-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OYi+1qujojtwL1moenz2BZepCx3Ni14zvY1d81fgv1sD9dFdbG7oPAjkTIMWt2qn 07hKTb2tAp7S8n+ebf1waw== 0000912057-02-000140.txt : 20020413 0000912057-02-000140.hdr.sgml : 20020413 ACCESSION NUMBER: 0000912057-02-000140 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20011221 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20020103 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENVEC INC CENTRAL INDEX KEY: 0000934473 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 232705690 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-24469 FILM NUMBER: 2501292 BUSINESS ADDRESS: STREET 1: 65 W WATKINS MILL RD CITY: GAITHERSBURG STATE: MD ZIP: 20878 BUSINESS PHONE: 2406320740 MAIL ADDRESS: STREET 1: 65 W WATKINS MILL RD CITY: GAITHERSBURG STATE: MD ZIP: 20878 8-K 1 a2067073z8-k.txt FORM 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): December 21, 2001 GENVEC, INC. (Exact name of issuer as specified in charter) Delaware 0-24469 23-2705690 ---------------------------- ------------------------ ------------------ (State or other jurisdiction (Commission File Number) (I.R.S. Employer of incorporation) Identification No.) 65 West Watkins Mill Road Gaithersburg, MD ------------------- (Address of principal executive offices) 20878 ----- (Zip code) (240) 632-0740 -------------- (Registrant's telephone number, including area code) Item 5. Other Events On December 21, 2001, GenVec, Inc. (the "Company") completed a private placement of 3,582,000 shares of its common stock, par value $0.001 per share (the "Common Stock") to HealthCare Ventures V, L.P. and HealthCare Ventures VI, L.P. (each a "Purchaser" and together the "Purchasers") pursuant to a stock purchase agreement between the Company and the Purchasers dated December 21, 2001 (the "Stock Purchase Agreement"). The placement resulted in gross proceeds to the Company, prior to the deduction of expenses, of approximately $12.9 million. A copy of the Stock Purchase Agreement is included as Exhibit 4.1 to this report and incorporated by reference herein. In connection with the private placement, the Company and the Purchasers entered into an investor rights agreement dated as of December 21, 2001 (the "Investor Rights Agreement"). During the term of the Investor Rights Agreement, the Company and the Purchasers have agreed that the Purchasers may designate one director for election to the Company's Board of Directors in accordance with the Company's bylaws. As of January 1, 2002, the Board of Directors has elected Harold R. Werner, the Purchasers' designee, to fill a vacancy in a class of directors created by the departure of Hal S. Broderson, M.D. Mr. Werner's term of office will expire at the annual meeting of stockholders to be held in 2004. The Investor Rights Agreement also provides for certain registration, preemptive and other rights as are set forth more fully in the Investor Rights Agreement, a copy of which is included as Exhibit 4.2 to this report and incorporated by reference herein. On December 21, 2001, the Company issued a press release relating to the transaction. A copy of the press release is included as Exhibit 99.1 to this report and incorporated by reference herein. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits (c) Exhibits 4.1 Stock Purchase Agreement, dated as of December 21, 2001, by and among the Company and the Purchasers. 4.2 Investor Rights Agreement, dated as of December 21, 2001, by and among the Company and the Purchasers. 99.1 Text of Press Release, dated December 21, 2001. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. GENVEC, INC. (Registrant) /s/ PAUL H. FISCHER ---------------------------------------- Paul H. Fischer, Ph.D. President and Chief Executive Officer Date: January 2, 2002 EX-4.1 3 a2067073zex-4_1.txt EXHIBIT 4.1 Exhibit 4.1 STOCK PURCHASE AGREEMENT THIS AGREEMENT, dated this 21st day of December 2001, is entered into by and among GenVec, Inc., a Delaware corporation (the "Corporation"), and the persons listed on Schedule 1 attached hereto (the "Investors"). The Corporation and the Investors wish to provide for the issuance of shares of Common Stock (as hereinafter defined), as more specifically set forth hereinafter. NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereto, intending to be legally bound, hereby agree as follows: SECTION 1. AUTHORIZATION OF ISSUANCE AND SALE OF COMMON STOCK; CLOSING. Subject to the terms and conditions hereof, the Corporation has authorized the issuance on the Closing Date (as defined in Section 3 hereof) of an aggregate of 3,582,000 shares (the "Shares") of its common stock, par value $.001 per share (the "Common Stock"). SECTION 2. SALE AND DELIVERY OF SHARES. 2.1 AGREEMENT TO SELL AND PURCHASE THE SHARES. Subject to the terms and conditions hereof, the Corporation is selling to each Investor and each Investor is severally (but not jointly and severally) purchasing from the Corporation subject to the satisfaction of the conditions precedent set forth in Sections 4.1, 4.2, 6.1 and 6.2 hereof and subject to the terms and other conditions hereinafter set forth, at the Closing, the number of Shares set forth opposite the name of such Investor on Schedule 1 hereto for a purchase price of $3.60 per share (subject to adjustment to reflect stock splits, stock dividends, stock combinations, recapitalizations and like occurrences), representing an aggregate purchase price of $12,895,200.00 for the Shares purchased by all Investors; 2.2 DELIVERY OF SHARES. At the Closing, the Corporation shall deliver to each Investor a certificate or certificates, registered in the name of such Investor, representing that number of Shares being purchased by such Investor at the Closing. Delivery of certificates representing the Shares shall be made against receipt by the Corporation of a wire transfer of immediately available funds to an account designated by the Corporation in the full amount of the purchase price for the Shares being purchased by such Investor at the Closing. SECTION 3. THE CLOSING. (a) The closing (the "Closing") hereunder with respect to the transactions contemplated by Section 2 hereof is taking place by facsimile transmission of executed copies of the documents contemplated hereby (the date hereof sometimes being referred to herein as the "Closing Date") and confirmed by overnight delivery of originally executed copies of such documents. SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION TO THE INVESTORS. The Corporation hereby represents and warrants to the Investors as follows: 4.1 ORGANIZATION. The Corporation is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own and lease its property and to carry on its business as presently conducted and as proposed to be conducted as described in the Corporation Reports (as hereinafter defined). The Corporation is duly qualified to do business as a foreign corporation in the states set forth on Schedule 4.1. The Corporation does not own or lease property or engage in any activity in any other jurisdiction which would require its qualification in such jurisdiction and in which the failure to be so qualified would have a material adverse effect on the business, financial condition or results of operations or prospects of the Corporation (a "Material Adverse Effect"), individually or in the aggregate. 4.2 CAPITALIZATION. The authorized and outstanding capital stock of the Corporation immediately preceding the Closing shall consist of: (a) 60,000,000 shares of Common Stock, of which: (i) 18,090,857 shall be validly issued and outstanding, fully paid and nonassessable; and (ii) 582,317 shares shall have been duly reserved for issuance upon conversion or exercise of Common Stock Warrants (the "Warrant Shares"); and (iii) 350,000 shares shall have been duly reserved for issuance of Common Stock under the Corporation's Employee Stock Purchase Plan of which 12,664 shares have been issued and are included in the total shares outstanding in 4.2(a)(i) and 337,336 shares remain outstanding and issuable under the Employee Stock Purchase Plan; and (iv) 5,000,000 shares shall have been duly reserved for issuance in connection with the options available under the Corporation's Director Option Plan and the Corporation's Incentive Stock Purchase Plan (the "Option Shares"), of which options to purchase 817,566 shares have been exercised and are included in the total shares outstanding in 4.2(a)(i) and 3,741,423 shares are subject to outstanding, unexercised options. (b) 5,000,000 shares of Preferred Stock, 600,000 of which shall have been designated as Series A Junior Participating Preferred Stock and none of which shall be issued or outstanding. Except pursuant to the terms of this Agreement, the Investor Rights Agreement dated the date hereof in the form attached hereto as Exhibit A (the "Investor Rights Agreement"), and as set forth in Schedule 4.2 attached hereto, there are, and immediately following the Closing, there will be: (1) no outstanding warrants, options, rights, agreements, convertible securities or other commitments or instruments pursuant to which the Corporation is or may become obligated to issue, sell, repurchase or redeem any shares of capital stock or other 2 securities of the Corporation (other than the Warrant Shares and Option Shares); (2) no preemptive, contractual or similar rights to purchase or otherwise acquire shares of capital stock of the Corporation pursuant to any provision of law, the Certificate of Incorporation of the Corporation (the "Certificate"), the By-laws of the Corporation (the "By-laws") or any agreement to which the Corporation is a party or may otherwise be bound; (3) no restrictions on the transfer of capital stock of the Corporation imposed by the Restated Certificate or By-laws of the Corporation, any agreement to which the Corporation is a party, any order of any court or any governmental agency to which the Corporation is subject, or any statute other than those imposed by relevant state and federal securities laws; (4) no cumulative voting rights for any of the Corporation's capital stock; (5) no registration rights under the Securities Act of 1933, as amended, (the "Securities Act") with respect to shares of the Corporation's capital stock; (6) to the Corporation's knowledge, no options or other rights to purchase shares of capital stock from stockholders of the Corporation granted by such stockholders; and (7) no agreements, written or oral, between the Corporation and any holder of its securities, or, to the Corporation's knowledge, among holders of its securities, relating to the acquisition, disposition or voting of the securities of the Corporation. 4.3 AUTHORIZATION OF THIS AGREEMENT AND THE INVESTOR RIGHTS AGREEMENT. The execution, delivery and performance by the Corporation of this Agreement and the Investor Rights Agreement and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all requisite action on the part of the Corporation and/or its stockholders, as necessary. Each of this Agreement and the Investor Rights Agreement has been duly executed and delivered by the Corporation and constitutes a valid and binding obligation of the Corporation, enforceable in accordance with its respective terms, subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other equitable remedies, and to limitations of public policy. The execution, delivery and performance of this Agreement and the Investor Rights Agreement and the compliance with the provisions hereof and thereof by the Corporation, will not, except as set forth in Schedule 4.3(b) hereto, and except to the extent that any such violation, conflict or breach would not be reasonably likely to have a Material Adverse Effect individually or in the aggregate: (a) violate any provision of law, statute, ordinance, rule or regulation or any ruling, writ, injunction, order, judgment or decree of any court, administrative agency or other governmental body to or by which the Corporation is bound; (b) conflict with or result in any breach of any of the terms, conditions or provisions of, or constitute (with due notice or lapse of time, or both) a default (or give rise to any right of termination, cancellation or acceleration) under (i) any agreement, document, instrument, contract, understanding, arrangement, note, indenture, mortgage or lease to which the Corporation is a party or under which the Corporation or any of its assets is bound or affected, (ii) the Certificate, or (iii) the By-laws; or (c) result in the creation of any lien, security interest, charge or encumbrance upon any of the properties or assets of the Corporation. 3 4.4 AUTHORIZATION OF SHARES. The issuance, sale and delivery of the Shares has been duly authorized by all requisite action of the Corporation, and, when issued, sold and delivered in accordance with this Agreement, the Shares will be validly issued and outstanding, fully paid and nonassessable, with no personal liability attaching to the ownership thereof, and, not subject to preemptive or any other similar rights of the stockholders of the Corporation or others. 4.5 CONSENTS AND APPROVALS. No authorization, consent, approval or other order of, or declaration to or filing with, any governmental agency or body (other than filings required to be made under applicable federal and state securities laws) or any other person, entity or association is required for: (a) the valid authorization, execution, delivery and performance by the Corporation of this Agreement and the Investor Rights Agreement; or (b) the valid authorization, issuance, sale and delivery of the Shares. The Corporation has obtained all other consents that are necessary to permit the consummation of the transactions contemplated hereby and thereby. 4.6 BUSINESS OF CORPORATION. (a) The description of the business of the Corporation (the "Business") contained in the Corporation Filings is accurate in all material respects. (b) Except as set forth in Schedule 4.6(b) attached hereto: (i) the Corporation has not entered into and is not a party to and is not otherwise bound or affected by any written or oral contract, agreement, understanding, arrangement, lease, guaranty or other obligation or series of related obligations or transactions required to be filed as an exhibit to the Corporation Filings that has not been so filed; (ii) the Corporation is not a party to, or, directly or indirectly, bound by, any indenture, mortgage, deed of trust or other agreement or instrument relating to the borrowing of money, the guarantee of indebtedness or the granting of any security interest, negative pledge or other encumbrance on the assets of the Corporation required to be filed as an exhibit to the Corporation Filings that has not been so filed; and (iii) the Corporation has not incurred and is not subject to any liabilities or obligations, fixed or contingent, matured or unmatured or otherwise, that, individually or in the aggregate, would be reasonably expected to have a Material Adverse Effect, that has not been accrued in the Corporation's Financial Statements or disclosed in the Corporation Filings to the extent required thereby, except for liabilities or obligations assumed in the ordinary course of the Business or by contract. (c) The financial statements included in the Corporation Filings, including any notes thereto, reflect all liabilities of the Corporation required in accordance with United States generally accepted accounting principles ("GAAP") as of the date of such financial statements. Since the date of the September 30, 2001 Balance Sheet (as such term is hereinafter defined), the Corporation has not incurred any obligation (or series of related obligations) or 4 liability, contingent or otherwise, in excess of Two Hundred Thousand Dollars ($200,000) except as incurred in the ordinary course of the Business or set forth in Schedule 4.6(c) attached hereto. (d) Except as disclosed in the Corporation Reports: (i) there are no actions, suits, arbitrations, claims, investigations or legal or administrative proceedings pending or, to the Corporation's knowledge, threatened, against the Corporation, whether at law or in equity which, if determined adversely to the Corporation, would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; (ii) there are no judgments, decrees, injunctions or orders of any court, government department, commission, agency, instrumentality or arbitrator entered or existing against the Corporation or any of its assets or properties for any of the forgoing or otherwise which, taken separately or in the aggregate, would reasonably be expected to have a Material Adverse Effect; and (iii) the Corporation has not admitted in writing its inability to pay its debts generally as they become due, filed or consented to the filing against it of a petition in bankruptcy or a petition to take advantage of any insolvency act, made an assignment for the benefit of creditors, consented to the appointment of a receiver for itself or for the whole or any substantial part of its property, or had a petition in bankruptcy filed against it, been adjudicated bankrupt, or filed a petition or answer seeking reorganization or arrangement under the federal bankruptcy laws or any other laws of the United States or any other jurisdiction. (e) Except where such non-compliance would not be reasonably likely to have a Material Adverse Effect individually or in the aggregate (i) the Corporation is in material compliance with all obligations, agreements and conditions contained in any evidence of indebtedness or any loan agreement or other contract or agreement (whether or not relating to indebtedness) to which the Corporation is a party or is subject (collectively, the "Obligations"), the lack of compliance with which could afford to any person the right to accelerate any indebtedness or terminate any right of or agreement with the Corporation, and (ii) to the Corporation's knowledge, all other parties to such Obligations are in material compliance with the terms and conditions of such Obligations. (f) Except as set forth in the Corporation Reports, and pursuant to this Agreement and the Investor Rights Agreement, there are no agreements, understandings or proposed transactions between the Corporation and any of its officers, directors or other "affiliates" (as defined in Rule 404 promulgated under the Securities Act) and there are no transactions between any of such persons and the Corporation in each case of a type required to be disclosed under Rule 404 promulgated under the Securities Act that have not been so disclosed. (g) Each current employee of or consultant to the Corporation who has or is proposed to have access to confidential and/or proprietary information of the Corporation is a signatory to, and is bound by, an agreement with the Corporation relating to non-use, nondisclosure, proprietary information and assignment of patent, copyright and other intellectual property rights. 5 (h) To the Corporation's knowledge, no employee of or consultant to the Corporation is in violation of any term of any employment contract, patent disclosure agreement or any other contract or agreement including, but not limited to, those matters relating (i) to the relationship of any such employee with the Corporation or to any other party as a result of the nature of the Corporation's business as currently conducted, or (ii) to unfair competition, trade secrets or proprietary information. (i) The Corporation does not have any collective bargaining agreements covering any of its employees or any employee benefit plans, except as disclosed in the Corporation Reports as a result of which there would be a Material Adverse Effect individually or in the aggregate. (j) The Corporation is not in violation of or default under any provision of its By-laws or Certificate, or any contract, instrument, judgment, order, writ or decree to which it is a party or by which it or any of its properties are bound, and the Corporation is not in violation of any material provision of any federal or state statute, rule or regulation applicable to the Corporation, which violation could result in a Material Adverse Effect individually or in the aggregate. (k) Included in the Corporation Filings are the Balance Sheet dated December 31, 2000 (the "2000 Balance Sheet") and Statements of Operation, Stockholders' Equity and Cash Flows for the year then ended (collectively, the "Financial Statements"), audited by KPMG LLP, independent certified public accountants of the Corporation, which Financial Statements have been prepared in accordance with generally accepted accounting principles consistently applied and fairly present the financial position of the Corporation as of the date of such financial statements and the results of its operations for the period covered thereby, subject only to the matters described in the accountant's report attached thereto. Also included in the Corporation Filings is the Unaudited Balance Sheet dated September 30, 2001 (the "Balance Sheet") and Statements of Operation, Stockholders' Equity and Cash Flows for the period from January 1, 2001 through September 30, 2001 (collectively, the "Unaudited Financial Statements"). The Unaudited Financial Statements are in accordance with the books and records of the Corporation and present fairly the financial condition and results of operations of the Corporation, as at the dates and for the periods indicated, and have been prepared in accordance with generally accepted accounting principles consistently applied, except that the Unaudited Financial Statements may not be in accordance with generally accepted accounting principles solely because of the absence of footnotes normally contained therein and are subject to normal year-end audit adjustments which, in the aggregate, will not be material. (l) Since the date of the Balance Sheet and other than as set forth in the Corporation's SEC filings and on Schedule 4.6(l) attached hereto, there has not been: (i) any damage, destruction or loss to any property of the Corporation, whether or not covered by insurance, that has had or will have a Material Adverse Effect individually or in the aggregate; 6 (ii) any waiver by the Corporation of a material valuable right or of a material debt owed to it; (iii) any satisfaction or discharge of any lien, claim or encumbrance or payment of any obligation by the Corporation, except such a satisfaction, discharge or payment made in the ordinary course of business that is not material to the financial condition, operating results or business or prospects of the Corporation; (iv) any material change or amendment to a material contract or arrangement by which the Corporation or any of its assets or properties is bound or subject; (v) any material change in any material compensation arrangement or agreement with any present or prospective employee, contractor or director of the Corporation; (vi) any loan to any officer, director or stockholder of the Corporation, other than advances in the ordinary course of business; (vii) any debt, obligation or liability incurred, assumed or guaranteed by the Corporation, except for those that are immaterial in amount and for current liabilities incurred in the ordinary course of business; (viii) to the Corporation's knowledge, any other event or condition of any character which would have Material Adverse Effect individually or in the aggregate; or (ix) any agreement by the Corporation to do any of the foregoing. (m) The Corporation has no material liabilities, contingent, accrued, unaccrued, known, unknown or otherwise, that were not reflected in the Balance Sheet, except for liabilities incurred after the date thereof in the ordinary course of business that would not have a Material Adverse Effect individually or in the aggregate, and except for liabilities that would not be required to be accrued under GAAP. (n) The Corporation has filed all federal, state, local and foreign tax returns which have been required to be filed and has paid all taxes shown thereon and all assessments received by it to the extent that such taxes have become due and are not being contested in good faith, except where such failure to file tax returns or pay such taxes and assessments would not, individually or in the aggregate, have a Material Adverse Effect, and there is no tax deficiency which has been or would reasonably be expected to be asserted or threatened against the Corporation which would, individually or in the aggregate, if decided adversely could reasonably be expected to have a Material Adverse Effect. 4.7 INTELLECTUAL PROPERTY RIGHTS. Except as described in the Corporation Reports, the Corporation owns, is licensed to use or otherwise possesses adequate right to use the patents, patent rights, licenses, inventions, trademarks, service marks, trade names, copyrights 7 and know-how, including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems, processes or procedures (collectively, the "Intellectual Property") reasonably necessary to carry on the business conducted by it, except to the extent that the failure to own, be licensed to use or otherwise possess adequate rights to use such Intellectual Property would not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect; except as described in the Corporation Reports, the Corporation has not received any notice of infringement of or conflict with, and the Corporation has no knowledge of any infringement of or conflict with, asserted rights of others with respect to its Intellectual Property which could reasonably be expected to, individually or in the aggregate, result in a Material Adverse Effect; except as described in the Corporation Reports, the discoveries, inventions, products or processes of the Corporation referred to in the Registration Statement and the Prospectus do not, to the Corporation's knowledge, infringe or conflict with any right or patent of any third party, or any discovery, invention, product or process which is the subject of a patent application filed by any third party, which infringement or conflict could reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect; except as described in the Corporation Reports, the Corporation is not obligated to pay a royalty, grant a license or provide other consideration to any third party in connection with its patents, patent rights, licenses, inventions, trademarks, service marks, trade names, copyrights and know-how; and no third party, including any academic or governmental organization, possesses rights to the Intellectual Property which, if exercised would reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect To the Corporation's knowledge, none of its employees is obligated under any contract (including licenses, covenants, or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would materially interfere with their duties to the Corporation or that would materially conflict with the Corporation's business as currently conducted or proposed to be conducted. To the Corporation's knowledge, it will not be necessary to utilize any inventions, trade secrets or proprietary information of any of its employees made prior to their employment by the Corporation, except for inventions, trade secrets or proprietary information that have been assigned to the Corporation. 4.8 SECURITIES LAWS. In connection with the transactions contemplated hereunder, neither the Corporation nor anyone acting on its behalf has offered securities of the Corporation for sale to, or solicited any offers to buy the same from, or sold securities of the Corporation to, any person or organization, in any case so as to subject the Corporation, its promoters, directors and/or officers to any liability under the Securities Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any state securities or "blue sky" law and the rules and regulations promulgated thereunder (collectively, the "Securities Laws"). The offer, grant, sale and/or issuance of the Shares, as contemplated by this Agreement, will not be in violation of the Securities Laws when offered, sold and issued in accordance with this Agreement. 4.9 TITLE TO PROPERTIES. Except as set forth on Schedule 4.9 attached hereto, the Corporation has good title to all personal property owned by it, in each case free and clear of all liens, encumbrances and defects except such as are described or referred to in the Corporation 8 Reports or such as do not materially affect the value of such property and do not materially interfere with the use made or proposed to be made of such property by the Corporation; and any real property and buildings held under lease by the Corporation are in good condition and repair and are held by it under valid, existing and enforceable leases with such exceptions as are not material and do not interfere with the use made or proposed to be made of such property and buildings by the Corporation. Each such lease constitutes a valid and binding obligation of, and is enforceable in accordance with its terms against, the respective parties thereto. The Corporation does not own any real property. 4.10 INVESTMENTS IN OTHER PERSONS. Except as disclosed in the Corporation Reports, (a) the Corporation has not made any loan or advance to any person or entity which is outstanding on the date hereof, nor is it committed or obligated to make any such loan or advance, and (b) the Corporation has never owned or controlled and does not currently own or control, directly or indirectly, any subsidiaries and has never owned or controlled and does not currently own or control any capital stock or other ownership interest, directly or indirectly, in any corporation, association, partnership, trust, joint venture or other entity. 4.11 ERISA. Except as set forth in Schedule 4.11 attached hereto, the Corporation has not made and is not obligated to make contributions to any pension, defined benefit or defined contribution plans for its employees which are subject to the Federal Employee Retirement Income Security Act of 1974, as amended. 4.12 USE OF PROCEEDS. The net proceeds received by the Corporation from the sale of the Shares shall be used by the Corporation generally for the purposes set forth in Schedule 4.12 attached hereto. 4.13 PERMITS AND OTHER RIGHTS; COMPLIANCE WITH LAWS. The Corporation has all franchises, permits, licenses and other rights and privileges necessary to permit it to own its properties and to conduct its business as presently conducted, except where the failure to obtain such franchises, permits, licenses and other rights and privileges would not reasonably be likely to have, individually or in the aggregate, a Material Adverse Effect. The Corporation is in compliance in all material respects under each, and the transactions contemplated by this Agreement will not cause a violation under any of such franchises, permits, licenses and other rights and privileges, except for such noncompliance that would not reasonably be likely to have, individually or in the aggregate, a Material Adverse Effect. The Corporation is in compliance in all respects with all material provisions of the laws and governmental rules and regulations applicable to its businesses, properties and assets, and to the products and services sold by it, except for such noncompliance that would not reasonably be likely to, individually or in the aggregate, have a Material Adverse Effect. 4.14 INSURANCE. The Corporation carries, or is covered by, insurance in such amounts and covering such risks as it reasonably believes in the judgment of its management is adequate for the conduct of its business and the value of its properties and as is customary for companies engaged in similar businesses in similar industries. 9 4.15 ENVIRONMENTAL MATTERS. The Corporation (i) is in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("Environmental Laws"), (ii) has received all permits, licenses or other approvals required of it under applicable Environmental Laws to conduct its businesses and (iii) is in compliance with all terms and conditions of any such permit, license or approval, except where such noncompliance with Environmental Laws, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals would not, individually or in the aggregate, have a Material Adverse Effect. 4.16 SEC REPORTS. The Corporation has made available to the Investors its registration statement, and all amendments and exhibits thereto, filed with the Securities and Exchange Commission ("SEC") in connection with its initial public offering, and each other report, registration statement, proxy statement or information statement, including, without limitation, all reports required under the Exchange Act (the "34 Act Reports"), filed by it with the SEC under the Securities Laws since the effective date of that registration statement (the "Corporation Reports"). The Corporation has timely filed all such documents required to be filed by it with the SEC under the Securities Laws and, as of their respective dates, the Corporation Reports (i) complied as to form in all material respects with the applicable requirements of the Securities Laws and (ii) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein under the circumstances in which they were made not misleading. To the Corporation's knowledge, none of the Corporation Reports currently is the subject of any review or investigation by the SEC or any other government authority and there is no currently unresolved violation asserted by the SEC or any government authority with respect to any of the Corporation Reports. 4.17 LISTING. The Corporation's Common Stock is included in The Nasdaq National Market. The Corporation is in compliance with the terms of its listing agreement with The Nasdaq Stock Market, Inc. ("Nasdaq"), the Nasdaq Marketplace Rules and Nasdaq's standards for continued listing and has complied or will timely comply with such agreements and such Rules and standards in connection with the transactions contemplated by this Agreement. No proceeding is pending or, to the Corporation's knowledge, threatened relating to any unresolved violation of any of such items or delisting of the Corporation's Common Stock and the Corporation has no reason to believe that its Common Stock will not continue to be so listed. The Corporation understands that the foregoing representations and warranties shall be deemed material and to have been relied upon by each of the Investors. As used herein, the term "to the Corporation's knowledge" shall mean and include (a) with respect to matters relating directly to the Corporation and its operations, actual knowledge or that knowledge which a business person not acting negligently would have discovered in the management of his or her business affairs, and (b) with respect to external events or conditions, the actual knowledge, of the Corporation's President and Chief Executive Officer or its Chief Financial Officer. 10 SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS TO THE CORPORATION. Each of the Investors, as to itself, represents and warrants to the Corporation severally and not jointly, as follows: (a) The Investor will not sell or otherwise transfer the Shares without registration under the Securities Act or applicable state securities laws or an exemption therefrom. The Investor acknowledges that neither the offer nor sale of the Shares has been registered under the Securities Act or under the securities laws of any state. The Investor represents and warrants that the Investor is acquiring the Shares for the Investor's own account, for investment and not with a view toward resale or distribution within the meaning of the Securities Act. The Investor has not offered or sold the Shares being acquired nor does the Investor have any present intention of selling, distributing or otherwise disposing of the Shares either currently or after the passage of a fixed or determinable period of time or upon the occurrence or non-occurrence of any predetermined event or circumstances in violation of the Securities Act. The Investor is aware that (i) the Shares are not currently eligible for sale in reliance upon Rule 144 promulgated under the Securities Act and (ii) the Corporation has no obligation to register the Shares purchased hereunder, except as provided in Section 2 of the Investor Rights Agreement. (b) It is an "accredited investor" as such term is defined in Rule 501(a) promulgated under the Securities Act. (c) It agrees that the Corporation may place a legend on the certificates delivered hereunder stating that the Shares have not been registered under the Securities Act, and, therefore, cannot be offered, sold or transferred unless they are registered under the Securities Act or an exemption from such registration is available. (d) The execution, delivery and performance by it of this Agreement have been duly authorized by all requisite action of it. (e) It further understands that the exemptions from registration afforded by Rule 144 and Rule144A (the provisions of which are known to it) promulgated under the Securities Act depend on the satisfaction of various conditions, and that, if applicable, Rule 144 may afford the basis for sales only in limited amounts. (f) It has such knowledge and experience in business, financial and tax matters so as to enable it to understand and evaluate the merits and risks of the Investor's investment in the Common Stock and to make an informed investment decision with respect thereto. It has been afforded the opportunity during the course of negotiating the transactions contemplated by this Agreement to ask questions of, and to secure such information from, the Corporation and its officers and directors as it deems necessary to evaluate the merits and risks of entering into such transactions. (g) If it is a natural person, it has the power and authority to enter into this Agreement and the Investor Rights Agreement. If it is not a natural person, it is duly 11 organized and validly existing and has the power and authority to enter into this Agreement and the Investor Rights Agreement and the signature of the party signing on behalf of such entity is binding upon such entity. Any Investor which is a corporation, partnership or trust represents that it has not been organized, reorganized or recapitalized specifically for the purpose of acquiring the securities of the Corporation. (h) It has adequate net worth and means of providing for its current needs and personal contingencies, and it is able to bear the substantial economic risk of an investment in the Common Stock for an indefinite period of time, has no need for liquidity in such investment and can afford a complete loss of its investment in the Corporation. SECTION 6. CLOSING CONDITIONS. 6.1 ACKNOWLEDGMENT OF DELIVERIES; CONDITIONS PRECEDENT TO THE CLOSING. The several obligations of the Investors to purchase and pay for the Shares at the Closing are subject to the satisfaction of the following conditions precedent: (a) All proceedings to have been taken and all waivers and consents to be obtained in connection with the transactions contemplated by this Agreement shall have been taken or obtained, and all documents incidental thereto shall be satisfactory to each Investor and its counsel, and each Investor and its counsel shall have received copies (executed or certified, as may be appropriate) of all documents which such Investor or its counsel may reasonably have requested in connection with such transactions. (b) Arnold & Porter, special counsel to the Corporation, shall have furnished to the Investors their written opinion substantially in the form attached as Exhibit B hereto. (c) The representations and warranties of the Corporation contained herein shall be true and correct in all material respects on and as of the date of such Closing with the same force and effect as though such representations and warranties had been made on and as of such date. (d) The Investor Rights Agreement in form and substance attached hereto as Exhibit A shall have been executed by the Corporation. (e) The Corporation shall have delivered to the Investors a certificate or certificates, dated the Closing Date, of the Secretary of the Corporation certifying as to (i) the resolutions of the Corporation's Board of Directors authorizing the execution and delivery of this Agreement, the issuance to the Investors of the Shares, the execution and delivery of such other documents and instruments as may be required by this Agreement, and the consummation of the transactions contemplated hereby, and certifying that such resolutions were duly adopted and have not been rescinded or amended as of said date, and (ii) the name and the signature of the officers of the Corporation authorized to sign, as appropriate, this Agreement and the other documents and certificates to be delivered pursuant to this Agreement by either the Corporation or any of its officers. 12 (f) The Corporation shall have delivered to the Investors a certificate or certificates, dated as of the Closing Date, of the President of the Corporation certifying as to the accuracy and completeness, in all material respects, of the representations and warranties made by the Corporation pursuant to this Agreement. (g) The Corporation shall have delivered to the Investors a certificate or certificates, dated as of the Closing Date, of the Chief Financial Officer of the Corporation certifying that since the date of the Unaudited Financial Statements, there has not been any material adverse change in the financial condition or operations of the Corporation. 6.2 CONDITIONS TO OBLIGATIONS OF THE CORPORATION. It shall be a condition precedent to the obligations of the Corporation hereunder to be performed at the Closing, as the case may be, as to each Investor severally, but not jointly, that the representations and warranties contained herein of each of the Investors hereunder shall be true and correct as of the date of the Closing with the same force and effect as though such representations and warranties had been made on and as of such date. In addition, the parties acknowledge that as of the date of this Agreement in connection with the Closing, each Investor has executed and delivered this Agreement and the Investor Rights Agreement. SECTION 7. EXPENSES AND FEES. The Corporation agrees to pay, in connection with the preparation, execution, delivery, filing, administration, modification and amendment of this Agreement, the Investor Rights Agreement and the other documents to be delivered under this Agreement, all costs, expenses and transfer taxes incurred by the Investors in connection therewith, including the fees and out-of-pocket expenses of counsel for the Investors with respect thereto and with respect to advising the Investors as to their rights and responsibilities under this Agreement and the Investor Rights Agreement, as modified from time to time, which amount shall not exceed $50,000 in the aggregate. The Corporation further agrees that it will pay, and hold each of the Investors harmless from, any and all liability with respect to any stamp or similar taxes which may be determined to be payable in connection with the execution and delivery of this Agreement or any modification, amendment or alteration of the terms or provisions of this Agreement and that it will similarly pay, and hold each of the Investors harmless from, all issue taxes in respect of the issuance of the Shares to each of the Investors. SECTION 8. BROKERS OR FINDERS. The Corporation represents and warrants to each of the Investors, and each of the Investors, as to itself, represents and warrants to the Corporation, that no person or entity has or will have, as a result of the transactions contemplated by this Agreement, any right, interest or valid claim against or upon the Corporation or the Investors for any commission, fee or other compensation as a finder or broker because of any act or omission by the Corporation or the Investors or by any agent of the Corporation or the Investors. SECTION 9. EXCHANGES; LOST, STOLEN OR MUTILATED CERTIFICATES. 13 Upon surrender by any Investor to the Corporation of the Shares purchased or acquired by such Investor hereunder, the Corporation, at its expense, will issue in exchange therefor, and deliver to such Investor, a new certificate or certificates representing such Shares in such denominations as may be requested by such Investor. Upon receipt of evidence satisfactory to the Corporation of the loss, theft, destruction or mutilation of any certificate representing any Shares purchased or acquired by any Investor hereunder and, in case of any such loss, theft or destruction, upon delivery of any indemnity agreement satisfactory to the Corporation, or in case of any such mutilation, upon surrender and cancellation of such certificate, the Corporation, at its expense, will issue and deliver to such Investor a new certificate for such Shares as applicable, of like tenor, in lieu of such lost, stolen or mutilated certificate. SECTION 10. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and warranties set forth in Section 4 and 5 hereof shall survive the Closing indefinitely. SECTION 11. INDEMNIFICATION; BREACH OF REPRESENTATIONS AND WARRANTIES 11.1 INDEMNIFICATION. With respect to any claims by third parties, the Corporation shall indemnify, defend and hold each of the Investors harmless against any and all liabilities, loss, cost or damage, together with all reasonable costs and expenses related thereto (including legal and accounting fees and expenses), arising from, relating to, or connected with the untruth, inaccuracy or breach of any statements, representations, warranties or covenants of the Corporation contained herein, including, but not limited to, all statements, representations, warranties or covenants concerning environmental matters. In connection with any claim for indemnification pursuant to this Section 11, the Corporation shall have the right to assume the defense thereof with counsel mutually satisfactory to the Investors. 11.2 BREACH OF REPRESENTATIONS AND WARRANTIES. With respect to any claim by the Investors against the Corporation for a breach of a representation, warranty, or covenant hereunder, the Corporation expressly agrees that the Investors are relying upon the truth and accuracy of each and every representation and warranty, and the Investors shall not be required to demonstrate reliance in connection with any such claim, provided that the Investors are able to demonstrate all other elements of the claim including, but not limited to, materiality and causation to the extent required. SECTION 12. 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 or parties entitled to the benefit of such covenants or agreements may proceed to protect and enforce their rights either by suit in equity and/or action at law, including, but not limited to, an action for damages as a result of any such breach and/or an action for specific performance of any such covenant or agreement contained in this Agreement. The rights, powers and remedies of the parties under this Agreement are cumulative and not exclusive of any other right, power or remedy which such parties may have under 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. 14 SECTION 13. SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided herein, this Agreement shall bind and inure to the benefit of the Corporation and each of the Investors and the respective permitted successors and assigns of each of the Investors and the permitted successors and assigns of the Corporation. This Agreement and the rights and duties of the Investors set forth herein may be freely assigned, in whole or in part, by the Investors. Neither this Agreement nor any of the rights or duties of the Corporation set forth herein shall be assigned by the Corporation, in whole or in part, without having first received the written consent of the Investors holding 66 2/3% in voting power of the Shares. SECTION 14. ENTIRE AGREEMENT. This Agreement, together with the other writings referred to herein or delivered pursuant hereto which form a part hereof, contains the entire agreement among the parties with respect to the subject matter hereof and amends, restates and supersedes all prior and contemporaneous arrangements or understandings, whether written or oral, with respect thereto. SECTION 15. NOTICES. All notices, requests, consents and other communications hereunder to any party shall be deemed to be sufficient if contained in a written instrument delivered in person or duly sent by first class registered, certified or overnight mail, postage prepaid, or telecopied with a confirmation copy by regular mail, addressed or telecopied, as the case may be, to such party at the address or telecopier number, as the case may be, set forth below or such other address or telecopier number, as the case may be, as may hereafter be designated in writing by the addressee to the addressor listing all parties: (i) if to the Corporation, to: GenVec Inc. 65 West Watkins Mill Road Gaithersburg, MD 20878 Attention: Jeffrey W. Church Telecopier: (301) 632-0735 with a copy to: Arnold & Porter 555 Twelfth Street, NW Washington, DC 20004 Attention: Richard E. Baltz Telecopier: (202) 942-5999 (ii) if to Investors, as set forth on Schedule 1. 15 with a copy to: McCarter & English, LLP Four Gateway Center 100 Mulberry Street Newark, New Jersey 07012 Attention: Jeffrey A. Baumel, Esquire Telecopier: (973) 624-7070 All such notices, requests, consents and other communications shall be deemed to have been received: (a) in the case of personal delivery, on the date of such delivery; (b) in the case of mailing, on the third business day following the date of such mailing; (c) in the case of overnight mail, on the first business day following the date of such mailing; and (d) in the case of facsimile transmission, when confirmed by facsimile machine report. SECTION 16. CHANGES. The terms and provisions of this Agreement may not be modified or amended, or any of the provisions hereof waived, temporarily or permanently, except pursuant to a writing executed by a duly authorized representative of the Corporation and a majority in voting power of the outstanding Shares issued in connection herewith. SECTION 17. 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 18. HEADINGS. The headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of this Agreement. SECTION 19. 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 20. 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 without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 16 SECTION 21. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, excluding choice of laws rules thereof. 17 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. GENVEC, INC. By: /s/ Paul H. Fischer ----------------------------------------- Paul H. Fischer, Ph.D. Title: President and Chief Executive Officer INVESTORS: HEALTHCARE VENTURES VI, L.P. By: HealthCare Partners VI, L.P. its General Partner By: /s/ Jeffrey B. Steinberg ----------------------------------------- Jeffrey B. Steinberg Title: Administrative Partner HEALTHCARE VENTURES V, L.P. By: HealthCare Partners V, L.P. its General Partner By: /s/ Jeffrey B. Steinberg ----------------------------------------- Jeffrey B. Steinberg Title: Administrative Partner SCHEDULE 1 Investor Number of Shares HealthCare Ventures V, L.P. 1,791,000 44 Nassau Street Princeton, NJ 08542 ATTN: Jeffrey B. Steinberg HealthCare Ventures VI, L.P. 1,791,000 44 Nassau Street Princeton, NJ 08542 ATTN: Jeffrey B. Steinberg EX-4.2 4 a2067073zex-4_2.txt EXHIBIT 4.2 Exhibit 4.2 GENVEC INC. INVESTOR RIGHTS AGREEMENT THIS INVESTOR RIGHTS AGREEMENT (the "Agreement") is entered into as of December 21, 2001, by and among GenVec Inc., a Delaware corporation (the "Company"), and the holders of the Company's Common Stock set forth on Exhibit A hereto. All of the holders of such shares of Common Stock shall be referred to hereinafter as the "Investors" and each individually as an "Investor." RECITALS WHEREAS, the Company proposes to sell and issue up to 3,582,000 shares of its Common Stock to the Investors; WHEREAS, as a condition of purchasing the shares of Common Stock, the Investors have requested that the Company extend to them registration rights, pre-emptive and other rights as set forth below; NOW, THEREFORE, in consideration of the mutual promises, representations, warranties, covenants and conditions set forth in this Agreement and the investment of the Investors in the Common Stock, the parties mutually agree as follows: SECTION 1. GENERAL 1.1 Definitions. As used in this Agreement the following terms shall have the following respective meanings: "COMMON STOCK" means the Common Stock, $.001 par value of the Company. "EQUITY PERCENTAGE" shall mean, as to any Holder, that percentage figure which expresses the ratio that (a) the number of shares of issued and outstanding Common Stock then owned by such Holder bears to (b) the aggregate number of shares of issued and outstanding Common Stock. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "FORM S-3" means such form under the Securities Act as in effect on the date hereof or any successor registration form under the Securities Act subsequently adopted by the SEC which permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC. "HCV V" means HealthCare Ventures V, LP. "HCV VI" means HealthCare Ventures VI, LP. "HOLDER" means any person owning of record Registrable Securities that have not been sold to the public or any assignee of record of such Registrable Securities in accordance with Section 2.8 hereof. "REGISTER," "REGISTERED," and "REGISTRATION" refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of effectiveness of such registration statement or document. "REGISTRABLE SECURITIES" means (a) the Shares and (b) any Common Stock of the Company issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, such above described securities. Notwithstanding the foregoing, Registrable Securities shall not include as to any Holder, any securities (i) sold by a person to the public pursuant to a registration statement or Rule 144 under the Securities Act, (ii) eligible to be sold by a particular Holder under Rule 144(k) under the Securities Act or (iii) sold in a private transaction in which the transferor's rights under Section 2 of this Agreement are not assigned. "REGISTRABLE SECURITIES THEN OUTSTANDING" shall be the number of shares determined by calculating the total number of shares of the Company's Common Stock that are Registrable Securities and either (a) are then issued and outstanding or (b) are issuable pursuant to then exercisable or convertible securities. "REGISTRATION EXPENSES" shall mean all expenses incurred by the Company in complying with Sections 2.2 and 2.3 hereof, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel for the Company, reasonable fees and disbursements not to exceed an aggregate of $20,000 of a single special counsel for the Holders, blue sky fees and expenses and the fees and expenses of all independent accountants retained by the Company (but excluding the compensation of regular employees of the Company which shall be paid in any event by the Company). "SEC" or "COMMISSION" means the Securities and Exchange Commission. "SECURITIES ACT" shall mean the Securities Act of 1933, as amended. "SELLING EXPENSES" shall mean all underwriting fees, discounts and selling commissions applicable to the sale. "SHARES" shall mean the Company's Common Stock issued to the Investors listed on Exhibit A hereto and their permitted assigns. SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER 2.1 RESTRICTIONS ON TRANSFER. 2 (a) Each Holder agrees not to make any disposition of all or any portion of the Shares or Registrable Securities unless and until: (i) There is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such registration statement; (ii) Such disposition is made pursuant to and in compliance with Rule 144; or (iii) (A) The transferee has agreed in writing to be bound by the terms of this Agreement by executing a counterpart signature page hereto (which shall not be deemed to be an amendment hereto), (B) such Holder shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, and (C) if reasonably requested by the Company, such Holder shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, that such disposition will not require registration of such shares under the Securities Act. (iv) Notwithstanding the provisions of paragraphs (i), (ii) and (iii) above, no such registration statement or opinion of counsel shall be necessary for a transfer by a Holder which is: (A) a Holder's transfer without consideration of any or all Shares held either during such Holder's lifetime or on death by will or intestacy to such Holder's immediate family or to any custodian or trustee for the account of such Holder or such Holder's immediate family. "Immediate family" as used herein shall mean spouse, lineal descendant, father, mother, brother, or sister of the Holder making such transfer; (B) a Holder's transfer of any or all of such Holder's Shares to the Company; (C) a corporate Holder's transfer of any or all of its Shares pursuant to and in accordance with the terms of any merger, consolidation, reclassification of shares or capital reorganization of the corporate Holder, or pursuant to a sale of all or substantially all of the stock or assets of a corporate Holder; (D) a corporate Holder's transfer without consideration of any or all of its Shares to any or all of its stockholders; (E) a transfer by a Holder which is a limited or general partnership to any or all of its partners or former partners; (F) a transfer without consideration by a limited liability company to its members or former members in accordance with their interest in the limited liability company; and (G) a transfer without consideration by a Holder to a retirement plan (regardless of form) created by a Holder for the primary benefit of, or in trust for, the Holder and/or such Holder's immediate family or a transfer from such retirement plan to the designated beneficiary or beneficiaries thereof; PROVIDED that in each case the transferee has agreed in writing to be bound by the terms of this Agreement by executing a counterpart signature page hereto (which shall not be deemed to be an amendment hereto). (b) Each certificate representing Shares or Registrable Securities shall (unless otherwise permitted by the provisions of the Agreement) be stamped or otherwise imprinted with a legend substantially similar to the following (in addition to any legend required under applicable state securities laws): 3 THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED. (c) The Company shall be obligated to reissue promptly unlegended certificates at the request of any Holder thereof if the Holder shall have obtained an opinion of counsel (which counsel may be counsel to the Company) reasonably acceptable to the Company to the effect that the securities proposed to be unlegended may lawfully be so disposed of without registration, qualification or legend. (d) Any legend endorsed on an instrument pursuant to applicable state securities laws and the stop transfer instructions with respect to such securities shall be removed upon receipt by the Company of an order of the appropriate blue sky authority authorizing such removal. (e) Notwithstanding the foregoing provisions of this Section 2.1, the restrictions imposed by this Section 2.1 upon the transferability of any Restricted Securities shall cease and terminate when (a) any such Restricted Securities are sold or otherwise disposed of in accordance with the intended method of disposition by the seller or sellers thereof set forth in a registration statement or such other method contemplated by Section 2.1 hereof that does not require that the securities transferred bear the legend set forth in Section 2.1(b) hereof, including a transfer pursuant to Rule 144 under the Securities Act or a successor rule thereof (as amended from time to time), or (b) the holder of Restricted Securities has met the requirements for transfer of such Restricted Securities pursuant to subparagraph (k) of Rule 144 under the Securities Act or a successor rule thereof (as amended from time to time) promulgated by the Commission under the Securities Act. Whenever the restrictions imposed by this Section 2.1 have terminated, a holder of a certificate for Restricted Securities as to which such restrictions have terminated shall be entitled to receive from the Company, without expense, a new certificate not bearing the restrictive legend set forth in Section 2.1(b) hereof and not containing any other reference to the restrictions imposed by this Section 2.1. (f) During the period beginning 30 days prior to the date of this Agreement and ending on the date of this Agreement, each Investor represents, warrants, covenants and agrees that neither it, nor any persons acting under its direction or control, has engaged, directly or indirectly, in any trading of Common Stock, including but not limited to short sales (as defined in any applicable SEC or NASD rules) or hedging of any kind, other than as contemplated by the Stock Purchase Agreement entered into by and among the Company and the Investors dated as of the date hereof (the "Stock Purchase Agreement"). Further, each Investor agrees that it will not, and that it will cause any persons acting under its direction or control not to, directly or indirectly, engage in any short sales of or hedging transactions, in violation of 4 applicable SEC or NASD rules, with respect to the Company's Common Stock while such Investor or person acting under its direction or control holds any of the Shares. 2.2 SHELF REGISTRATION. The Company shall within thirty (30) days from the date of this Agreement (the "Filing Date") file a registration statement under the Securities Act covering all of the Registrable Securities then outstanding for an offering to be made on a continuous basis pursuant to Rule 415 in accordance with the intended method of distribution of the Holders (the "Shelf Registration"). The Company shall use its reasonable best efforts to effect, as soon as practicable, the registration of all Registrable Securities to be registered and shall use its reasonable best efforts to cause the Shelf Registration to become effective within 90 days of the Filing Date (the "Required Effectiveness Date"). 2.3 PIGGYBACK REGISTRATIONS. The Company shall notify all Holders at least 15 days prior to the filing of any registration statement under the Securities Act covering the sale of securities of the Company for cash (including, but not limited to, registration statements relating to secondary offerings of securities of the Company, but excluding registration statements relating to employee benefit plans or corporate reorganizations or other transactions under Rule 145 of the Securities Act) and will afford each such Holder an opportunity to include in such registration statement all or part of the Registrable Securities held by such Holder. Each Holder desiring to include Registrable Securities in any such registration statement shall notify the Company within 5 days after the notice from the Company. Such notice shall state the intended method of disposition of the Registrable Securities by such Holder. If a Holder decides not to include all of its Registrable Securities in any registration statement filed by the Company, such Holder shall nevertheless continue to have the right to include any Registrable Securities in any subsequent registration statement or registration statements as may be filed by the Company, all upon the terms and conditions set forth herein. (a) UNDERWRITING ARRANGEMENTS. The right of any Holder to registration pursuant to this Section 2.3 in connection with an underwritten offering shall be conditioned upon the participation by such Holder in the underwriting arrangements specified by the Company in connection with such registration and the inclusion of the Registrable Securities of such Holder in such underwriting to the extent provided herein. All Holders proposing to distribute their Registrable Securities through such underwriting shall (together with the Company) enter into an underwriting agreement in customary form with the managing underwriter; PROVIDED, HOWEVER, that none of the Holders shall be required to make any representations or warranties or provide indemnification except as it relates to such Holder's Registrable Securities, including such Holder's ownership of Shares and authority to enter into the underwriting agreement and to such Holder's intended method of distribution, and the liability of such Holder shall be limited to an amount equal to the net proceeds from the offering received by such Holder, except in the case of fraud. Notwithstanding any other provision of this Section 2.3, if the managing underwriter determines in good faith that marketing factors require a limitation of the number of shares to be underwritten the managing underwriter may limit the total number of Registrable Securities to be included in such registration to the extent set forth below. The Company shall so advise all Holders distributing Registrable Securities through such underwriting, and there shall be included in such registration and underwriting, first shares offered by the Company, then shares offered by any existing stockholder of the Company having 5 registration rights senior to the Holders as of the date of this Agreement and thereafter Shares offered by the Holders on a pro-rata basis. (b) RIGHT TO TERMINATE REGISTRATION. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 2.3 prior to the effectiveness of such registration whether or not any Holder has elected to include securities in such registration. The Registration Expenses of such withdrawn registration shall be borne by the Company in accordance with Section 2.4 hereof. 2.4 EXPENSES OF REGISTRATION. Except as specifically provided herein, all Registration Expenses incurred in connection with any registration, qualification or compliance pursuant to Section 2.2 or any registration under Section 2.3 herein shall be borne by the Company. All Selling Expenses incurred in connection with any registrations hereunder, shall be borne by the Company or the stockholders selling the securities, as the case may be. 2.5 OBLIGATIONS OF THE COMPANY. Whenever required to register any Registrable Securities, the Company shall, as expeditiously as reasonably possible: (a) Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its reasonable best efforts to cause such registration statement to become effective, and, in the case of the Shelf Registration, keep such registration statement effective until the earlier of 24 months or until such time that each Holder may dispose of all Registrable Securities owned by such Holder without limitations as to volume or method of sale (the "Effectiveness Period"). (i) Notwithstanding the above, the Company may suspend the effectiveness of the Shelf Registration, suspend the use of any prospectus included therein ("Prospectus") and shall not be required to amend or supplement the Shelf Registration, any related Prospectus or any document incorporated therein by reference for a period of time not to exceed 60 consecutive days and in no event to exceed more than an aggregate of 90 days during any 12-month period (the "Pending Event Suspension Period"), if an event or circumstance occurs and is continuing that (A) has not been publicly disclosed and, if not disclosed in the Shelf Registration, any related Prospectus or any document incorporated therein by reference as then amended or supplemented would, in the Company's good faith reasonable judgment, result in the Shelf Registration, any related Prospectus or any such document containing an untrue statement of a material fact or omitting to state a material fact required to be stated therein, or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, and (B) in the good faith judgment of the Board of Directors of the Company (the "Board"), after consultation with its outside securities counsel, the Company has a bona fide business purpose for not then disclosing the existence of such event or circumstance; provided, further, that the Effectiveness Period shall be extended by the number of days in any Pending Event Suspension Period occurring during the Effectiveness Period, and such period and any extension thereof is hereinafter referred to as the "Effectiveness Period." In the event of the occurrence of any Pending Event Suspension Period, the Company will promptly notify the Holders in writing. The Company will also provide written notice to the Holders of the end of each Pending Event Suspension Period. Each Holder agrees to cease all 6 public disposition efforts under any registration statement with respect to the Common Stock held by such Holder immediately upon receipt of notice of the beginning of any Pending Event Suspension Period and until the Holder receives notice of the end of such Pending Event Suspension Period. (ii) Upon the occurrence of any Event (as defined below), as relief for the damages suffered therefrom by the Investors, the Company shall pay to each Holder, such amounts and at such times as shall be determined pursuant to this Section 2.5(a)(ii). For such purposes, each of the following shall constitute an "Event": (A) the Shelf Registration is not filed in appropriate form on or prior to the Filing Date, in which case the Company shall pay (x) on the calendar day following the Filing Date an amount in cash equal to one-half of one percent (0.5%) of the aggregate purchase price paid by such Investor, plus (y) on the calendar day following every 30-calendar day period following the Filing Date beginning with the 31st calendar day after the Filing Date an amount in cash equal to one percent (1.0%) of the aggregate purchase price paid by such Investor, provided that no such amounts shall be required to be paid by the Company after the cure of such Event; (B) the Shelf Registration is not declared effective on or prior to the Required Effectiveness Date, in which case the Company shall pay (x) on the calendar day following the Required Effectiveness Date an amount in cash equal to one-half of one percent (0.5%) of the aggregate purchase price paid by such Investor, plus (y) on the calendar day following every 30-calendar day period beginning with the 31st calendar day after the Required Effectiveness Date an amount in cash equal to one percent (1.0%) of the aggregate purchase price paid by such Investor, provided that no such amounts shall be required to be paid by the Company after the cure of such Event; or (C) the Shelf Registration is declared effective but thereafter, except pursuant to an allowable Pending Event Suspension Period in compliance with Section 2.5(a)(i) hereof, ceases to be effective or usable for any period of five consecutive trading days (an "Effectiveness Default"), in which case the Company shall pay (x) on the calendar day following the date of the Effectiveness Default an amount in cash equal to one-half of one percent (0.5%) of the aggregate purchase price paid by such Investor, plus (y) on the calendar day following every 30-calendar day period following the Effectiveness Default beginning with the 31st calendar day after the Effectiveness Default an amount in cash equal to one percent (1.0%) of the aggregate purchase price paid by such Investor, provided that no such amounts shall be required to be paid by the Company after the cure of such Event. (b) Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement for the period set forth in paragraph (a) above including such amendments as may be necessary for the Holders to sell their Registrable Shares in an underwritten offering. 7 (c) Furnish to the Holders such number of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them. (d) Use its reasonable best efforts to register or qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions in the United States of America as shall be reasonably requested by the Holders; provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business, subject itself to taxation, register as a broker or dealer in securities or file a general consent to service of process in any such states or jurisdictions. (e) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter(s) of such offering and otherwise cooperate with the Holders as requested in connection with such offering, including, without limitation, causing its President and Chief Executive Officer and Chief Financial Officer to participate in a "road show" in connection with such underwritten offering. (f) Notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. Each Investor agrees to cease all public disposition efforts under any registration statement with respect to the Common Stock held by such Investor immediately upon receipt of such notice and until the Investor receives notice that such deficiency has been cured. (g) Request that (i) counsel representing the Company for the purposes of such registration furnish to the Holders, on the date that such Registrable Securities are delivered to the underwriters for sale, if such securities are being sold through underwriters, an opinion, dated as of such date, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and (ii) the Company's auditors furnish to the Holders, a letter dated as of such date, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering addressed to the underwriters. (h) Cause the Registrable Securities to be listed or included on each securities exchange on which similar securities are then listed or included. (i) Following the effective date of the Shelf Registration, issue to transferees of the Holders which are limited partners of the Holders, certificates representing the Shares that will be free of any restrictive legends if, and to the extent, such transferees execute a representation letter reasonably acceptable to the Company with respect to compliance with federal and state securities laws. 8 2.6 FURNISHING INFORMATION. It shall be a condition precedent to the obligations of the Company to take any action pursuant to Section 2.2 or 2.3 that the selling Holders shall furnish to the Company such information regarding themselves, the Registrable Securities held by them and the intended method of disposition of such securities and such other information as shall be required to effect the registration of their Registrable Securities. 2.7 INDEMNIFICATION. In the event any Registrable Securities are included in a registration statement under Sections 2.2 or 2.3: (a) To the extent permitted by law, the Company will indemnify and hold harmless each Holder and the partners, officers, directors and stockholders of each Holder, any underwriter (as defined in the Securities Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a "Violation") by the Company: (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law in connection with the offering covered by such registration statement; and the Company will pay as incurred to each such Holder, partner, officer, director, stockholder, underwriter or controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action (subject to recoupment if this indemnification is determined to be inapplicable); provided however, that the indemnity agreement contained in this Section 2.7(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, nor shall the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation which occurs (i) in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by such Holder, partner, officer, director, stockholder, underwriter or controlling person of such Holder or (ii) pursuant to such Holder's use of an outdated or defective prospectus after the Company has notified such Holder that the prospectus is outdated or defective. (b) To the extent permitted by law, each Holder will, if Registrable Securities held by such Holder are included in the securities as to which such registration, qualification or compliance is being effected, severally and not jointly, indemnify and hold harmless the Company, each of its directors, officers, agents, employees and its legal counsel and independent accountants, and each person, if any, who controls the Company within the meaning of the Securities Act, any underwriter and any other Holder selling securities under such registration statement or any of such other Holder's partners, directors, officers, agents, employees, 9 stockholders, legal counsel and independent accountants, or any person who controls such Holder, against any losses, claims, damages or liabilities to which the Company or any such person may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder under an instrument duly executed by such Holder and stated to be specifically for use in connection with such registration statement; and each such Holder will pay as incurred any legal or other expenses reasonably incurred by the Company or any such person in connection with investigating or defending any such loss, claim, damage, liability or action if it is judicially determined that there was such a Violation; PROVIDED, HOWEVER, that the indemnity agreement contained in this Section 2.7(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; provided further, that in no event shall any indemnity under this Section 2.7(b) exceed the net proceeds from the offering received by such Holder. (c) Promptly after receipt by an indemnified party under this Section 2.7 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.7, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; PROVIDED, HOWEVER, that an indemnified party shall have the right to retain its own counsel, if such indemnified party shall have been advised by counsel that representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding; PROVIDED FURTHER, HOWEVER, that the indemnifying party shall not be responsible for the fees and expenses of more than one counsel for all indemnified parties. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if materially prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 2.7, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 2.7. (d) If the indemnification provided for in this Section 2.7 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any losses, claims, damages or liabilities referred to herein, the indemnifying party, in lieu of indemnifying such indemnified party thereunder, shall to the extent permitted by applicable law contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the Violation(s) that resulted in such loss, claim, damage or liability, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by a court of law by reference to, among other things, whether the untrue or alleged 10 untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided, that in no event shall any contribution by a Holder hereunder exceed the net proceeds from the offering received by such Holder. (e) The obligations of the Company and Holders under this Section 2.7 shall survive completion of any offering of Registrable Securities in a registration statement and the termination of this Agreement. No indemnifying party, in the defense of any such claim or litigation, shall, except with the consent of each indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. 2.8 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company to register Registrable Securities and to provide indemnification pursuant to this Section 2 may be assigned by a Holder to a transferee or assignee of Registrable Securities which (a) is a subsidiary, parent, general partner, limited partner, retired partner, member, retired member or affiliate of a Holder, (b) is a Holder's immediate family member or trust for the benefit of an individual Holder or immediate family members or (c) acquires at least 50,000 shares of Registrable Securities (as adjusted for stock splits, combinations and similar events); PROVIDED, HOWEVER, (i) the transferor shall, within ten (10) days after such transfer, furnish to the Company written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned and (ii) such transferee shall agree to be subject to all restrictions set forth in this Agreement by executing a counterpart signature page hereto (which shall not be deemed to be an amendment hereto). 2.9 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Section 2 may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Holders of at least a majority of the Registrable Securities then outstanding. Any amendment or waiver effected in accordance with this Section 2.9 shall be binding upon each Holder and the Company. By acceptance of any benefits under this Section 2, Holders of Registrable Securities hereby agree to be bound by the provisions hereunder. 2.10 LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. After the date of this Agreement, the Company shall not, without the prior written consent of the Holders of a majority of the Registrable Securities then outstanding, enter into any agreement with any holder or prospective holder of any securities of the Company that would grant such holder registration rights senior to those granted to the Holders hereunder. 2.11 RULE 144 REPORTING. With a view to making available to the Holders the benefits of certain rules and regulations of the SEC which may permit the sale of the Registrable Securities to the public without registration, the Company agrees to use its reasonable best efforts to: 11 (a) Make and keep public information available, as those terms are understood and defined in SEC Rule 144 or any similar or analogous rule promulgated under the Securities Act; (b) File with the SEC, in a timely manner, all reports and other documents required of the Company under the Exchange Act; and (c) So long as a Holder owns any Registrable Securities, furnish to such Holder forthwith upon request: a written statement by the Company as to its compliance with the reporting requirements of said Rule 144 of the Securities Act, and of the Exchange Act; a copy of the most recent annual or quarterly report of the Company; and such other reports and documents as a Holder may reasonably request in availing itself of any rule or regulation of the SEC allowing it to sell any such securities without registration. SECTION 3 COVENANTS OF THE COMPANY 3.1 INSPECTION RIGHTS. Each Holder shall have the right to visit and inspect any of the properties of the Company or any of its subsidiaries, and to discuss the affairs, finances and accounts of the Company or any of its subsidiaries with its officers, and to review such information as is reasonably requested all during normal business hours following reasonable notice and as often as may be reasonably requested; PROVIDED, HOWEVER, that the Company shall not be obligated under this Section 3.1 with respect to any Holder that is a competitor of the Company. 3.2 CONFIDENTIALITY OF RECORDS. Each Holder agrees to use, and to use its reasonable best efforts to insure that its authorized representatives use, the same degree of care as such Holder uses to protect its own confidential information to keep confidential any information furnished to it which the Company identifies in writing as being confidential or proprietary (so long as such information is not in the public domain), except that such Holder may disclose such proprietary or confidential information to any partner, subsidiary or parent of such Holder for the purpose of evaluating its investment in the Company as long as such partner, subsidiary or parent is advised of the confidentiality provisions of this Section 3.2. 3.3 BOARD OF DIRECTORS; COMMITTEES; BY-LAWS. (a) VOTING FOR DIRECTORS. Effective January 1, 2002, the Board of Directors of the Company, subject to its fiduciary duties, shall elect the Investors' designee to fill a vacancy in a class of directors of the Board in accordance with the provisions of the Company's by-laws. During the remaining term of this Agreement, at each annual meeting of the stockholders of the Company and at each special meeting of the stockholders of the Company called for the purposes of electing directors of the class in which the director elected pursuant to this Section 3.3(a) is included, and at any time at which stockholders of the Company shall have the right to, or shall, vote for or consent to the election of such class of directors, then the Company shall nominate for election and the Board shall so support in connection with the election thereto one 12 (1) director designated by the Investors who is reasonably satisfactory to the Company. The Company shall use its reasonable best efforts to effectuate the purposes of this Section 3.3. (b) NOTICES. The Investors shall notify the Company in writing of the persons designated by it pursuant to Section 3.3(a) above as nominee for election to the Board, and shall promptly furnish all information necessary for all required filings with the SEC. In the absence of any notice from the Investors, the director then serving and previously designated by the Investors shall be renominated. (c) VACANCY. Any vacancy on the Board created by the resignation, removal, incapacity or death of any person designated under the foregoing provisions of this Section 3.3 shall be filled by another person designated by the Investors. Each member of the Board shall vote in accordance with each such new designation, and no such vacancy shall be filled in the absence of a new designation by the original Designating Party. 3.4 DIRECTORS' EXPENSES. The Director elected pursuant to Section 3.3 hereof shall be entitled to compensation, reimbursement for reasonable out of pocket expenses incurred in connection with the performance of his or her duties as a Director, Directors' liability insurance and indemnification in accordance with the policies established by the Board for all Directors generally. 3.5 INDEMNIFICATION WITH RESPECT TO HOLDERS; ADVANCEMENT. In the event that either of HCV V, HCV VI, or any director, officer, employee, affiliate or agent thereof (the "Indemnitees"), becomes involved in any action, proceeding, investigation or inquiry in connection with or arising out of any matter by virtue of the service of any Indemnitee as a director of the Company, the Company shall, to the extent legally permissible, reimburse each Indemnitee for its legal and other expenses (including the cost of any investigation and preparation) as they are incurred by such Indemnitee in connection therewith, and all liabilities, damages, losses, settlements, claims, actions, suits, penalties, fines, costs or expenses (including, without limitation, attorneys' fees), incurred by or asserted against any Indemnittee of whatever kind or nature, on terms no less favorable than those provided to any similarly situated director of the Company. The foregoing agreement shall be in addition to any rights that any Indemnitee may have at common law or otherwise. SECTION 4 PRE-EMPTIVE RIGHTS 4.1 SUBSEQUENT OFFERINGS. Each Holder shall have the pre-emptive right to purchase its Equity Percentage of all Equity Securities, as defined below, that the Company may, from time to time, propose to sell and issue after the date of this Agreement, other than the Equity Securities excluded by Section 4.5 hereof. The term "Equity Securities" shall mean (i) any Common Stock or Preferred Stock of the Company, (ii) any security convertible, with or without consideration, into any Common Stock or Preferred Stock (including any option to purchase such a convertible security), (iii) any security carrying any warrant or right to subscribe to or purchase any Common Stock or Preferred Stock or (iv) any such warrant or right. 13 4.2 EXERCISE OF RIGHTS. If the Company proposes to issue any Equity Securities, it shall give the Holders notice of its intention, describing the Equity Securities, the price and the terms and conditions upon which the Company proposes to issue the same. Each Holder shall have 20 days from the giving of such notice to agree to purchase up to its Equity Percentage of the Equity Securities for the price and upon the terms and conditions specified in the notice by giving notice to the Company and stating therein the quantity of Equity Securities it agrees to purchase. If some but not all of the Holders elect to purchase their Equity Percentage of the offered Equity Securities, those electing Holders shall have five additional days to agree to purchase all but not less than all of the offered Equity Securities that were available for purchase by the non-electing Holders, allocated pro rata among the electing Holders who choose to purchase such additional offered Equity Securities. Notwithstanding the above, if the pre-emptive rights hereunder are exercised by HCV V or HCV VI in connection with a firm commitment underwritten public offering, HCV V and HCV VI shall, if requested, comply with reasonable conditions and procedures imposed by the managing underwriters thereof and otherwise with applicable rules and regulations. 4.3 NO TERMINATION UPON WAIVER OF PRE-EMPTIVE RIGHTS. The pre-emptive rights established by this Section 4 shall not terminate nor be deemed to be waived with respect to any subsequent transactions if the Holders and/or their assignees do not exercise their rights as provided in Section 4.2 to purchase Equity Securities offered to them pursuant to Section 4.1. The provisions of this Section 4 may be amended or waived only by the agreement of the Company and the holders of at least a majority of the shares of Common Stock purchased by the Investors. 4.4 TRANSFER OF PRE-EMPTIVE RIGHTS. Each Holder may assign its pre-emptive rights under this Section 4 in whole or in part to one or more of the following: any subsidiary, parent, general partner, limited partner, retired partner, member, retired member, general partner of a general partner, affiliate or family trust of such Holder, who shall agree to be bound by this Agreement in connection with and following such assignment by executing a counterpart signature page hereto (which shall not be deemed to be an amendment hereto). 4.5 EXCLUDED SECURITIES. The pre-emptive rights established by this Section 4 shall have no application to any of the following Equity Securities: (a) shares of Common Stock (and/or options, warrants or other Common Stock purchase rights issued pursuant to such options, warrants or other rights) issued or to be issued to employees, officers or directors of, or consultants or advisors to the Company or any subsidiary, pursuant to compensation plans, agreements, or other arrangements that are approved by the Board of Directors; (b) as to Holders other than HCV V and HCV VI, shares of Common Stock issued in connection with a firm commitment underwritten public offering; (c) any Equity Securities issued pursuant to such rights or agreements granted after the date of this Agreement, PROVIDED that the pre-emptive rights established by this Section 4 applied with respect to the initial sale or grant by the Company of such rights or agreements; 14 (d) any Equity Securities issued for consideration other than cash pursuant to a merger, consolidation, acquisition or similar business combination; (e) any Equity Securities issued in connection with any stock split, stock dividend or recapitalization by the Company; (f) any Equity Securities issued pursuant to any equipment leasing arrangement, or debt financing from a bank or similar financial institution; and (g) any Equity Securities issued in connection with strategic transactions involving the Company and other entities, including but not limited to (i) joint ventures, manufacturing, marketing or distribution arrangements or (ii) technology transfer or development arrangements. SECTION 5 MISCELLANEOUS 5.1 TERMINATION. The rights and obligations of the Company and the Holders under this Agreement shall terminate as to any specific Holder at the earlier of (i) such time that all Holders hereunder own, in the aggregate, less than 50% of the total Shares purchased by the Investors and (ii) seven years from the date hereof except that the provisions of Sections 2.7, 3.4 and 3.5 shall not terminate and shall extend until there is no representative, partner or designee of HCV V or HCV VI on the Board of Directors of the Company. 5.2 GOVERNING LAW. This Agreement shall be governed by and construed under the laws of the State of Delaware as applied to agreements among Delaware residents entered into and to be performed entirely within Delaware. 5.3 SURVIVAL. Except as expressly provided herein, the representations, warranties, covenants, and agreements made herein shall survive any investigation made by any Holder and the closing of the transactions contemplated hereby. All statements as to factual matters contained in any certificate or other instrument delivered by or on behalf of the Company pursuant hereto in connection with the transactions contemplated hereby shall be deemed to be representations and warranties by the Company hereunder solely as of the date of such certificate or instrument. 5.4 FURTHER ASSURANCES. Each party to this Agreement agrees to act in accordance herewith and not to take any action that is designed to avoid the intention hereof. From time to time, as and when requested by any party hereto, the other parties shall execute and deliver, or cause to be executed and delivered, all such documents and instruments and shall take, or cause to be taken, all such further or other actions as such party may reasonably deem necessary or appropriate in connection with the consummation of the transactions contemplated by this Agreement. 5.5 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors, and administrators of the parties hereto and shall inure to the benefit of and be 15 enforceable by each person who shall be a holder of Registrable Securities and in particular any assignee, from time to time; PROVIDED, HOWEVER, that prior to the receipt by the Company of adequate written notice of the transfer of any Registrable Securities specifying the full name and address of the transferee, the Company may deem and treat the person listed as the holder of such shares in its records as the absolute owner and holder of such shares for all purposes, including the payment of dividends or any redemption price. 5.6 ENTIRE AGREEMENT. This Agreement, the Exhibits hereto, the Stock Purchase Agreement and the other documents delivered pursuant thereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and no party shall be liable or bound to any other in any manner by any representations, warranties, covenants and agreements except as specifically set forth herein and therein. 5.7 SEVERABILITY. In case any provision of the Agreement shall be invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 5.8 AMENDMENT AND WAIVER. (a) Except as otherwise expressly provided, this Agreement may be amended or modified only upon the consent of (i) the Company, and (ii) the holders of at least a majority of the Shares. (b) Except as otherwise expressly provided, the obligations of the Company and the rights of the Holders under this Agreement may be waived only with the consent of the holders of at least a majority of the Shares. 5.9 DELAYS OR OMISSIONS. It is agreed that no delay or omission to exercise any right, power, or remedy accruing to any Holder, upon any breach, default or noncompliance of the Company under this Agreement shall impair any such right, power, or remedy, to the extent that the Company is not prejudiced thereby, nor shall it be construed to be a waiver of any such breach, default or noncompliance, or any acquiescence therein, or of any similar breach, default or noncompliance thereafter occurring. It is further agreed that any waiver, permit, consent, or approval of any kind or character on any Holder's part of any breach, default or noncompliance under the Agreement or any waiver on such Holder's part of any provisions or conditions of this Agreement must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement, by law, or otherwise afforded to Holders, shall be cumulative and not alternative. 5.10 NOTICES AND CONSENTS. All notices and consents required or permitted hereunder must be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by facsimile if sent during normal business hours of the recipient; if not, then on the next business day, (c) five days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one business day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the party to be notified at the address as set forth on 16 the signature pages hereof or Exhibit A hereto or at such other address as such party may designate by ten (10) days advance written notice to the other parties hereto. 5.11 TITLES AND SUBTITLES. The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement. 5.12 COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. 17 IN WITNESS WHEREOF, the parties hereto have executed this INVESTOR RIGHTS AGREEMENT as of the date set forth in the first paragraph hereof. GENVEC, INC. By: /s/ Paul H. Fischer ------------------------------------------ Name: Paul H. Fischer, Ph.D. Title: President and Chief Executive Officer INVESTORS: HEALTHCARE VENTURES VI, L.P. By: HealthCare Partners VI, L.P. its General Partner By: /s/ Jeffrey B. Steinberg ------------------------------------------ Jeffrey B. Steinberg Title: Administrative Partner HEALTHCARE VENTURES V, L.P. By: HealthCare Partners V, L.P. its General Partner By: /s/ Jeffrey B. Steinberg ------------------------------------------ Jeffrey B. Steinberg Title: Administrative Partner EXHIBIT A INVESTORS HEALTHCARE VENTURES VI, L.P. HEALTHCARE VENTURES V, L.P. 2 EX-99.1 5 a2067073zex-99_1.txt EXHIBIT 99.1 Exhibit 99.1 PRESS RELEASE Company Contact Mary P. Sundeen Executive Director, Corporate Communications (240) 632-5533 (240) 372-7194 msundeen@genvec.com (mailto:msundeen@genvec.com) GenVec, Inc. COMPLETES PRIVATE PLACEMENT OF COMMON STOCK GAITHERSBURG, Maryland, December 21, 2001-- GenVec, Inc. (Nasdaq: GNVC) announced today the completion of a private placement of 3,582,000 shares of common stock that raised gross proceeds of approximately $13 million. The shares were purchased by funds managed by HealthCare Ventures. We are pleased with this new financial commitment and the expanded flexibility it provides our company to continue our current development programs and to explore the development of additional product candidates, said Paul H. Fischer, GenVec's Chief Executive Officer. The proceeds from the placement will be used to further GenVec's clinical development programs for TNFerade, which is being developed for use in the treatment of certain cancers, and AdPEDF, which is being developed for use in the treatment of certain kinds of blindness, particularly macular degeneration and diabetic retinopathy, and for general corporate purposes. HealthCare Ventures based in Princeton, New Jersey, is exclusively devoted to capital formation for the healthcare industry. HealthCare Ventures (HCV) is among the largest venture capital funds in the world specialized in healthcare. HCV has formed many leading healthcare companies including MedImmune and Human Genome Sciences. GenVec is a publicly held biotechnology company focused on the development and commercialization of gene-based therapies that produce medically beneficial proteins at the site of disease. The Company combines its patented gene transfer technologies with proprietary therapeutic genes to create product candidates, such as BioBypass angiogen for cardiovascular disease, TNFerade for cancer and AdPEDF for macular degeneration and diabetic retinopathy. Additional information on GenVec is available at its web site located at www.genvec.com (http://www.genvec.com), and in the Company's various filings with the Securities and Exchange Commission. Statements herein relating to future financial or business performance, conditions or strategies and other financial and business matters, including expectations regarding future revenues and operating expenses, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Forward-looking statements are typically identified by words or phrases such as "believe," "expect," "anticipate," "intend," "estimate," "assume," "plan," "outlook," "prospect," and variations of such words and similar expressions, or future or conditional verbs such as "will," "would," "should," "could," "may," or similar expressions. GenVec cautions that these forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. The following factors, among others, could cause actual results to differ materially from forward-looking statements or historical experience: risks relating to the early stage of product candidates under development, risks relating to GenVec's ability to identify and enter into agreements with potential collaborative partners, uncertainties relating to clinical trials, dependence on third parties, future capital needs, and risks relating to the commercialization, if any, of GenVec's proposed product candidates (such as marketing, regulatory, patent, product liability, supply, competition and other risks). GenVec's SEC reports identify additional factors that can affect forward-looking statements. These forward-looking statements speak only as of the date of this press release, and GenVec assumes no duty to update forward-looking statements. -----END PRIVACY-ENHANCED MESSAGE-----