon receipt by the Company of evidence satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant, and (in the
case of loss, theft or destruction) of reasonably satisfactory indemnification,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
will execute and deliver a new warrant of like tenor and date.
7. NO RIGHTS AS STOCKHOLDER. The Holder shall not, as holder of this
Warrant, be entitled to vote, if applicable, or to receive dividends or to be
deemed the holder of Common Stock that may at any time be issuable upon exercise
of this Warrant for any purpose whatsoever, nor shall anything contained herein
be construed to confer upon the Holder, as such, any of the rights of a
stockholder of the Company or, if applicable, any right to vote for the election
of directors or upon any matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate action (whether upon
any recapitalization, issue or reclassification of stock, change of par value or
change of stock to no par value, consolidation, merger or conveyance or
otherwise), or to receive notice of meetings, or to receive dividends or
subscription rights, until such holder shall have exercised the Warrant and been
issued the Warrant Shares in accordance with the provisions hereof.
8. NON-TRANSFERABILITY. Neither this Warrant nor any Warrant Shares
shall be registered under the Securities Act of 1933, as amended, and applicable
state securities laws. Therefore, the Company shall require, as a condition of
allowing the transfer or exchange of this Warrant or such Warrant Shares, that
the Holder of this Warrant or such Warrant Shares, as the case may be, furnish
to the Company an opinion of counsel reasonably acceptable to the Company to the
effect that such transfer or exchange will be exempt from the registration and
prospectus delivery requirements under the Securities Act of 1933, as amended,
and applicable state securities laws. The certificates evidencing the Warrant
Shares shall bear a legend to the effect that the Warrant Shares evidenced by
such certificate have not been registered under the Securities Act of 1933, as
amended, and applicable state securities laws and are, therefore, subject to
restrictions on transfer.
9. INVESTMENT REPRESENTATIONS AND WARRANTIES. The Holder hereby
represents and warrants to the Company that (a) it has knowledge and experience
in financial and business matters sufficient to enable it to evaluate the merits
and risks of an investment in the Company; (b) it has assets sufficient to
enable it to bear the economic risk of its investment in this Warrant and the
Warrant Shares and is an "accredited investor" as defined in Rule 501 under the
Securities Act of 1933, as amended; (c) it is acquiring this Warrant and, upon
exercise, will acquire the Warrant Shares, for its own account, and not with a
view to, or for sale in connection with, any distribution thereof; (d) it or its
representatives have received from the Company such information with respect to
the Company as it has deemed necessary and relevant in connection with this
Warrant and the Warrant Shares and it has had the
3
<PAGE>
opportunity, directly or through such representatives, to ask questions of and
receive answers from persons acting on behalf of the Company necessary to verify
the information so obtained; and (e) it and its officers, directors, employees
and agents have not employed any broker or finder or incurred any liability for
any brokerage or finder's fees or commissions or similar payments in connection
with this Warrant and the Warrant Shares.
10. GOVERNING LAW. This Agreement and all amendments, modifications,
alterations, or supplements hereto shall be construed under and governed by the
laws of the State of New Jersey and the United States of America, without regard
to the principles of conflicts of law thereof.
11. MISCELLANEOUS. Except as provided in Sections 4 and 5 hereof, this
Warrant and any term hereof may be changed, waived, discharged or terminated
only by an instrument in writing signed by the party against which enforcement
of such change, waiver, discharge or termination is sought. The headings in
this Warrant are for purposes of reference only and shall not limit or otherwise
affect any of the terms hereof. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.
12. EXPIRATION. The right to exercise this Warrant shall expire at 5:00
P.M. Eastern Standard Time on December 23, 2006.
This Warrant is executed as of the date and year first written above.
Witness: ORAPHARMA, INC.
By: /s/ Michael Kishbauch
- --------------------------- ----------------------------
Michael Kishbauch, President
4
<PAGE>
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: OraPharma, Inc.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder _______ shares
of Common Stock, $.001 par value per share, of OraPharma, Inc. and herewith
makes payment of $__________ therefor, and requests that the certificates for
such shares be issued in the name of, and delivered to the undersigned at
_____________________________.
Dated: _____________________________________________
(Signature must conform to name of holder as
specified on the face of the Warrant)
__________________________________
(Address)
__________________________________
<PAGE>
Exhibit 4.31
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR
STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT OR STATE
SECURITIES LAWS.
No. 13 Right to Purchase Shares of Common Stock of OraPharma, Inc.
ORAPHARMA, INC.
Common Stock Purchase Warrant
This is to certify that, FOR VALUE RECEIVED, TL Ventures III Offshore L.P.
("Holder"), is entitled to purchase, subject to the provisions of this Warrant,
from OraPharma, Inc., a Delaware corporation (the "Company"), 3,728 fully paid,
validly issued and nonassessable shares of Common Stock, par value $.001 per
share, of the Company (the "Common Stock") at an exercise price of $6.46 per
share. The number of shares of Common Stock to be received upon the exercise of
this Warrant and the price to be paid for each share of Common Stock may be
adjusted from time to time as hereinafter set forth. The shares of Common Stock
deliverable upon such exercise, and as adjusted from time to time, are
hereinafter sometimes referred to as "Warrant Shares" and the exercise price of
a share of Common Stock in effect at any time and as adjusted from time to time
is hereinafter sometimes referred to as the "Exercise Price".
1. EXERCISE OF WARRANT.
-------------------
a. Exercise for Cash. This Warrant may be exercised in whole or in
part at any time or from time to time starting from a period of twelve months
and five days after issue until 5:00 p.m. Eastern Standard Time on December 23,
2006 (the "Exercise Period"). This Warrant may be exercised by presentation and
surrender hereof to the Company at its principal office, or at the office of its
stock transfer agent, if any, with the Purchase Form annexed hereto duly
executed and accompanied by payment of the Exercise Price for the number of
Warrant Shares specified in such form. The Exercise Price may be paid by bank
check, wire transfer or cancellation of indebtedness. As soon as practicable
after each such exercise of this Warrant, but not later than seven (7) days from
the date of such exercise, the Company shall issue and deliver to the Holder a
certificate for the Warrant Shares issuable upon such exercise, registered in
the name of the Holder. If this Warrant should be exercised in part only, the
Company shall, upon surrender of this Warrant for cancellation, execute and
deliver a new Warrant evidencing the rights of the Holder thereof to purchase
the balance of the Warrant Shares purchasable thereunder. Upon receipt by the
Company of this Warrant at its office, or by the stock transfer agent of the
Company at its office, in proper form for exercise, the Holder shall be deemed
to be the holder of record of the shares of Common Stock issuable upon such
exercise, notwithstanding that the stock transfer books of the Company shall
then be closed or that certificates representing such shares of Common Stock
shall not then be physically delivered to the Holder.
<PAGE>
b. Warrant Exchange. At any time during the Exercise Period, the
Holder may, at its option, exchange this Warrant, in whole or in part (a
"Warrant Exchange"), into the number of Warrant Shares determined in accordance
with this Section 1(b), by surrendering this Warrant at the principal office of
the Company or at the office of its stock transfer agent, accompanied by a
notice stating the Holder's intent to effect such exchange, the number of
Warrant Shares to be exchanged and the date on which the Holder requests that
such Warrant Exchange occur (the "Notice of Exchange"). The Warrant Exchange
shall take place on the date specified in the Notice of Exchange or, if later,
the date the Notice of Exchange is received by the Company (the "Exchange
Date"). Certificates for the shares issuable upon such Warrant Exchange and, if
applicable, a new warrant of like tenor evidencing the balance of the shares
remaining subject to this Warrant, shall be issued as of the Exchange Date and
delivered to the Holder within seven (7) days following the Exchange Date. In
connection with any Warrant Exchange, this Warrant shall represent the right to
subscribe for and acquire the number of Warrant Shares equal to (i) the number
of Warrant Shares specified by the Holder in its Notice of Exchange (the "Total
Number") less (ii) the number of Warrant Shares equal to the quotient obtained
by dividing (A) the product of the Total Number and the existing Exercise Price
by (B) the Fair Market Value, provided that any fractional shares determined by
this calculation shall be represented by the issuance of a new Warrant. "Fair
Market Value" shall be determined as follows: (1) if the Common Stock is listed
on a national securities exchange or admitted to unlisted trading privileges on
such exchange or listed for trading on the Nasdaq Stock Market, the Fair Market
Value shall be the average of the last reported sale prices of the Common Stock
on such exchange or system for the twenty (20) business days ending on the last
business day prior to the date for which the determination is being made; or (2)
if the Common Stock is not so listed or admitted to unlisted trading privileges,
the Fair Market Value shall be the average of the last reported bid and asked
prices reported by the National Quotation Bureau, Inc. for the twenty (20)
business days ending on the last business day prior to the date for which the
determination is being made; or (3) if the Common Stock is not so listed or
admitted to unlisted trading privileges and bid and asked prices are not so
reported, the Fair Market Value shall be an amount, not less than book value
thereof as at the end of the most recent fiscal quarter of the Company ending
prior to the Exchange Date, determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
2. RESERVATION OF SHARES. The Company shall at all times reserve for
issuance and/or delivery upon exercise of this Warrant such number of shares of
its Common Stock as shall be required for issuance and delivery upon exercise of
this Warrant.
3. FRACTIONAL SHARES. No fractional shares of Common Stock shall be
issued upon the exercise of this Warrant. With respect to any fraction of a
share called for upon any exercise hereof, the Company shall pay to the Holder
an amount in cash equal to such fraction multiplied by the Fair Market Value of
a share of Common Stock.
4. ANTIDILUTION PROVISIONS. In the event the Common Stock is changed by
reason of a stock split, reverse stock split, stock dividend or recapitalization
or is converted into or exchanged for other securities as a result of a merger,
consolidation or reorganization in which the Company is the surviving
corporation, appropriate adjustments shall be made in the terms of this Warrant,
or additional warrants shall be granted to the Holder as shall be equitable and
appropriate, or an adjustment in the number and class of shares allocated to,
and the Exercise Price of, this Warrant shall likewise be made.
5. CERTAIN EXTRAORDINARY TRANSACTIONS. In the event the Common Stock is
2
<PAGE>
exchanged for securities, cash or other property of any other corporation or
entity as the result of a reorganization, merger or consolidation in which the
Company is not the surviving corporation, the dissolution or liquidation of the
Company, or the sale of all or substantially all the assets of the Company, the
Board of Directors of the Company or the board of directors of any successor
corporation or entity may, in its discretion, as to the unexercised portion of
this Warrant, (a) provide for payment of an amount equal to the excess of the
fair market value of the Warrant Shares, as determined by the Board of Directors
of the Company or such board, over the Exercise Price of such Warrant Shares as
of the date of the transaction, in exchange for the surrender of the right to
exercise this Warrant, or (b) provide for the assumption of this Warrant, or the
substitution therefor of new warrants, by the successor corporation or entity.
6. LOSS OF WARRANT. Upon receipt by the Company of evidence satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant, and (in the
case of loss, theft or destruction) of reasonably satisfactory indemnification,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
will execute and deliver a new warrant of like tenor and date.
7. NO RIGHTS AS STOCKHOLDER. The Holder shall not, as holder of this
Warrant, be entitled to vote, if applicable, or to receive dividends or to be
deemed the holder of Common Stock that may at any time be issuable upon exercise
of this Warrant for any purpose whatsoever, nor shall anything contained herein
be construed to confer upon the Holder, as such, any of the rights of a
stockholder of the Company or, if applicable, any right to vote for the election
of directors or upon any matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate action (whether upon
any recapitalization, issue or reclassification of stock, change of par value or
change of stock to no par value, consolidation, merger or conveyance or
otherwise), or to receive notice of meetings, or to receive dividends or
subscription rights, until such holder shall have exercised the Warrant and been
issued the Warrant Shares in accordance with the provisions hereof.
8. NON-TRANSFERABILITY. Neither this Warrant nor any Warrant Shares
shall be registered under the Securities Act of 1933, as amended, and applicable
state securities laws. Therefore, the Company shall require, as a condition of
allowing the transfer or exchange of this Warrant or such Warrant Shares, that
the Holder of this Warrant or such Warrant Shares, as the case may be, furnish
to the Company an opinion of counsel reasonably acceptable to the Company to the
effect that such transfer or exchange will be exempt from the registration and
prospectus delivery requirements under the Securities Act of 1933, as amended,
and applicable state securities laws. The certificates evidencing the Warrant
Shares shall bear a legend to the effect that the Warrant Shares evidenced by
such certificate have not been registered under the Securities Act of 1933, as
amended, and applicable state securities laws and are, therefore, subject to
restrictions on transfer.
9. INVESTMENT REPRESENTATIONS AND WARRANTIES. The Holder hereby
represents and warrants to the Company that (a) it has knowledge and experience
in financial and business matters sufficient to enable it to evaluate the merits
and risks of an investment in the Company; (b) it has assets sufficient to
enable it to bear the economic risk of its investment in this Warrant and the
Warrant Shares and is an "accredited investor" as defined in Rule 501 under the
Securities Act of 1933, as amended; (c) it is acquiring this Warrant and, upon
exercise, will acquire the Warrant Shares, for its own account, and not with a
view to, or for sale in connection with, any distribution thereof; (d) it or its
representatives have received from the Company such information with respect to
the Company as it has deemed necessary and relevant in connection with this
Warrant and the Warrant Shares and it has had the
3
<PAGE>
opportunity, directly or through such representatives, to ask questions of and
receive answers from persons acting on behalf of the Company necessary to verify
the information so obtained; and (e) it and its officers, directors, employees
and agents have not employed any broker or finder or incurred any liability for
any brokerage or finder's fees or commissions or similar payments in connection
with this Warrant and the Warrant Shares.
10. GOVERNING LAW. This Agreement and all amendments, modifications,
alterations, or supplements hereto shall be construed under and governed by the
laws of the State of New Jersey and the United States of America, without regard
to the principles of conflicts of law thereof.
11. MISCELLANEOUS. Except as provided in Sections 4 and 5 hereof, this
Warrant and any term hereof may be changed, waived, discharged or terminated
only by an instrument in writing signed by the party against which enforcement
of such change, waiver, discharge or termination is sought. The headings in
this Warrant are for purposes of reference only and shall not limit or otherwise
affect any of the terms hereof. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.
12. EXPIRATION. The right to exercise this Warrant shall expire at 5:00
P.M. Eastern Standard Time on December 23, 2006.
This Warrant is executed as of the date and year first written above.
Witness: ORAPHARMA, INC.
By: /s/ Michael Kishbauch
- --------------------------- ----------------------------
Michael Kishbauch, President
4
<PAGE>
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: OraPharma, Inc.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder _______ shares
of Common Stock, $.001 par value per share, of OraPharma, Inc. and herewith
makes payment of $__________ therefor, and requests that the certificates for
such shares be issued in the name of, and delivered to the undersigned at
_____________________________.
Dated: _____________________________________________
(Signature must conform to name of holder as
specified on the face of the Warrant)
__________________________________
(Address)
__________________________________
<PAGE>
Exhibit 4.32
THIS WARRANT AND THE SECURITIES TO BE ISSUED UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS
OF ANY STATE AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF UNLESS REGISTERED PURSUANT TO SUCH ACT AND ANY APPLICABLE
STATE SECURITIES LAW OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
ORAPHARMA, INC.
STOCK WARRANT AGREEMENT
-----------------------
GRANTEE: Mucosal Therapeutics LLC
DATE OF GRANT: December 28, 1999
NUMBER OF SHARES: 82,305
EXERCISE PRICE: $2.43 per share
EXPIRATION DATE: December 27, 2004
Pursuant to the License Agreement dated as of December 14, 1998 (the
"License Agreement") by and between Mucosal Therapeutics LLC ("Mucosal") and
OraPharma, Inc. (the "Company"), the Company has agreed to grant to Mucosal, as
of the Date of Grant set forth above, a warrant (the "Warrant") to purchase up
to the aggregate number of shares of Common Stock, par value $.001 per share
(the "Common Stock"), of the Company set forth herein at the price per share set
forth herein, all upon the terms and conditions hereof. This Stock Warrant
Agreement is hereinafter referred to as either the "Agreement" or this
"Warrant".
TERMS AND CONDITIONS
--------------------
1. Grant and Exercise of Warrant. (a) The Company hereby grants to
Mucosal, and Mucosal is entitled, upon the terms and subject to the conditions
hereinafter set forth, to purchase, from the Company, 82,305 shares of the
Company's Common Stock (the "Warrant Shares") at a purchase price of $2.43 per
share (the "Exercise Price"). This Warrant shall be fully vested as of the date
hereof. This Warrant may not be exercised after the Expiration Date set forth
above.
(b) This Warrant may not be exercised at a time when the exercise
thereof or the issuance or transfer of shares upon such exercise would, in the
opinion of the Board of
<PAGE>
Directors of the Company, constitute a violation of any law, federal, state,
local or foreign, or any regulations thereunder, or the requirements of the New
York Stock Exchange or any other national securities exchange or market.
2. Procedure for Exercise. (a) This Warrant may be exercised, in whole or
part, by Mucosal by delivering a written notice (the "Notice") to the Secretary
of the Company. This Warrant may not be exercised for any fractional share.
The Notice shall (i) state that Mucosal elects to exercise the Warrant; (ii)
state the number of Warrant Shares with respect to which the Warrant is being
exercised; and (iii) include the reaffirmation of the representations and
warranties of Mucosal set forth in Section 3 below. This Warrant may not be
exercised unless and until Mucosal shall have entered into a Restricted Stock
Agreement with the Company in substantially the form of Exhibit A hereto with
respect to the Warrant Shares as to which this Warrant is being exercised.
(b) Payment of the aggregate Exercise Price for such Warrant Shares
shall be made in cash or by certified check payable to the Company in an amount
equal to the aggregate Exercise Price of the Warrant Shares with respect to
which this Warrant is being exercised.
(c) The Company shall issue a stock certificate in the name of Mucosal
for such Warrant Shares as soon as practicable after receipt of the Notice and
payment of the aggregate Exercise Price for such Warrant Shares. Mucosal shall
not have any privileges as a stockholder of the Company with respect to any
Warrant Shares until such Warrant Shares shall be registered on the books of the
Company in the name of Mucosal.
3. Representations and Warranties. Mucosal acknowledges, represents and
warrants to the Company as follows:
(a) In connection with its exercise of the Warrant, it will consult
with such independent legal counsel or other advisors considered appropriate to
it to assist it in evaluating its proposed investment in the Company. Without
limiting the foregoing, Mucosal acknowledges that there may be certain adverse
tax consequences to it in connection with its exercise of the Warrant and the
Company has advised Mucosal to seek the advice of experts in such areas prior to
exercising the Warrant.
(b) Mucosal shall own the Warrant, and shall purchase the Warrant
Shares, for its own account for investment, and not with a view to or for resale
in connection with the distribution thereof, nor with any present intention of
selling or otherwise disposing of all or any part of the Warrant or Warrant
Shares. Mucosal agrees that it must bear the economic risk of its investment
for an indefinite period of time because, among other reasons, any Warrant
Shares purchased by it upon exercise of the Warrant may not be registered under
the Securities Act of 1933, as amended (the "Act") or under the securities laws
of certain states and, therefore, cannot be Transferred unless they are
subsequently registered under the Act
-2-
<PAGE>
and under applicable securities laws of such states or an exemption from such
registration is available. Mucosal understands that the Company is under no
obligation to register this Warrant and/or the Warrant Shares on Mucosal's
behalf or to assist it in complying with any exemption from such registration
under the Act or any state securities laws. Furthermore, Mucosal hereby
acknowledges and agrees that it will not Transfer, either publicly or privately,
the Warrant or the Warrant Shares without registration thereof under the Act or
an exemption therefrom. For purposes of this Agreement, the term "Transfer"
means to directly or indirectly sell, assign, transfer, pledge (other than a
pledge to the Company), hypothecate or to otherwise encumber or dispose of any
record or beneficial ownership of the Warrant or Warrant Shares (or contract to
do any of the foregoing).
(c) Mucosal understands that the Warrant and the Warrant Shares are
speculative investments which involve a high degree of risk of loss of its
entire investment in the Company. Mucosal can afford (i) to hold unregistered
securities for an indefinite period of time; and (ii) to sustain a complete loss
of the entire amount of its investment in the Company and, at the same time,
bear any tax liability which may result if its investment in the Company is
lost. Mucosal has determined that the Warrant (and, upon exercise of the
Warrant, will determine with respect to the Warrant Shares) is a suitable
investment and it has the financial ability to bear the economic risk of its
investment in the Company (including its possible total loss), has adequate
means for providing for its current needs and personal contingencies and has no
need for liquidity with respect to its investment in the Company.
(d) Mucosal is an "accredited investor", as defined in Rule 501 under
the Act.
(e) Mucosal has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of an
investment in the Warrant and the Warrant Shares and making an informed and
reasoned investment decision, and has obtained, in its judgment, sufficient
information from the Company to evaluate the merits and risks of an investment
in the Company.
(f) Mucosal has been given the opportunity to ask questions of, and
receive answers from, the Company concerning the Company and other matters
pertaining to this investment, and to obtain any additional information
necessary to verify the accuracy of any information provided, and has not been
furnished any offering literature or prospectus and has not received any general
solicitation or general advertising regarding the purchase of any Common Stock.
Mucosal has been furnished with all additional documents and information
requested by it.
(g) Mucosal is aware that there is no assurance as to the future
performance of the Company. No representations or warranties of any kind have
been made to Mucosal by the Company or any officer, employee, agent or affiliate
of the Company.
-3-
<PAGE>
(h) Mucosal understands that the Warrant is, and the Warrant Shares
will be, issued pursuant to a specific exemption under the provisions of the Act
and exemptions under various state securities laws, which exemptions may depend,
among other things, upon Mucosal's investment intent. Mucosal understands that
the availability of such exemptions is in part dependent upon the truthfulness
and accuracy of the representations made by it herein and that the Company will
rely on such representations in issuing the Warrant and the Warrant Shares to
Mucosal.
Mucosal acknowledges and agrees that each time it exercises the Warrant and
purchases Warrant Shares, and as a condition to such purchase, it shall re-state
and reaffirm all of the representations and warranties set forth above, unless
the Warrant Shares shall then be subject to an effective registration statement
under the Act and applicable state securities laws. Notwithstanding the
foregoing, even if Mucosal does not so re-state and reaffirm as required, upon
each exercise of the Warrant it will automatically be deemed to have so re-
stated and reaffirmed.
4. Stock Dividends, Splits, Etc. In the event the Common Stock is
changed by reason of a stock split, reverse stock split, stock dividend or
recapitalization (exclusive of any public or private sales of Capital Stock of
the Company), or is converted into or exchanged for other securities as a result
of a merger, consolidation or reorganization in which the Company is the
surviving corporation, appropriate adjustments shall be made in the terms of
this Warrant, or additional warrants shall be granted to Mucosal as shall be
equitable and appropriate, or an adjustment in the number and class of shares
allocated to, and the Exercise Price of, the Warrant shall be made.
5. Certain Extraordinary Transactions. In the event the Common Stock is
exchanged for securities, cash or other property of any other corporation or
entity as the result of a reorganization, merger or consolidation in which the
Company is not the surviving corporation, the dissolution or liquidation of the
Company, or the sale of all or substantially all the assets of the Company, the
Board of Directors of the Company or the board of directors of any successor
corporation or entity shall, as to the unexercised portion of this Warrant, (a)
provide for payment of an amount equal to the excess of the fair market value of
the Warrant Shares, as determined by the Board of Directors of the Company or
such board, over the Exercise Price of such Warrant Shares as of the date of the
transaction, in exchange for the surrender of the right to exercise the Warrant,
or (b) provide for the assumption of the Warrant, or the substitution therefor
of new warrants, by the successor corporation or entity.
6. Restriction on Transfer of Warrant. The Warrant may not be
Transferred in any way by Mucosal. The Warrant shall not be subject to
execution, attachment or similar process. Any attempted Transfer of the Warrant
contrary to the provisions hereof, and the levy of any execution, attachment or
similar process upon the Warrant, shall result in the immediate termination of
the Warrant. If requested in writing by the managing underwriters, if any, of
any public offering, Mucosal shall not offer, sell, contract to sell or
otherwise
-4-
<PAGE>
dispose of any of the Warrant Shares except as part of such public offering
within 30 days before or 180 days after the effective date of the registration
statement filed with respect to said offering.
7. Right of First Offer. (a) If, prior to the date of the initial public
offering of shares of the Common Stock, Mucosal desires to Transfer to any
third-party all or any part of the Warrant Shares pursuant to the terms of a
bona fide offer received from a third party, Mucosal shall first submit a
written offer (the "Offer") to sell such Warrant Shares (the "Offered Shares")
to the Company on terms and conditions, including price, not less favorable to
the Company then those on which Mucosal proposes to sell such Warrant Shares to
such third party. The Offer shall disclose the identity of the proposed
purchaser, specify the number of Offered Shares proposed to be sold, the total
number of Offered Shares owned by Mucosal, and the agreed terms and conditions
of the sale and any other material facts relating to the sale.
(b) The Company shall have the right to purchase all or any portion of
the Offered Shares on the same terms and conditions specified in the Offer.
(c) If the Company desires to purchase all or any portion of the
Offered Shares, the Company shall communicate in writing its election to
purchase (an "Acceptance") to Mucosal, which Acceptance shall be delivered to
Mucosal within 30 days of the Company's receipt of the Offer.
(d) If the Company elects to purchase all or any of the Offered
Shares, sale of the Offered Shares to be so purchased pursuant to this Section
shall be made at the offices of the Company on the 30th day following the
expiration of the 30-day period applicable pursuant to paragraph (c) of this
Section (or if such 30th day is not a business day, then on the next succeeding
business day). Such sales shall be effected by Mucosal's delivery to the
Company of a certificate or certificates evidencing the Offered Shares to be
purchased by it, duly endorsed for Transfer to the Company, which Offered Shares
shall be delivered free and clear of all liens, charges, claims and encumbrances
of any nature whatsoever, against payment to Mucosal of the purchase price
therefor by the Company. Payment for the Offered Shares shall be made as
provided in the Offer or by wire transfer or certified check.
(e) If the Company does not elect to purchase all of the Offered
Shares, then the Offered Shares not so purchased may be sold by Mucosal at any
time within 150 days after the Company's receipt of the Offer. Any such sale
shall be upon terms and conditions, including price, not less favorable to
Mucosal than those specified in the Offer, and the purchaser or transferee (and
all subsequent purchasers or transferees) shall be subject to all the terms of
this Agreement. Any Offered Shares not sold within such 150-day period shall
continue to be subject to the requirements of a first offer by the Company
pursuant to this Section.
-5-
<PAGE>
8. Restrictive Legends. Stock certificates representing the Warrant
Shares shall bear such legend or legends as the Board of Directors of the
Company shall deem appropriate.
9. Miscellaneous.
(a) Jurisdiction. Each party hereby submits itself for the sole
purpose of this Agreement and any controversy arising hereunder to the exclusive
jurisdiction of the courts located in the State of New York, and any courts of
appeal therefrom, and waives any objection (on the grounds of lack of
jurisdiction, or forum non conveniens or otherwise) to the exercise of such
jurisdiction over it by any such courts.
(b) Governing Law. This Agreement and all amendments, modifications,
alterations, or supplements hereto, and the rights of the parties hereunder,
shall be construed under and governed by the laws of the State of New York and
the United States of America, without regard to the principles of conflicts of
law thereof.
(c) Notices. All notices, consents and other communications required
or which may be given under this Agreement shall be deemed to have been duly
given (i) when delivered by hand, (ii) three (3) days after being mailed by
registered or certified mail, return receipt requested, or (iii) when received
by the addressee, if sent by facsimile transmission (with acknowledgment of
complete transmission) or by Express Mail, Federal Express or other express
delivery service (receipt requested), in each case addressed to the Company at
its principal place of business and to Mucosal its address as listed on the
books and records of the Company (or in either case to such other address as
such party may hereafter designate as to itself by notice to the other party
hereto).
(d) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective legal
representatives, successors and permitted assigns.
(e) Entire Agreement. This Agreement constitutes the entire agreement
between the Company and Mucosal with respect to the subject matter hereof and
shall not be modified, amended or terminated except as herein provided or except
by another agreement in writing executed by the parties hereto.
(f) Headings. The Section headings are for convenience only and are
not a part of this Agreement.
(g) Severability. All rights and restrictions contained herein may be
exercised and shall be applicable and binding only to the extent that they do
not violate any applicable laws and are intended to be limited to the extent
necessary so that they will not render this Agreement illegal, invalid or
unenforceable. If any provision or portion of any provision of this Agreement
not essential to the commercial purpose of this Agreement shall be
-6-
<PAGE>
held to be illegal, invalid or unenforceable by a court of competent
jurisdiction, it is the intention of the parties that the remaining provisions
or portions thereof shall constitute their agreement with respect to the subject
matter hereof, and all such remaining provisions or portions thereof shall
remain in full force and effect. To the extent legally permissible, any illegal,
invalid or unenforceable provision of this Agreement shall be replaced by a
valid provision agreeable to the parties hereto which will implement the
commercial purpose of the illegal, invalid or unenforceable provision. In the
event that any provision essential to the commercial purpose of this Agreement
is held to be illegal, invalid or unenforceable and is not replaced by a valid
provision which will implement the commercial purpose of this Agreement and
which is agreed to the parties hereto in writing within 30 days following such
holding, this Agreement and the rights granted herein shall terminate.
(h) Waiver; Remedies. The failure of any party hereto to require
performance hereunder, or the written waiver by any party hereto of any breach
of this Agreement, shall not prevent the subsequent enforcement thereof nor be
deemed a waiver of any subsequent breach.
(i) Counterparts. This agreement may be executed in counterparts,
each of which shall be deemed an original and both of which together shall
constitute one instrument.
(j) Expenses; Further Assurances. Unless otherwise provided herein,
all costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party which shall have
incurred the same, and the other party shall have no liability relating thereto.
Without limiting the generality of any provision of this Agreement, each party
agrees that upon request of any other party, it shall, from time to time, do any
and all other acts and things as may reasonably be required to carry out its
obligations hereunder, to consummate the transactions contemplated hereby, and
to effectuate the purposes hereof.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Stock Warrant Agreement
as of the 28th day of December, 1999.
MUCOSAL THERAPEUTICS LLC
By:___________________________________
Name:
Title:
ORAPHARMA, INC.
By:__________________________________
Name:
Title:
-8-
<PAGE>
Exhibit 10.12
ORAPHARMA, INC.
JOINT UNANIMOUS WRITTEN CONSENT
OF THE BOARD OF DIRECTORS AND STOCKHOLDERS
The undersigned, being all of the directors and the holders of sixty-six
and two-thirds percent (66-2/3%) of the Preferred Stock, par value $.001 (voting
together as a single class), and a majority of the Common Stock, par value $.001
(the "Common Stock"), of OraPharma, Inc., a Delaware corporation (the
------------
"Company"), hereby consent to the taking of the following actions and the
-------
adoption of the following resolutions without a meeting in accordance with the
procedures established by Sections 141(f) and 228 of the Delaware General
Corporation Law, and agree that they shall have the same force and effect as
though duly taken and adopted at a meeting of the Board of Directors and
stockholders of the Company duly called and legally held.
IT IS HEREBY:
RESOLVED, that it is advisable and in the best interest of the Company that
the Company's 1996 Stock Option Plan (the "Plan") be amended; and
----
FURTHER RESOLVED, that Section 12 of the Plan be, and hereby is, amended to
read in its entirety as follows:
CORPORATE TRANSACTIONS.
----------------------
(a) Change of Control. For purposes hereof, a "Change of
-----------------
Control" transaction shall mean any of the following:
(i) any person or entity, other than a person or entity
who is a beneficial owner of the Company's securities before the
consummation of the transaction, becomes, after such
consummation, the beneficial owner, directly or indirectly, of
securities of the Company representing fifty percent (50%) or
more of the combined voting power of the Company's then
outstanding securities;
(ii) the Company consummates a merger, consolidation or
reorganization the result of which is that the persons or
entities who were stockholders of the Company immediately prior
to consummation of such transaction own less than fifty percent
(50%) of the equity of the corporation or entity surviving or
resulting from such transaction;
(iii) the sale in one or more series of transactions of all
or substantially all of the assets of the Company; or
(iv) the dissolution or liquidation of the Company.
<PAGE>
(b) Committee or Board Action Immediately Prior to Change of
--------------------------------------------------------
Control. Immediately prior to or simultaneously with the consummation
-------
of a Change of Control, the Committee or the Board of Directors of the
Company may, in its discretion, as to outstanding options (i)
accelerate the exercise date or dates of such options pursuant to
Section 8(a) above; (ii) upon written notice to the holders thereof,
provided the options have been accelerated pursuant to clause (i)
above, terminate all such options prior to the consummation of the
transaction unless exercised within a prescribed period; (iii) provide
for payment of an amount equal to the excess of the fair market value,
as determined by the Committee or Board of Directors, over the Option
Price of such shares as of the date of the transaction, in exchange
for the surrender of the right to exercise such options; or (iv)
provide for the assumption of such options, or the substitution
therefor of new options, by the successor corporation or entity;
provided, however, that with respect to ISOs the requirements of
-------- -------
Sections 422 and 425 of the Code shall be met.
(c) Termination of Employment. If in connection with the
-------------------------
consummation of a Change of Control the employment by the Company (or
its successor) of Mark B. Carbeau, Michael D. Kishbauch, James R.
Lawter, Jan M. Lessem, James A. Ratigan or Joseph E. Zack is
terminated by the Company (or such successor) without Cause, the
exercise date of all outstanding options, if any, held by such person
as of the date of such termination shall be automatically deemed
accelerated to the date of such termination pursuant to Section 8(a)
above; provided, however, that with respect to ISOs the requirements
-------- -------
of Sections 422 and 424 of the Code shall be met.
For purposes hereof, "Cause" shall mean any of the
following:
(i) the Optionee is convicted of, pleads guilty to or
confesses to (y) a felony, or (z) any act of fraud,
misappropriation, embezzlement, dishonesty or disloyalty
which damages the Company (or its successor) in any material
respect;
(ii) substantial and repeated failure by the Optionee to
follow the direction of the Chief Executive Officer or Board
of Directors of the Company (or its successor) and such
failure is not cured within thirty (30) days after the
Optionee receives notice thereof from the Company (or its
successor);
(iii) failure by the Optionee to meet reasonable performance
objectives; or
(iv) gross negligence or willful misconduct of Optionee
with respect to the Company (or its successor)." and
-2-
<PAGE>
FURTHER RESOLVED, that the form, terms and provisions of the Amendment to
the Restricted Stock Purchase Agreement between the Company and each of Michael
D. Kishbauch and James R. Lawter (the "Amendments") (such Amendments to be
----------
substantially in the form of the attached), be, and the same hereby are, in all
respects authorized and approved.
IN WITNESS WHEREOF, the undersigned have executed this Unanimous Written
Consent as of the 3rd day of September, 1999.
DIRECTORS:
/s/ Michael Kishbauch
----------------------
Michael Kishbauch
/s/ James Mauzey
-----------------
James Mauzey
/s/ Christopher Moller
-----------------------
Christopher Moller
/s/ Eileen M. More
-------------------
Eileen M. More
/s/ Harry T. Rein
------------------
Harry T. Rein
/s/ Seth Rudnick
-----------------
Seth Rudnick
-3-
<PAGE>
/s/ David I. Scheer
-------------------
David I. Scheer
/s/ Jesse I. Treu
-----------------
Jesse I. Treu
STOCKHOLDERS:
SCHEER INVESTMENT HOLDINGS I,
L.L.C.
By:----------------
David I. Scheer
Managing Member
OAK INVESTMENT PARTNERS VI,
LIMITED PARTNERSHIP
By: Oak Associates VI, L.L.C.,
General Partner
By: /s/ Eileen M. More
-------------------
Eileen M. More
Managing Member
OAK VI AFFILIATES FUND,
LIMITED PARTNERSHIP
By: Oak VI Affiliates L.L.C.,
General Partner
By: /s/ Eileen M. More
-------------------
Eileen M. More
Managing Member
-4-
<PAGE>
CANAAN S.B.I.C., L.P.
By: Canaan S.B.I.C. Partners, L.P.,
General Partner
By: /s/ Harry T. Rein
------------------
Harry T. Rein
General Partner
CANAAN CAPITAL LIMITED
PARTNERSHIP
By: Canaan Capital Management, L.P.,
General Partner
By: Canaan Capital Partners L.P.,
General Partner
By: /s/ Harry T. Rein
------------------
Harry T. Rein
General Partner
CANAAN CAPITAL OFFSHORE
LIMITED PARTNERSHIP C.V.
By: Canaan Capital Management L.P.,
General Partner
By: Canaan Capital Partners L.P.,
General Partner
By: /s/ Harry T. Rein
------------------
Harry T. Rein
General Partner
-5-
<PAGE>
CANAAN EQUITY, L.P.
By: Canaan Equity Partners LLC,
Member/Manager
By: /s/ Harry T. Rein
------------------
Harry T. Rein
Member/Manager
FRAZIER HEALTHCARE II, L.P.
By: FHM, L.L.C.,
General Partner
By: Frazier Management, L.L.C.,
Member
By: /s/ Jon Gilbert
----------------
Jon Gilbert
Member
TL VENTURES III L.P.
By: TL Ventures III Management L.P.,
General Partner
By: TL Ventures III LLC,
General Partner
By /s/ Christopher Moller
-----------------------
Christopher Moller
Managing Director
-6-
<PAGE>
TL VENTURES III OFFSHORE, L.P.
By: TL Ventures III Offshore Partners L.P.,
General Partner
By: TL Ventures III Offshore Ltd.,
General Partner
By: /s/ Christopher Moller
-----------------------
Christopher Moller
TL VENTURES III INTERFUND L.P.
By: TL Ventures III LLC,
General Partner
By: /s/ Christopher Moller
-----------------------
Christopher Moller
DOMAIN PARTNERS IV, L.P.
By: One Palmer Square Associates IV,
L.L.C., General Partner
By: One Palmer Square Associates IV,
L.L.C., General Partner
By: /s/ Jesse I. Treu
------------------
Managing Member
DP IV ASSOCIATES, L.P.
By: One Palmer Square Associates IV,
L.P., General Partner
By:/s/ Jesse I. Treu
--------------------
Managing Member
-7-
<PAGE>
BIOTECHNOLOGY INVESTMENTS
LIMITED
By: Old Court Limited
By: /s/ Jesse I. Treu
------------------------------
Attorney-in-Fact
SENTRON MEDICAL, INC.
By: -----------------------------
HEALTHCAP KB
By: Healthcap AB, General Partner
By: -----------------------------
Director
HEALTHCAP KB
By: Healthcap AB, General Partner
By: -----------------------------
Director
-8-
<PAGE>
HEALTHCAP COINVEST KB
By: Healthcap AB, General Partner
By:________________________
Director
/s/ Michael Kishbauch
----------------------
Michael Kishbauch
/s/ James R. Lawter
---------------------
James R. Lawter
-9-
<PAGE>
Frazier & Company, Inc.
By: /s/ [signature illegible]
--------------------------
--------------------------
Charles H. Blanchard
/s/ Jon N. Gilbert
--------------------------
Jon N. Gilbert
/s/ Nader J. Nain
--------------------------
Nader J. Nain
--------------------------
Glenn R. Stewart
/s/ Fred E. Silverstein
--------------------------
Fred E. Silverstein
American Home Products, Inc.
By: /s/ [signature illegible]
--------------------------
/s/ Dr. Gary Jernberg
--------------------------
Dr. Gary Jernberg
/s/ Frank R. Stanton
--------------------------
Frank R. Stanton
/s/ James E. Mulvihill
--------------------------
James E. Mulvihill
Children's Medical Center Corporation
By: /s/ [signature illegible]
--------------------------
Assistant Treasurer
-10-
<PAGE>
Biomorphics Group, Inc.
By: /s/ [signature illegible]
--------------------------
/s/ Michael G. Lanzilotti
--------------------------
Michael G. Lanzilotti
/s/ Dorinda Alevritis
----------------------
Dorinda Alevritis
-11-
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
and to all references to our Firm included in or made a part of this S-1
Registration Statement.
ARTHUR ANDERSEN LLP
Philadelphia, Pa.
February 4, 2000
<PAGE>
Exhibit 23.3
ARNALL GOLDEN & GROCERY, LLP
2800 ONE ATLANTIC CENTER
1201 WEST PEACHTREE STREET - ATLANTA, GEORGIA 30309-3450
TELEPHONE (404) 873-8500 - FASCIMILE (404) 873-8501
FIRST LIBERTY BANK TOWER WRITER'S DIRECT DIAL NUMBER
SUITE 1000 (404) 873-8794
201 SECOND STREET
MACON, GEORGIA 31201 WRITER'S DIRECT DIAL FACSIMILE
(912) 746-3344 (404) 873-8795
WRITER'S EMAIL ADDRESS
[email protected]
CONSENT OF ARNALL, GOLDEN & GREGORY, LLP
We hereby consent to the reference to this firm under the caption
"Experts" in the prospectus included as part of this Form S-1 Reistration
Statement.
Arnall, Golden & Gregory, LLP
/s/ Patrea Pabst
February 7, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ORAPHARMA,
INC.'S DECEMBER 31, 1998 AND SEPTEMBER 30, 1999 FINANCIAL STATEMENT AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 DEC-31-1999
<CASH> 19,236,084 13,073,803
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 19,282,525 13,559,759
<PP&E> 1,165,383 1,402,328
<DEPRECIATION> 193,970 444,431
<TOTAL-ASSETS> 20,480,402 14,711,739
<CURRENT-LIABILITIES> 2,106,862 2,066,166
<BONDS> 480,978 288,043
28,771,713 33,730,563
0 0
<COMMON> 957 1,040
<OTHER-SE> (10,880,108) (21,374,073)
<TOTAL-LIABILITY-AND-EQUITY> 20,480,402 14,711,739
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 8,915,350 11,784,105
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 38,018 52,496
<INCOME-PRETAX> (8,490,862) (11,147,148)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (8,490,862) (11,147,148)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (8,490,862) (12,876,799)
<EPS-BASIC> (13.28) (16.61)
<EPS-DILUTED> (13.28) (16.61)
</TABLE>
