Document:

exv10w19c

 

Exhibit 10.19C

Therapeutic Genomics, Inc.

Amendment No. 2 to Series A Convertible Preferred Stock Purchase Agreement

     Agreement of Amendment dated as of June 1, 2000 by and between Therapeutic Genomics, Inc., a
Delaware corporation (the “Company”) and those entities listed on Schedule I hereto (the
“Consenting Purchasers”).

     Whereas, pursuant to a certain Series A Convertible Preferred Stock Purchase Agreement dated
as of December 28, 1999 between the Company and the Consenting Purchasers (as amended by Amendment
No. 1 thereto dated as of March 1, 2000, the “Agreement”), the Company issued and sold to the
Consenting Purchasers shares of the Company’s Series A Convertible Preferred Stock (the “Preferred
Stock”); and

     Whereas, the Company and the Consenting Purchasers desire to amend the Agreement to
authorize the Company to issue and sell shares of Preferred Stock to additional investors; and

     Whereas, the Consenting Purchasers hold, in the aggregate, a sufficient number of shares
of Preferred Stock to effect an amendment to the Agreement;

     Now, therefore, for good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the Agreement is hereby amended as follows:

     1. The second paragraph of the Agreement is amended and restated to read in its entirety as
follows:

“Whereas, the Company wishes to issue and sell to the Purchasers, and the
Purchasers wish to purchase on the terms and subject to the conditions set forth in
this Agreement, an aggregate of up to 6,000,000 shares (the “Preferred Shares”) of
the authorized but unissued Series A Convertible Preferred Stock, $0.01 par value,
of the Company (the “Preferred Stock”);”

     2. Section 1.02(b) of the Agreement is amended and restated to read in its entirety as
follows:

     “(b) If less than all of the authorized number of Preferred Shares are
sold at the Initial Closing, the Company may in its sole discretion, at a one or
more additional closings to take place at the offices of Peabody & Arnold, 50 Rowes
Wharf, Boston, Massachusetts, on or before July 31, 2000 (each such closing, together
with the Initial Closing, being called a “Closing” and such date and time, together
with the Initial Closing Date, being called a “Closing Date”) issue and sell to
those Purchasers who elect to purchase additional Preferred Shares and/or one or
more additional Purchasers who elect to become parties to this Agreement, by
executing a counterpart hereof and causing Schedule I to be amended appropriately,
any or all of the Preferred Shares not purchased at the Initial Closing.”

     In all other respects the Agreement shall remain in full force and effect without amendment or
alteration.

 

 

     In Witness Whereof, the Company and the Consenting Purchasers have executed
this Agreement of Amendment as of the date first above written.

	 	 	 	 	 
	 	 	Therapeutic Genomics, Inc.
	 
	 	 	 	 
	

	 	By:
	 	/s/ Kenneth C. Carter, Ph.D.
	

	 	 	 	 
	

	 	 	 	     President
	 
	 	 	 	 
	 	 	Oxford Bioscience Partners iii l.p.
	 	 	By: OBP Management iii l.p.
	 
	 	 	 	 
	

	 	By:	 	Alan G. Walton
	

	 	 	 	 
	

	 	 	 	     General Partner
	 
	 	 	 	 
	 	 	Oxford Bioscience Partners (Adjunct) iii l.p.
	 	 	By: OBP Management (Adjunct) iii l.p.
	 
	 	 	 	 
	

	 	By:
	 	Alan G. Walton
	

	 	 	 	 
	

	 	 	 	     General Partner
	 
	 	 	 	 
	 	 	Oxford Bioscience Partners (Bermuda)
iii limited partnership 
	 	 	By: OBP Management (Bermuda) iii
limited partnership
	 
	 	 	 	 
	

	 	By:	 	Alan G. Walton
	

	 	 	 	 
	

	 	 	 	     General Partner
	 
	 	 	 	 
	 	 	GIMV n.v.
	 
	 	 	 	 
	

	 	By:	 	Patrick Van Beneden
	

	 	 	 	 
	

	 	 	 	     Title:

2exv10w20

 

Exhibit 10.20

AVALON PHARMACEUTICALS, INC.

SERIES B CONVERTIBLE PREFERRED

STOCK PURCHASE AGREEMENT

October 26, 2001

Series B Convertible Preferred Stock Purchase Agreement dated as
of October 26, 2001, by and between Avalon Pharmaceuticals, Inc., a
Delaware corporation (the “Company”), and those individuals
or entities listed on Schedule I attached hereto (each, individually, a “Purchaser” and, collectively, the “Purchasers”).

WHEREAS, the Company wishes to issue and sell to the Purchasers, and the Purchasers wish to
purchase on the terms and subject to the conditions set forth in this Agreement, an aggregate of up
to nineteen million eight hundred forty-three thousand five hundred twenty (19,843,520) (the
“Authorized Number”) shares of the authorized but unissued Series B Convertible Preferred Stock,
$0.01 par value, of the Company (the “Series B Preferred Stock” or “Series B Preferred Shares”).

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained in this
Agreement, the parties agree as follows:

	1.  	DEFINITIONS
	 
	1.1  	In this Agreement:
	 
	1.1.1  	“1999 Plan” has the meaning ascribed thereto at Section 3.5 hereof;

 

 

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	1.1.2  	“Affiliate” means, with respect to any Purchaser, any Person controlling, controlled by
or under common control with such Purchaser. For the purposes of this definition,
“control” shall have the meaning specified as of the date of this Agreement for that
word in Rule 405 promulgated by the Commission under the Securities Act;
	 
	1.1.3  	“Agreement” means this Stock Purchase Agreement and all writings supplemental
hereto or in amendment or confirmation hereof; “herein”, “hereof”, “hereto”,
“hereunder” and similar expressions mean and refer to this Agreement and not to any
particular Section, subsection, paragraph or other subdivision hereof;
	 
	1.1.4  	“Amended and Restated Certificate of Incorporation” has the meaning ascribed
thereto at subsection 2.1.1 hereof;
	 
	1.1.5  	“Applicable Law” means any domestic or foreign national, federal, state, provincial,
county, local, municipal or regional statute, law, ordinance,
regulation, restriction, by-law (zoning or otherwise), principles of common law, civil law or equity, as well as
Permits, Orders, decrees and rules (having the force of law), and any judgements or
injunctions issued, promulgated, approved or entered thereunder;
	 
	1.1.6  	“Assets” means all of the assets, rights and properties of the Company, of whatsoever
nature, kind or description, whether movable or immovable, real or personal, tangible
or intangible and wheresoever situated;
	 
	1.1.7  	“Authorized Number” has the meaning ascribed thereto in the preamble hereto;
	 
	1.1.8  	"Balance Sheet Date” means August 31, 2001;
	 
	1.1.9  	“Benefit Plans” means all pension, retirement, profit sharing, bonus, savings,
compensation, incentive, severance, stock option, stock purchase, stock appreciation,
group insurance, medical, dental, hospitalization, disability, death and other benefit
plans, programs, arrangements or practices covering any or all past or present
employees, shareholders, directors or officers of the Company;
	 
	1.1.10  	“Best Efforts” means the efforts that a prudent Person desirous of achieving a result
would use in similar circumstances to ensure that such result is achieved as
expeditiously as possible;
	 
	1.1.11  	“Board of Directors” means the board of directors of the Company;
	 
	1.1.12  	“Books and Records” means all books of account, accounting records, files, data and
other financial information and writings; and all data stored on computer support
devices relating to any of the foregoing;
	 
	1.1.13  	“Closing” means the occurrence of all events and the taking of all actions required for
the completion of the transactions contemplated hereby and also has the meaning
ascribed thereto at subsection 2.2.2 hereof;
	 
	1.1.14  	“Closing Date” has the meaning ascribed thereto at subsection 2.2.2 hereof;
	 
	1.1.15  	“Common Stock” has the meaning ascribed thereto at Section 3.1 hereof;

 

 

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	1.1.16  	“Commission” means the Securities and Exchange Commission;
	 
	1.1.17  	“Contracts” means all agreements, obligations and undertakings of whatsoever
nature, kind or description and whether written or oral;
	 
	1.1.18  	“Conversion Shares” has the meaning ascribed thereto at Section 3.1 hereof;
	 
	1.1.19  	“Disclosure Schedule” means the Disclosure Schedule of the Company attached
hereto as Schedule. 1.1.1.9;
	 
	1.1.20  	“Employee Plans” has the meaning ascribed thereto at subsection 3.24.2 hereof;
	 
	1.1.21  	“Employment Agreements” means the employment agreements and offer letters
entered into between the Company and each of its employees, a list of each of which
is set forth in Section 1.1.21 of the Disclosure Schedule;
	 
	1.1.22  	“Encumbrances” means any encumbrance of whatsoever nature, kind or description
including, a security interest, mortgage, lien, hypothec, pledge, prior claim,
assignment, charge, trust or deemed trust (whether contractual, statutory or
howsoever otherwise arising), voting trust or pooling agreement with respect to
securities, right of first refusal, easement, servitude, restrictive covenant,
encroachment or other survey or title defect, any adverse claim or any other right,
option or claim, or any restriction or limitation;
	 
	1.1.23  	“Engagement Letter” shall have the meaning ascribed thereto at Section 3.31 hereof;
	 
	1.1.24  	“Environment” means soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwater, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other environmental medium or
natural resource;
	 
	1.1.25  	“Environmental, Health and Safety Liabilities” means any cost, damages, expense,
liability, obligation, or other responsibility arising from or under Environmental Law or
Occupational Safety and Health Law and consisting of or relating to:
	 
	   	1.1.25.1 any environmental, health, or safety matters or conditions (including on-site or off-site contamination, occupational safety and health, and regulation of
chemical substances or products);
	 
	   	1.1.25.2 fines, penalties, judgments, awards, settlements, legal or administrative
proceedings, damages, losses, claims, demands and response, investigative,
remedial, or inspection costs and expenses arising under Environmental Law or
Occupational Safety and Health Law;
	 
	   	1.1.25.3 financial responsibility under Environmental Law or Occupational Safety
and Health Law for cleanup costs or corrective action, including any investigation,
cleanup, removal, containment, or other remediation or response actions (“Cleanup”)
required by applicable Environmental Law or Occupational Safety and Health Law

 

 

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	   	(whether or not such Cleanup has been required or requested by any Governmental
Body or any other Person) and for any natural resource damages; or
	 
	   	1.1.25.4 any other compliance, corrective, investigative, or remedial measures
required under Environmental Law or Occupational Safety and Health Law;
	 
	1.1.26  	“Environmental Law” means any Applicable Law that requires or relates to:
	 
	   	1.1.26.1 advising appropriate authorities, employees, and the public of intended,
threatened or actual Releases of pollutants or hazardous substances or materials,
violations of discharge limits, or other prohibitions and of the commencements of
activities, such as resource extraction or construction, that could have significant
impact on the Environment;
	 
	   	1.1.26.2 preventing or reducing to acceptable levels the Release of pollutants or
hazardous substances or materials into the Environment;
	 
	   	1.1.26.3 reducing the quantities, preventing the Release, or
minimizing the hazardous characteristics of wastes that are generated;
	 
	   	1.1.26.4 assuring that products are designed, formulated, packaged, and used so
that they do not present unreasonable risks to human health or the Environment when
used or disposed of;
	 
	   	1.1.26.5 protecting resources, species, or ecological amenities;
	 
	   	1.1.26.6 reducing to acceptable levels the risks inherent in the transportation of
hazardous substances, pollutants, oil, or other potentially harmful substances;
	 
	   	1.1.26.7 cleaning up pollutants that have been Released, preventing the threat of
Release, or paying the costs of such clean up or prevention; or
	 
	   	1.1.26.8 making responsible parties pay private parties, or groups of them, for
damages done to their health or the Environment, or permitting self-appointed
representatives of the public interest to recover for injuries done to public assets;
	 
	1.1.27  	“Equipment” means all furnishings, fixtures, machinery, equipment, tooling, spare
parts, leasehold improvements, supplies, computer hardware, telephone systems,
signs and any other tangible property, together with all related accessories and
maintenance equipment;
	 
	1.1.28  	“ERISA” shall have the meaning ascribed thereto at subsection 3.24.2 hereof;
	 
	1.1.29  	“Facilities” means any real property, leaseholds, or other interests currently or
formerly owned or operated by the Company (including, without limitation, the
Premises) and any buildings, plants, structures, or Equipment (including motor
vehicles, tank cars and rolling stock) currently or formerly owned or operated by the
Company;
	 
	1.1.30  	“Financial Statements” means the:

 

 

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	   	1.1.30.1 audited financial statements of the Company for the fiscal year ended
December 31, 2000, audited by Ernst & Young and as approved by the Board of
Directors, consisting of the balance sheet, statement of operations, statement of
redeemable convertible preferred stock and stockholders’s equity (deficit),
statement of
cash flows and the notes to financial statements of the Company as at December 31,
2000, and
	 
	   	1.1.30.2 unaudited financial statements of the Company for the period ended
August 31, 2001, as reviewed and accepted by the Board of Directors, consisting of
the balance sheet, profit and loss statement and statement of cash flow of the
Company as at August 31, 2001,
	 
	   	a copy of each of which is annexed hereto as
Schedule 1.1.30;
	 
	1.1.31  	“First Closing” has the meaning ascribed
thereto at subsection 2.2.1 hereof;
	 
	1.1.32  	“First Closing Date” has the meaning ascribed thereto at subsection 2.2.1 hereof;
	 
	1.1.33  	“Founder Investors” has the meaning ascribed thereto at Section 3.5 hereof;
	 
	1.1.34  	“Founder Shares” has the meaning ascribed thereto at Section 3.5 hereof;
	 
	1.1.35  	“Generally Accepted Accounting Principles” means generally accepted United
States accounting principles, applied on a basis consistent with the basis on which the
Financial Statements were prepared;
	 
	1.1.36  	“Governmental Body” means (i) any domestic or foreign national, federal, provincial,
state, county, focal, municipal or regional government or body, (ii) any multinational,
multilateral or international body, (iii) any subdivision,
agency, commission, board,
instrumentality or authority of any of the foregoing governments or bodies, (iv) any
quasi-governmental or private body exercising any regulatory, expropriation or taxing
authority under or for the account of any of the foregoing governments or bodies, or
(v) any domestic, foreign, international, multilateral or multinational judicial, quasijudicial, arbitration or administrative court, tribunal, commission, board or panel;
	 
	1.1.37  	“Hazardous Activity” means the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, Release, storage,
transfer, transportation, treatment, or use (including any withdrawal or other use of
groundwater) of Hazardous Materials in, on, under, about, or from the Facilities or any
part thereof into the Environment, and any other act, business, operation, or thing that
poses an unreasonable risk of harm to persons or property on or off the Facilities, or to
the value of the Facilities or the Company;
	 
	1.1.38  	“Hazardous Materials” means any waste or other substance that is listed, defined,
designated, or classified as, or otherwise determined to be, hazardous, radioactive, or
toxic or a pollutant or a contaminant under or pursuant to any Environmental Law,
including any admixture or solution thereof, and specifically including petroleum and all
derivatives thereof or synthetic substitutes therefor and asbestos or asbestos containing materials;

 

 

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	1.1.39  	“Intellectual Property Rights” means, collectively:
	 
	   	1.1.39.1 all intellectual property rights of whatsoever nature, kind or description
including:

	 	1.1.39.1.1  	all trade-marks, service marks, trade-mark and service mark registrations,
trade-mark and service mark applications, rights under registered user
agreements, logos, trade names and other trade-mark and service mark
rights,
	 
	 	1.1.39.1.2  	all copyrights and applications therefor, including all computer software (in
both source and object code formats) and related documentation including
that which documents the design and execution of computer software, and
rights to any of the foregoing,
	 
	 	1.1.39.1.3  	all inventions, patents, patent applications and patent rights (including any
patents issuing on such applications or rights),
	 
	 	1.1.39.1.4  	all licenses, sub-licenses and franchises,
	 
	 	1.1.39.1.5  	all trade secrets and proprietary and confidential information,
	 
	 	1.1.39.1.6  	all industrial designs and registrations thereof and applications therefor,
	 
	 	1.1.39.1.7  	all renewals, modifications and extensions of any of the items listed in
paragraphs 1.1.39.1.1 through 1.1.39.1.6 (inclusively) hereof; and

	   	1.1.39.2 all patterns, plans, designs, research data, other proprietary know-how,
processes, drawings, technology, inventions, formulae, specifications, performance
data, quality control information, unpatented blue prints, flow sheets, Equipment and
parts lists, instructions, manuals, records and procedures including testing and
inspection techniques and procedures, and all licenses and other Contracts relating to
any of the foregoing;
	 
	   	but does not include licenses for readily available “off the shelf” commercial software
programs having an acquisition price of less than $5,000;
	 
	1.1.40  	“Knowledge” - an individual will be deemed to have “Knowledge” of a particular fact or
other matter if:
	 
	   	1.1.40.1 such individual is actually aware of such fact or other matter, or
	 
	   	1.1.40.1 a prudent individual could be expected to discover or otherwise become
aware of such fact or other matter in the course of conducting a reasonable
investigation concerning the existence of such fact or other matter.
	 
	   	A Person (other than an individual) will be deemed to have “Knowledge” of a particular
fact or other matter if any individual who is serving, or who has at any time served, as a
director, officer, employee, partner, executor or trustee of such Person (or in any
similar capacity) has, or at any time had, Knowledge of such fact or other matter;

 

 

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	1.1.41  	“MDBED” has the meaning ascribed thereto at Section 5.14 hereof;
	 
	1.1.42  	“Occupational Safety and Health Law” means any Applicable Law designed to
provide safe and healthful working conditions and to reduce occupational safety and
health hazards, and any program, whether governmental or private (including those
promulgated or sponsored by industry associations and insurance companies),
designed to provide safe and healthful working conditions;
	 
	1.1.43  	“Option Stockholders” means holders of Common Stock of the Company issued
pursuant to the exercise of options granted under the 1999 Plan;
	 
	1.1.44  	“Order” means any order (draft or otherwise), judgment, injunction, decree, award or
writ of any Governmental Body;
	 
	1.1.45  	“ordinary course of business” means an action taken by a Person that is:
	 
	   	1.1.45.1 consistent with the past practices of such Person and is taken in the
ordinary course of the normal day-to-day operations of such Person, and
	 
	   	1.1.45.2 similar in nature and magnitude to actions customarily taken in the
ordinary course of the normal day-to-day operations of other Persons that are in the
same business as such Person;
	 
	1.1.46  	“Permit” means any license, permit, certificate, authorization, approval, right, privilege,
consent, concession or franchise issued, granted, conferred or otherwise created by a
Governmental Body;
	 
	1.1.47  	“Person” means an individual, firm, legal person, company, co-operative, partnership,
joint venture, trust, unincorporated association, entity with judicial personality or
Governmental Body;
	 
	1.1.48  	“Placement Agent” shall have the meaning ascribed thereto at Section 3.31 hereof;
	 
	1.1.49  	“Plan” shall have the meaning ascribed thereto at Section 5.20 hereof;
	 
	1.1.50  	“PPM”has the meaning ascribed thereto at Section 4.3 hereof;
	 
	1.1.51  	“Preferred Stock” and “Preferred Shares” means the Series A Preferred Stock and
the Series B Preferred Stock;
	 
	1.1.52  	“Premises” means the real or immovable property, together with all buildings,
structures, fixtures and improvements thereon, covered by the Real Property Lease;
	 
	1.1.53  	“Prime Rate” means the annual interest rate quoted publicly by the Company’s regular
bankers as the reference rate of interest used for determining the rate charged to its
most credit worthy customers for commercial demand loans made in U.S. dollars in the
United States and commonly known as such bank’s prime rate, as adjusted from time
to time;
	 
	1.1.54  	“Purchase Price” has the meaning ascribed thereto at subsection 2.1.2 hereof;

 

 

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	1.1.55  	“Purchaser” and “Purchasers” has the meaning ascribed thereto in the preamble
hereto;
	 
	1.1.56  	“Qualified IPO” has the meaning ascribed thereto at subsection 7.1.5 hereof;
	 
	1.1.57  	“Real Property Lease” means the lease agreement dated August 11, 2000 between
the Company, as tenant, and Are-19 Firstfield Road, LLC, as landlord, covering the
Premises and all attendant documents thereto, as described in Section 1.1.57 of the
Disclosure Schedule;
	 
	1.1.58  	“Registration Rights Agreement” has the meaning ascribed thereto at Section 5.10
hereof;
	 
	1.1.59  	“Release” means any spilling, leaking, emitting, discharging, depositing, escaping,
leaching, dumping, or other releasing into the Environment, whether intentional or
unintentional;
	 
	1.1.60  	“Securities Act” means the Securities Act of 1933, as amended;
	 
	1.1.61  	“Series A Preferred Stock” or “Series A Preferred Shares” means the Series A
Convertible Preferred Stock, $0.01 per value, of the Company;
	 
	1.1.62  	“Series B Preferred Stock” or “Series B Preferred Shares” has the meaning
ascribed thereto in the recitals hereof;
	 
	1.1.63  	“Sofinov” means Sofinov Société
Financiére d’Innovation Inc.;
	 
	1.1.64  	“Stockholders ”Agreement” has the meaning ascribed thereto at Section 5.9 hereof;
	 
	1.1.65  	“Tax Claim” means any claim based upon, arising out of or otherwise in respect of any
inaccuracy in or breach of any representation or warranty contained in Sections 3.30
and 3.33 hereof;
	 
	1.1.66  	“Tax Returns” means all reports, returns, remittances or other information, or any
amendment thereof, required to be filed in connection with any Taxes;
	 
	1.1.67  	“Taxes” means all taxes, domestic or foreign, whether national, federal, state,
provincial, county, local, municipal, regional or otherwise (including income, profit,
business, excise, sales, goods and services, value-added, franchise, withholding,
capital, transfer, stamp, unemployment insurance, payroll, pension plan, workers
compensation, property, excise and duties), whether or not measured in whole or in
part by net income, including interest and penalties with respect thereto,
	 
	2.  	THE PREFERRED SHARES
	 
	2.1  	Authorization, Issuance, Sale and Delivery of the
Preferred Shares.
	 
	2.1.1  	Pursuant to Section 151(a) and Section 245 of
the Delaware General Corporation Law,
the Company shall adopt and file with the Secretary of State of the State of Delaware, on or
before the First Closing Date, an Amended and Restated Certificate of

 

 

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	   	Incorporation setting forth the terms of the Preferred Stock, in the form attached
hereto as Schedule 3.3 (the “Amended and Restated
Certificate of Incorporation”).
	 
	2.1.2  	Subject to the terms and conditions hereinafter set forth, the Company hereby agrees to
issue and sell to each Purchaser, and each Purchaser (severally and not jointly) hereby
agrees to purchase from the Company, the number of Series B Preferred Shares set forth
opposite the name of such Purchaser on Schedule I, at the purchase price of $3.5276
per share (the “Purchase Price”).
	 
	2.2  	Closings.
	 
	2.2.1  	The first Closing of the purchase and sale of Series B Preferred Shares shall take place at
the offices of Schmeltzer, Aptaker & Shepard, P.C., 2600 Virginia Avenue, Suite 1000,
Washington, D.C. 20037, at 1:00 p.m. on October 16, 2001, or at such other location, date and
time as may be agreed upon between the Purchasers and the Company (such closing being called
the “First Closing” and such date and time being called the “First Closing Date”).
	 
	2.2.2  	If less than all of the Authorized Number of Series B Preferred Shares are sold at the
First Closing, the Company may in its sole discretion, at one or more additional closings to
take place at the offices of Schmeltzer, Aptaker & Shepard, 2600 Virginia Avenue, Suite 1000,
Washington, D.C. on or before December 15, 2001 (each such closing, together with the First

Closing, being called a “Closing” and such date and time, together with the First Closing
Date, being called a “Closing Date”) issue and sell any or all of the Authorized Number of
Series B Preferred Shares not purchased at the First Closing to those Purchasers who elect to
purchase additional Series B Preferred Shares and/or one or more additional purchasers who
elect to become parties to this Agreement, by (i) executing a counterpart hereof and causing
Schedule I to be amended appropriately, (ii) executing a counterpart signature page
to the Stockholders’ Agreement and (iii) executing a counterpart signature page to the
Registration Rights Agreement, whereupon (a) such additional purchaser shall become a party
to this Agreement, the Stockholders’ Agreement and the Registration Rights Agreement and (b)
all references to “Purchaser” and “Purchasers” herein shall be deemed to include such
additional purchaser.

2.3     Delivery of Certificates; Payment of Purchase Price. At each Closing, the Company
shall issue and deliver to each Purchaser purchasing Series B Preferred Shares at such Closing
a stock certificate or certificates in definitive form, registered in the name of such Purchaser or
as directed by such Purchaser, representing the Series B Preferred Shares being purchased by
such Purchaser at such Closing. Payment in full of the total Purchase Price for the Series B
Preferred Shares being purchased by the Purchaser at each Closing, and against delivery of the
stock certificate or certificates therefor as aforesaid, on each Closing Date shall be made by
way of: (a) in respect of the First Closing, delivery to Schmeltzer, Aptaker & Shepard of a
cheque payable to the order of Schmeltzer, Aptaker & Shepard, in trust, and in respect of any
subsequent Closings, delivery to the Company of a cheque payable to it (b) in respect of the
First Closing, wire transfer of funds to Schmeltzer, Aptaker & Shepard, in trust, and in respect of
any subsequent Closings, wire transfer of funds to the Company, in the amount of said total
Purchase Price, in accordance with the written wire transfer instructions set forth in Schedule 2.3 attached hereto, or (c) in respect of the First Closing, the cancellation of debt from
the

 

 

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Company to such Purchaser in the amount set forth opposite the name of such Purchaser, or by any
combination thereof.

3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company hereby represents and warrants to the Purchasers that the following
representations and warranties are true and accurate and acknowledges and confirms that the
Purchasers are relying upon such representations and warranties in connection herewith and would
not have entered into this Agreement without same:

3.1
     Organization and Corporate Power. The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware. The Company is
not a successor to any entity. The Company has the corporate power and authority to own,
lease and hold its properties and to carry on its business as now conducted and as proposed to
be conducted. The Company has all necessary corporate power and authority to execute,
deliver and perform its obligations under this Agreement, to issue, sell and deliver the Series B
Preferred Shares and to issue and deliver the shares of Common Stock, $0.01 par value, of the
Company (the “Common Stock”) issuable upon conversion of the Series B Preferred Shares
(the “Conversion Shares”) and to execute, deliver and perform its obligations under the
Stockholders’ Agreement and the Registration Rights Agreement. The Company is duly
qualified to transact business as a foreign corporation and is in good standing in the State of
Maryland and in every other jurisdiction in the United States and elsewhere in which the failure
to so qualify would have a material adverse effect on the business, Assets, properties, financial
condition or results of operations of the Company.

	3.2  	Authorization of Agreements, etc.
	 
	3.2.1  	The execution and delivery by the Company of this Agreement, of the Registration
Rights Agreement and of the Stockholders’ Agreement, the performance by the
Company of its obligations hereunder and thereunder, the issuance, sale and delivery
of the Series B Preferred Shares and the issuance and delivery of the Conversion
Shares have been duly authorized by all requisite corporate action on the part of the
Company and its directors and shareholders and will not (i) violate any provision of any
Applicable Law, the Amended and Restated Certificate of Incorporation, or the by-laws
of the Company, or any provision of any Contract to which the Company is bound, or
(ii) conflict with, result in a breach of or constitute (with due notice or lapse of time or
both) a default under any such Contract, or result in the creation or imposition of any
Encumbrances upon any of the Assets.
	 
	3.2.2  	The Series B Preferred Shares have been duly authorized and, when issued in
accordance with this Agreement, will be validly issued, fully paid
and non-assessable shares of Series B Preferred Stock with no personal liability attaching to the ownership
thereof and will be free and clear of any Encumbrances and the certificates
representing same shall be true, genuine and subsisting, and nothing shall affect the
validity of same. The Conversion Shares have been duly reserved for issuance upon
conversion of the Series B Preferred Shares and, when so issued, will be duly
authorized, validly issued, fully paid and non-assessable shares of Common Stock
with no personal liability attaching to the ownership thereof and will be free and clear
of
any Encumbrances and the certificates representing same shall be true, genuine and
subsisting, and nothing shall affect the validity of same. Neither the issuance, sale or

 

 

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	      	delivery of the Series B Preferred Shares, nor the issuance or delivery of the
Conversion Shares is subject to any pre-emptive right of stockholders of the Company or
to any right of first refusal or other right in favour of any Person which has not been
effectively waived.

3.3 Certificate of
Incorporation and Corporate Documents. Schedule 3.3 annexed hereto
contains a true and complete copy of the Certificate of Incorporation, as amended, and by-laws
of the Company, including the Amended and Restated Certificate of Incorporation, which have
not been amended other than as reflected in said Schedule, and there is no application or filing
pending for the amendment of any of same, other than as contemplated hereby. The minute
books and corporate records of the Company, true and complete copies of which have been
made available to the Purchasers prior to the date hereof, have been maintained in accordance
with Applicable Law and contain true and complete minutes of all meetings and consents and
resolutions in lieu of meetings of the Board of Directors (and all committees thereof) and its
shareholders, and accurately and completely reflect all matters referred to therein, and all
material transactions entered into by the Company are reflected therein. All resolutions
contained in the Company’s minute books have been duly adopted and all such meetings have
been duly called and held. The share certificate books and the registers of shareholders,
directors and transfers of the Company are true and complete

3.4 Validity. Each of this Agreement, the Registration Rights Agreement and the
Stockholders Agreement has been duly executed and delivered by the Company and
constitutes the legal, valid and binding obligations of the Company, enforceable against it in
accordance with its respective terms.

3.5 Authorized Capital
Stock. As of the Closing Date, the authorized capital stock of the
Company consists of thirty-nine million (39,000,000) shares of Common Stock and thirty-one
million (31,000,000) shares of Preferred Stock; of which six million (6,000,000) shares of
Preferred Stock have been designated Series A Convertible Preferred Stock and twenty-three
million (23,000,000) shares of Preferred Stock have been designated Series B Convertible
Preferred Stock and two million (2,000,000) shares of Preferred Stock remain undesignated.
Immediately prior to the Closing, one million one thousand (1,001,000) shares of Common
Stock and five million five hundred and seventy-seven thousand five hundred (5,577,500)
shares of Series A Preferred Stock will be validly issued and outstanding, the holders of which
are set forth in Section 3.5 of the Disclosure Schedule, and no other shares of Common Stock
or Preferred Stock will have been issued. One million (1,000,000) shares of Common Stock are
identified as “Founder Shares” and held by “Founder
Investors” as enumerated in Section 3.5 of
the Disclosure Schedule. There have been reserved for issuance (i) under the Company’s 1999
Stock Plan (the “1999 Plan”), an aggregate of two million five hundred and seventy-five
thousand (2,575,000) shares of Common Stock (ii) pursuant to certain third party agreements,
two hundred and sixty-five thousand (265,000) shares of Common Stock and (iii) pursuant to
certain third party agreements, one million six hundred seven thousand four hundred and eighty
two (1,607,482) Series B Preferred Shares. The outstanding shares of Common Stock and
Series A Preferred Stock were issued in accordance with the registration or qualification
provisions of the Securities Act and any relevant state securities laws, or pursuant to valid
exemptions therefrom.

3.6 Options to Acquire
Securities. Except as set forth in Section 3.6 of the Disclosure
Schedule, no subscription, warrant, option, convertible security, or other right (contingent or
other) to subscribe, purchase or otherwise acquire any securities of the Company is outstanding

 

 

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and there is no commitment by the Company to issue shares, subscriptions, warrants, options,
convertible securities, or other such rights or to distribute to holders of any of its securities
any evidence of indebtedness or asset. Except as set forth in Section 3.6 of the
Disclosure Schedule, the Company has no obligation (contingent or other) to purchase, redeem or
otherwise acquire any of its securities or any interest therein or to pay any dividend or make any
other distribution in respect thereof.

3.7 Governmental
Approvals. No consent, approval, order or authorization of or
registration qualification, designation, declaration or filing with, any Person, including without
limitation, any Governmental Body is or will be necessary for the valid execution, delivery and
performance by the Company of this Agreement, the Registration Rights Agreement and the
Stockholders Agreement, the issuance, sale and delivery of the Series B Preferred Shares or, upon
conversion thereof, the issuance and delivery of the Conversion Shares, other than the filing of
any post-closing notice that may be required pursuant to Applicable Law in connection with the
sale of the Series B Preferred Shares.

3.8 Offering of the Preferred
Shares. Neither the Company nor any Person authorized or employed by
the Company as agent, broker, dealer or otherwise in connection with the offering or sale of the
Series B Preferred Shares or any security of the Company similar to the Series B Preferred Shares
has offered the Series B Preferred Shares or any such similar security for sale to, or solicited
any offer to buy the Series B Preferred Shares or any such similar security from, or otherwise
approached or negotiated with respect thereto with, any Person or Persons, and neither the Company
nor any Person acting on its behalf has taken or will take any other action (including, without
limitation, any offer, issuance or sale of any security of the Company under circumstances which
might require the integration of such security with Series B Preferred Shares under the Securities
Act or any other Applicable Law), in either case so as to subject the offering, issuance or sale
of the Series B Preferred Shares to the registration provisions of the Securities Act or any other
Applicable Law. Subject in part to the truth and accuracy of each Purchaser’s representations and
warranties set forth in Section 4 of this Agreement, the offer, sale and issuance of the Series B
Preferred Stock as contemplated by this Agreement and the Conversion Shares are exempt from the
registration requirements of any Applicable Law, and neither the Company nor any authorized agent
acting on its behalf will take any action hereafter that would cause
the loss of such exemption.

3.9 Subsidiaries and
Business. The Company does not have any equity or other interest in any
Person and does not carry on and is not involved in any business other than the research and
development of genomics-based drug therapeutics for, including but not limited to, cancer.

3.10 Powers of Attorney.
Section 3.10 of the Disclosure Schedule contains a true and
complete list of all Persons holding a power of attorney or like authority on behalf of the
Company.

3.11 Financial
Statements. The Financial Statements have been prepared in accordance
with Generally Accepted Accounting Principles, are true and complete in all respects, accurately
disclose the assets and liabilities (whether direct or indirect, accrued, absolute, contingent or
otherwise, known or unknown) of the Company, present fairly, accurately and completely its
financial condition and results of operations, as at the dates thereof and for the periods covered
thereby, and contain or reflect adequate reserves and accruals, provided, however, that the
unaudited financial statements are subject to normal recurring year-end audit adjustments

 

 

- 13 -

(which are not expected to be material), and do not contain all footnotes required under Generally
Accepted Accounting Principles.

3.12 Undisclosed Liabilities of the Company. Except as set forth in Section 3.12 of the
Disclosure Schedule and except for Environmental, Health and Safety Liabilities which are dealt
with in subsections 3.21.3 and 3.21.4 hereof, the Company has no liabilities (whether direct or
indirect, accrued, absolute, contingent or otherwise, known or unknown) of whatsoever nature, kind
or description, except liabilities disclosed or provided for in the Financial Statements and
liabilities incurred in the ordinary course of business since the Balance Sheet Date which are not
and are not reasonably anticipated to be, individually or in the aggregate, material and adverse to
the Assets, its business, operations, condition or prospects, financial or otherwise.

3.13 Subsequent Activities of the Company. Without limiting the generality of Section 3.12
hereof, since the Balance Sheet Date, except as set forth in Section 3.13 of the Disclosure
Schedule, the Company has not, directly or indirectly:

	3.13.1  	declared or paid any dividend or other distribution or payment on or with respect to its
capital stock or redeemed, purchased or otherwise acquired any shares of its capital stock, or
otherwise reduced its paid up capital or altered its capital stock,
	 
	3.13.2  	carried on its business except in the ordinary course of business including, without
limitation, entered into, amended, extended, terminated or otherwise modified any Contract to
which it is a party or by which it or any Assets may be bound except in the ordinary course of
business,
	 
	3.13.3  	increased the salary, benefits, bonuses or other compensation of its officers, directors or
employees, or adopted, modified or terminated any Benefit Plan,
	 
	3.13.4  	mortgaged, pledged or otherwise subjected any of its assets to any Encumbrance,
	 
	3.13.5  	settled any liability, claim, dispute, proceedings, suit or appeal pending against it,
	 
	3.13.6  	suffered any material loss, whether or not covered by insurance, except for losses from
operations described in Section 3.13.6 of the Disclosure Schedule,
	 
	3.13.7  	purchased or leased any Assets, except for purchases of Equipment and supplies in
the ordinary course of business,
	 
	3.13.8  	made any change in personnel practices, except in the ordinary course of business,
	 
	3.13.9  	made any change in its accounting principles, policies or practices, including the basis
upon which the Assets or its liabilities are recorded on its Books and Records, its earnings
are ascertained or the methods or rates of depreciation or amortization employed,
	 
	3.13.10  	violated any provision of any Contract to which it is a party or by which it or any Assets
may be bound,
	 
	3.13.11  	effected any corporate reorganization or merger, or any sale, transfer or other disposition
of any material Asset,

 

 

- 14 -

	3.13.12  	suffered any material adverse change in the Assets or its business (including customer and
employee relations and financing arrangements), operations, condition or prospects,
financial or otherwise, in any division thereof, or
	 
	3.13.13  	agreed to do any of the things described in subsections 3.13.1 through 3.13.12,
inclusively, hereof.

3.14 Title to Assets. Except as set forth in Section 3.14 of the Disclosure
Schedule, the Company is the legal and beneficial owner of, has good and marketable title to and
possesses all the Assets, free and clear of any Encumbrances. With respect to the Assets it leases,
the Company holds a valid leasehold interest free and clear of any Encumbrances.

3.15 Equipment. All of the Equipment of the Company is (i) located at the Premises, (ii) is in good
working order and operating condition, except for normal wear and tear, and has been regularly
serviced and properly maintained, and (iii) is adequate and sufficient for the conduct of the
business of the Company as is presently being conducted.

3.16 Litigation,
Compliance with Law. There is no (i) action, suit, claim, proceeding or
investigation pending or, to the Company’s Knowledge, threatened against or affecting the Company,
the Founder Investors, at law or in equity, or before or by any Governmental Body, (ii) arbitration
proceeding relating to the Company pending under collective bargaining or union agreements or
otherwise, or (iii) governmental inquiry pending or, to the Company’s Knowledge, threatened against
or affecting the Company (including without limitation any inquiry as to the qualification of the
Company to hold or receive any Permit), and there is no state of facts which could provide a valid
basis for any of the foregoing. There is no action or suit by the Company pending or threatened
against others. The Company is not in default with respect to any
Order. The Company has conducted
and is conducting its business in compliance with Applicable Law.

3.17 Absence of
Restrictive Agreements. Without limiting the generality of Section 3.25
hereof, except as set forth in Section 3.17 of the Disclosure Schedule, the Company is not
a party to or bound by any Contract that limits the places in which, or Persons with whom, it may
conduct its business, nor the manner in which its business or any currently proposed business is to
be conducted.

3.18 Insurance.
Section 3.18 of the Disclosure Schedule contains a true and complete list
of each insurance policy currently maintained by the Company (specifying the insured, the amount of
coverage, the type of insurance and any pending claims thereunder). All such policies are in full
force and effect and are not void or voidable and nothing has been done or omitted to be done by
the Company that would make any such policy void or voidable. All liability policies maintained
by the Company provide coverage on a claims-made basis, except for commercial liability insurance
which provides for coverage on an occurrence basis. The Company has not failed to give any notice
or present any claim under any insurance policy when due or in a timely fashion. No claim presented
by the Company has been or continues to be disputed or is under negotiation, nor does any amount
recoverable from any insurer in respect of any such claim remain unpaid. The insurance coverage
maintained by the Company is in such amounts and against such losses as are reasonable based on the
Company’s claims history and on the Company’s business. To the Company’s Knowledge, there is no
fact, condition or circumstance which could result in any increase in insurance premiums payable by
the Company.

 

 

- 15 -

3.19 Real Property Lease and Premises.

	3.19.1  	Except as set forth in Section 3.19.1 of the Disclosure Schedule, the Real Property Lease is
the only lease, offer to lease, sublease, license or other agreement under which the Company
uses or occupies or has the right to use or occupy, now or in the future, any immovable or
real property,
	 
	3.19.2  	all of the land, buildings, structures, fixtures and improvements currently used by the
Company in the conduct of its business are included in the Real
Property Lease. Except as set
forth in Section 3.19.2 of the Disclosure Schedule, the Company does not own or have
any other right, title or interest in any immovable or real property,
	 
	3.19.3  	except as set forth in Section 3.19.3 of the Disclosure Schedule, the Company has not
entered into any sublease, license or other agreement granting to any Person any right to the
possession, use, occupancy or enjoyment of the Premises, or any portion thereof,
	 
	3.19.4  	there are no work orders outstanding against the Premises, and the Premises are in
compliance with the requirements of all insurance companies who have policies covering the
Premises, and
	 
	3.19.5  	except as disclosed in Section 3.19.5 of the Disclosure Schedule, all Permits, as
well as all approvals and authorizations from all insurance companies and fire rating
organizations, required to have been issued to the Company to enable the Premises to be
lawfully occupied and used by the Company for all of the purposes for which it is currently
occupied and used, have been lawfully issued and are in full force and effect.

3.20 Place of Business. The Company carries on business at the Premises and has no other place of
business.

3.21 Environmental Matters.

	3.21.1  	Without limiting the generality of Sections 3.16 and 3.28 hereof, the operations of the
Company, and the use by the Company of the Facilities and the Assets in which it has or had an
interest are now and have been in compliance with applicable Environmental Law, and the
operations of and use of the Facilities by any predecessor in interest of the Company, if
applicable, were in compliance with applicable Environmental Law.
	 
	3.21.2  	To the Company’s Knowledge, there are no Hazardous Materials present on or in the
Environment (excluding indoor air only) at the Facilities or at any property immediately
adjoining the Facilities. To the Company’s Knowledge, there are no Hazardous Materials
present in the indoor air, above occupational exposure limits, if any, at the Facilities or at
any property immediately adjoining the Facilities. The Hazardous Materials listed in
Section 3.21.2 of the Disclosure Schedule are used by the Company at the Premises, and
are and have been stored, used and disposed of in compliance with applicable Environmental
Law. Neither the Company nor, to the Knowledge of the Company, any other Person, has permitted
or conducted, or is aware of, any Hazardous Activity conducted with respect to the Facilities
or any other Assets in which the Company has or had an interest except in full compliance with
all applicable Environmental Laws.

 

 

- 16 -

	3.21.3  	The Company has no Environmental, Health and Safety Liabilities resulting from, arising out
of or in connection with, any action or omission by the Company, with respect to the
Facilities or with respect to any Assets in which the Company has or had an interest or, to
its Knowledge, with respect to any property immediately adjoining the Facilities.
	 
	3.21.4  	To the Company’s Knowledge, it has no Environmental, Health and Safety Liabilities resulting
from, arising out of or in connection with, any action or omission by any Person (other than
the Company), with respect to the Facilities or with respect to any Assets in which the
Company has or had an interest or, with respect to any property immediately adjoining the
Facilities.
	 
	3.21.5  	There has been no Release by the Company or, to the Knowledge of the Company, threat of
Release by the Company of any Hazardous Materials above the limits, if any, specified by
applicable Environmental Law or above levels of regulatory concern, at or from the Facilities
or from or by any other Assets in which the Company has or had an interest, or, to the
Knowledge of the Company, any property immediately adjoining the Facilities. To the
Company’s Knowledge, there has been no Release or threat of Release by any Person (other than
the Company) of any Hazardous Materials above the limits, if any, specified by applicable
Environmental Law or above the levels of regulatory concern, at or from the Facilities or from
or by any other Assets in which the Company has or had an interest, or any property
immediately adjoining the Facilities.
	 
	3.21.6  	The Company has delivered to the Purchasers true and complete copies and results of any
reports, studies, analyses, tests, or monitoring possessed or initiated by the Company
pertaining to Hazardous Materials or Hazardous Activities in, on, or under the Facilities, or
concerning compliance by the Company, or any other Person for whose conduct they are or may be
held responsible, with Environmental Laws. The Company has never conducted an environmental
audit of the Facilities or of the Assets in which the Company has or had an interest, or any
property immediately adjoining the Facilities.

3.22 Books and Records. The Books and Records of the Company are true and complete.

3.23 Employees and Labour Relations.

	3.23.1  	Section 3.23.1 of the Disclosure Schedule contains a true and complete list of the employees
of the Company detailing dates of hire, total remuneration and position held. Each of the
employees listed therein received compensation from the Company solely in consideration of
services performed on its behalf. The compensation of all officers and employees of the
Company was paid entirely by the Company,
	 
	3.23.2  	to the Company’s Knowledge, none of the officers, directors or senior employees of the
Company has any present intention to terminate its relationship with the Company,
	 
	3.23.3  	without limiting the generality of Section 3.16 hereof, the Company is in compliance with
Applicable Law respecting employment and employment practices, terms and conditions of
employment, including health and safety requirements, wages, hours of work and human and civil
rights,

 

 

- 17 -

	3.23.4  	without limiting the generality of Section 3.25 hereof, the Company is not bound by or
subject to any Contract with any labour union or collective bargaining agreement or collective
bargaining obligation and, to its Knowledge, no labour union or other employee representative
has applied to be certified as a bargaining agent for or to represent any employees,
representatives or agents of the Company or is in the process of seeking to represent or
organize or has threatened to represent or organize any of its employees, representatives or
agents,
	 
	3.23.5  	without limiting the generality of Section 3.16 hereof, there are no labour disruptions
outstanding, pending or to its Knowledge threatened against the Company and the Company is not
involved in any controversy with any of its employees,
	 
	3.23.6  	there are no written employment agreements to which the Company is a party, other than the
Employment Agreements, and no employment agreement to which the Company is a party, other than
the Employment Agreements, provides for a specified notice of termination or fixed term of
employment. Subject to the rights of certain of the Series A Preferred shareholders and the
Purchasers to nominate directors in accordance with the provisions of the Stockholders
Agreement, there is no director, officer or employee of the Company who cannot be dismissed
upon such notice as is required by Applicable Law, and
	 
	3.23.7  	without limiting the generality of Section 3.16 hereof, there has never been and there is
not presently pending or existing any strike, slowdown, picketing, work stoppage, labour
arbitration or, except in the ordinary course of business, proceeding in respect of the
grievance of any employee or other labour dispute, against or affecting the Company, or to its
Knowledge threatened against the Company. No fact, condition or circumstance exists which
could provide the basis for any work stoppage or other labour dispute affecting the Company.
	 
	3.24  	Benefit Plans.
	 
	3.24.1  	Section 3.24.1 of the Disclosure Schedule contains a true and complete list of all
Benefit Plans. True and complete copies of each Benefit Plan have been furnished to the
Purchasers,
	 
	3.24.2  	without limiting the generality of Sections 3.16 and 3.27 hereof, all Benefit Plans which
are funded plans are funded in accordance with their rules and all Applicable Law and are
fully funded on both a going-concern and a termination basis. Without limiting the generality
of Sections 3.16 and 3.30 hereof, all required employer contributions, premium payments and
source-deducted employee contributions under the Benefit Plans have been made and remitted to
the appropriate funding agents, including all current service costs and special payments.
Moreover, except as set forth in Section 3.24.2 of the Disclosure Schedule, the
Company does not sponsor or maintain any employee benefit plans, as that term is defined in
Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended (“ERISA”).
The employee benefit plans described in Section 3.24.2 of the Disclosure Schedule are
referred to herein as the “Employee Plans”. Without limiting the generality of Section 3.166,
each Employee Plan has been operated and administered in compliance with ERISA and the
Internal Revenue Code of 1986, as amended. The Company has never sponsored nor been obligated
to contribute to a “multiemployer plan,” as that term is defined in

 

 

- 18 -

	   	Section 3(37) of ERISA, or a “defined benefit plan,” as that term is defined in
Section 3(35) of ERISA,
	 
	3.24.3  	no step has been taken to terminate any Benefit Plan, but there exists no impediment to the
right of the Company to terminate any Benefit Plan at no cost or expense to it, and
	 
	3.24.4  	no promises or commitments have been made, or other Contract entered into by the Company to
amend any Benefit Plan, to provide increased benefits thereunder or to establish any
additional Benefit Plan.

3.25 Contracts. Section 3.25 of the Disclosure Schedule contains a true and complete list
of all Contracts to which the Company is a party or by which it or any of the Assets may be bound,
and none of them will be affected by the transactions contemplated hereby. The Company has
delivered to the Purchasers a true and complete copy of each of such Contracts. The Company is not
in violation of or in default with respect to and no event has occurred which, with lapse of time
or action by any Person, or both, could result in violation of or a default with respect to any of
such Contracts by the Company, and the Company has not received any notice of default or
termination under any of such Contracts. Each of such Contracts is in full force and effect and
valid, binding and enforceable in accordance with its terms and, to its Knowledge, all parties to
such Contracts (other than the Company) are in compliance with their obligations thereunder.
Neither the Company nor, to its Knowledge, any of the parties to such Contracts (other than the
Company) intends to terminate its obligations under any of such Contracts.

	3.26  	Intellectual Property.
	 
	3.26.1  	Section 3.26.1 A of the Disclosure Schedule contains a true and complete list and
copy of all patents, patent applications, trade-marks and registered trade-marks and
applications therefor, trade names, copyrights and copyright applications and
computer software programs owned by or licensed to the Company. Except as set forth in
Section 3.26.1 B of the Disclosure Schedule (licenses granted to the Company) and
Section 3.26.1C of the Disclosure Schedule (rights and licenses granted by the
Company), to the Knowledge of the Company and without having made an investigation, the
Company is the absolute owner of and has the exclusive right to use the confidential
information, patents, patent applications, trade-marks, registered trade-marks and
applications therefor, tradenames, copyrights, copyright applications and computer software
programs that are currently used by the Company. Neither International Genetics Associates,
Inc. nor Dr. Jeffrey Cossman has any rights in the Intellectual Property Rights that are
currently used by the Company,
	 
	3.26.2  	without limiting the generality of subsection 3.2.1 hereof, the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby will not breach, violate or conflict with any Contract governing any of
the Intellectual Property Rights used by the Company, and will not cause the forfeiture or
termination, or give rise to a right of forfeiture or termination, of such Intellectual
Property Rights or in any way impair the right of the Company to use, sell, license or dispose
of or to bring any action for the infringement of any of such Intellectual Property Rights,

 

 

- 19 -

	3.26.3  	all former and current officers and employees of the Company have entered into agreements
with the Company pursuant to which (i) they are obligated to maintain the confidentiality of
the Company’s intellectual Property Rights, and (ii) all Intellectual Property Rights
developed by them in the course of their relationship with the Company belong solely to the
Company, and all such agreements are included in the Contracts. To the Knowledge of the
Company without having made an investigation, none of its employees owns any Intellectual
Property Rights used by the Company and as to which such employee has not assigned such rights
to the Company. The Company has taken all reasonable and practical measures to safeguard and
maintain the secrecy and confidentiality of its confidential intellectual Property Rights,
	 
	3.26.4  	none of the development, manufacture, marketing, license, sale or use of any product or
service currently licensed or sold by the Company or currently under development or proposed
to be developed by the Company violates or will violate any Contract with any Person. Without
limiting the generality of Section 3.16 hereof, there are no outstanding, pending or
threatened proceedings, litigation or other adverse claims affecting, or with respect to, any
part of the Intellectual Property Rights used by the Company and, to its Knowledge, without
having made an investigation, no Person is infringing any Intellectual Property Right of the
Company,
	 
	3.26.5  	without limiting the generality of subsection 3.26.1 hereof, except as set forth in
Section 3.26.1 B and C of the Disclosure Schedule, no license or sub-license has been
granted or other Contract has been entered into with respect to any of the Intellectual
Property Rights of the Company. The Company has not conducted business under any name other
than its current corporate name and Therapeutic Genomics, Inc., and
	 
	3.26.6  	except as set forth in Section 3.26.6 of the Disclosure Schedule, to the Company’s
Knowledge, without having made an investigation, the Company’s business as presently conducted
does not infringe any Intellectual Property Rights of a third party that has not been licensed
to the Company and does not unlawfully use trade secrets and/or proprietary and confidential
information of a third party.

3.27 Related
Transactions. The Company does not have any indebtedness to any of its
shareholders, directors, officers or employees, past or present, or to any Person not dealing at
arm’s-length with any of such Persons, except for current unpaid salaries and bonuses and except as
otherwise set forth in Section 3-27 of the Disclosure Schedule, and except as set forth in
Section 3.27 of the Disclosure Schedule, no shareholder, director, officer or employee,
past or present, of the Company or any Person not dealing at arm’s-length with any of such Persons
has any indebtedness to the Company, and no such Person owns, directly or indirectly, any interest
in or is an employee of, a consultant to, or otherwise financially interested in, any Person that
is a competitor of the Company. Except as set forth in Section 3.27 of the Disclosure
Schedule, none of the Company’s shareholders, officers, directors or employees are directly or
indirectly interested in any Contract with the Company or any of the Assets.

3.28 Qualifications, Permits. Without limiting the generality of Sections 3.1 and 3.16
hereof, the Company has not been required to suspend operations of its business or been liable for
a fine or penalty as a result of the operation of its business or ownership or use of the Assets.
Except as set forth in Section 3.28 of the Disclosure Schedule, the Company has all Permits
necessary for the conduct of its business as now conducted and ownership and use of the Assets and
such Permits are validly issued, in full force and effect and the Company is in

 

 

- 20 -

compliance therewith, including the timely filing of all reports, notifications and plans
required pursuant to such Permits and none of such Permits will be affected by the transactions
contemplated hereby. To the Company’s Knowledge, it will be able to obtain the renewal of all such
Permits. The Company has no Knowledge of any Permits which will be necessary in the future which
could not be obtainable on commercially reasonable terms.

3.29 Absence of Guarantees. Without limiting the generality of Section 3.25 hereof, the
Company is not a party to or bound by any comfort letter, understanding or agreement of guarantee,
indemnification, assumption or endorsement or any like Contract with respect to the liabilities
(whether direct or indirect, accrued, absolute, contingent or otherwise, known or unknown) or
obligations of any Person.

	3.30  	Tax Matters. Without limiting the generality of Section 3.16 hereof:
	 
	3.30.1  	all Tax Returns required by Applicable Law to be filed by the Company have been properly and
timely filed and all such Tax Returns are true and complete, and all Taxes shown to be due on
such Tax Returns have been paid,
	 
	3.30.2  	there are no unpaid Taxes now due by the Company and no deficiency for Taxes has been
assessed against the Company by any applicable Governmental Body and no Tax Return of the
Company has ever been audited and no audit of any Tax Return is in progress or pending or, to
its Knowledge, threatened, in connection with the Company. No waiver or extension of any
statute of limitations has been given or is in effect with respect to the assessment of any
Taxes against the Company,
	 
	3.30.3  	all Taxes payable by the Company in respect of all taxation periods, whether or not shown on
any Tax Returns, for which the Company is liable have been paid or accrued and adequately
reserved on its Books and Records and Financial Statements,
	 
	3.30.4  	the Company has never entered into any closing or similar agreement with any taxing
Governmental Body,
	 
	3.30.5  	copies of all Tax Returns, deficiencies, assessments and notices from all taxing authorities
relating to the Company have been delivered to the Purchasers,
	 
	3.30.6  	the Company has not taken any action outside of the ordinary course of business that would
have the effect of deferring any Tax liability,
	 
	3.30.7  	the Company has collected all Taxes required to be collected by it and has remitted same on
a timely basis to the appropriate Governmental Body, or made adequate provision in its Books
and Records for the payment of such amounts to the proper Government Body. The Company has in
its possession all Books and Records, including supporting documents, required by Applicable
Law regarding the collection or payment of all sales, goods and services and use Taxes
required to be collected and paid over by it and regarding all exempt transactions for all
periods open under the applicable statutes of limitations, and the Company has maintained all
such Books and Records, including supporting documents, in accordance with Applicable Law, and
	 
	3.30.8  	the Company has withheld from each payment made to each of its past and present
shareholders, agents, employees, officers and directors, and all other Persons the

 

 

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	   	amount of all Taxes and all other deductions required to be withheld and has paid
same when due to the proper Governmental Body, in the form required under Applicable Law,
or made adequate provision in its Books and Records for the payment of such amounts to
the proper Governmental Body.

3.31 Brokers. The
Company has retained Array Capital L.L.C. to act as the Company’s placement
agent (the “Placement Agent”) to assist in placing the Series B Preferred Shares hereunder and
shall be obligated to make a payment to it in accordance with the terms and conditions of a certain
Engagement Letter, dated January 3, 2001 (the “Engagement Letter”), with respect to the
transactions contemplated by this Agreement. Other than the agreement with the Placement Agent
described in the Engagement Letter, the Company has no further Contract with any broker, finder or
similar agent.

3.32 Product Liability. Except as set forth in Section 3.32 of the Disclosure
Schedule, the Company has never sold, offered for sale or licensed any product or service. Subject
to any warranty required by Applicable Law, the Company has not issued any warranty to, and does
not have any Contract with, any Person relating to warranties, including warranties,
understandings or agreements, relating to the quality or condition of any products or services sold
or licensed by the Company.

3.33 Grants and Subsidies. Without limiting the generality of subsection 3.2.1 hereof, neither
the execution and delivery of this Agreement nor the completion of the transactions contemplated
hereby has resulted or will result in any obligation or liability of the Company to repay, in whole
or in part, any grant, subsidy, loan, Tax credit or other benefit which has been paid to or for the
benefit of the Company, nor has the Company suffered or will suffer any reduction in the amount of,
loss of right to or any adverse change in the terms and conditions of any grant, subsidy, loan, Tax
credit or other benefit paid to or for the benefit of the Company or which are or may become
payable to the Company after the date hereof.

3.34 Budgets. The Plan was prepared in good faith based on the Company’s past planning and
budgetary practices and represent the Company’s reasonable estimates.

3.35 Data processing Systems. Without limiting the generality of Section 3.26 hereof, the data
processing system used by the Company adequately meets the data processing needs of the business
and operations of the Company. The Company has taken appropriate action by instruction, agreement
or otherwise with its employees and other Persons permitted access to system application programs
and data files used in the date processing system to protect against unauthorized access, use,
copying, modification, theft and destruction of such programs and files. The data processing and
data storage facilities of the Company are adequately and properly protected.

3.36 No Expropriation. The Company has not received any notice of expropriation of any of the
Assets. There is no expropriation proceeding pending or, to its Knowledge, threatened against or
affecting any of the Assets.

3.37 Bankruptcy. The Company has not taken advantage of any insolvency or bankruptcy legislation,
had any Person take possession of any part of the Assets or had any execution of distress or
seizure become enforceable or levied upon any of the Assets.

 

 

- 22 -

3.38 Government
Programs. Except as set forth in Section 3.38 of the
Disclosure Schedule, no loans, funding arrangements, assistance programs or other Contracts are
outstanding in favour of the Company from any Governmental Body, and no basis exists for any
Governmental Body to seek payment or repayment from the Company in respect of any amount or benefit
received, or to seek performance of any obligation of the Company under, any of same.

3.39 Registration and
Voting Rights. Except for the rights granted to the Purchasers and
others pursuant to the Registration Rights Agreement and as set forth
in Section 3.39 of the
Disclosure Schedule, the Company has not granted or agreed to grant any registration rights,
including piggyback rights to any Person. Except as provided in the Stockholders’ Agreement,
no stockholder of the Company has entered into any agreement with respect to the voting of equity
securities.

	3.40  	Accuracy of information.
	 
	3.40.1  	All information which has been provided to any of the Purchasers is true and complete and no
material fact has been omitted therefrom which would make such information misleading. The
Company has made or caused to be made reasonable inquiry with respect to each covenant,
agreement, obligation, representation and warranty of the Company contained in this Agreement
and none of the aforesaid covenants, agreements, obligations, representations or warranties
contains any untrue statement of a material fact or omits to state a material fact necessary
to make such covenant, agreement, obligation, representation or warranty not misleading, and
	 
	3.40.2  	there is no fact, condition or circumstance which (i) materially adversely affects the
Assets or the business (including customer and employee relations and financing agreements),
operations, condition or prospects, financial or otherwise, of the Company, (ii) affects
the ability of the Company to perform its covenants, agreements and obligations under this
Agreement or (iii) relates to the Company and which might reasonably be expected to deter a
Purchaser from entering into this Agreement or any other agreements entered into between a
Purchaser and the Company in connection with the transactions contemplated hereby.
	 
	4.  	REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS

Each Purchaser, severally and not jointly, represents and warrants to the Company, with
respect only to itself, that:

4.1 unless such Purchaser has advised the Company to the contrary, and the Company has determined
an exemption exists notwithstanding, such Purchaser is an “accredited investor” within the meaning
of Rule 501 of Regulation D under the Securities Act;

4.2 such Purchaser has sufficient knowledge and experience in investing in companies similar to the
Company so as to be able to evaluate the risks and merits of its investment in the Company and is
able financially to bear the risks thereof;

4.3 such Purchaser has had an opportunity to discuss at its option, the Company’s business,
management and financial affairs with the Company, and has received and reviewed the Confidential
Private Placement Memorandum dated October 9, 2001 (“PPM”) prepared in

 

 

- 23 -

connection with the Company’s offering of the Series B Preferred Stock described herein. The
foregoing does not, however, limit or modify the representations or warranties of the Company in
Section 3 of this Agreement or the right of such Purchaser to rely thereon;

4.4 the Series B Preferred Shares being purchased by such Purchaser are being acquired for its own
account for the purpose of investment and not with a view to or for sale in connection with any
distribution thereof;

4.5 such Purchaser understands that (i) the Series B Preferred Shares and the Conversion Shares
have not been registered under the Securities Act by reason of their issuance in a transaction
exempt from the registration requirements of the Securities Act, including but not limited to,
pursuant to Section 4(2) thereof or Rule 506 promulgated under the Securities Act, (ii) the Series
B Preferred Shares and, upon conversion thereof, the Conversion Shares must be held indefinitely
unless a subsequent disposition thereof is registered under the Securities Act or is exempt from
such registration, (iii) the Series B Preferred Shares and
the Conversion Shares will bear a legend
to such effect and (iv) the Company will make a notation on its transfer books to such effect;

4.6 such Purchaser has no present need for liquidity in connection with its purchase of the Series
B Preferred Shares;

4.7 the purchase of the Series B Preferred Shares is consistent with the general investment
objectives of such Purchaser, and such Purchaser understands that the purchase of the Series B
Preferred Shares involves a high degree of risk, and there may never be an established market for
the Company’s capital stock; and

4.8 if the Purchaser is not a U.S. person within the meaning of Regulation S (as defined in the
Securities Act) and the investment in the Company is not being made on behalf of or for the account
of any U.S. person, such Purchaser, severally and not jointly, further represents and warrants to
the Company, with respect only to itself, that it cannot offer or sell the shares in the United
States or to U.S. Persons (other than distributors) unless the shares are registered under the
Securities Act or an exemption from the registration requirements of the Securities Act is
available.

5. CONDITIONS TO THE OBLIGATIONS OF THE PURCHASERS

The obligation of each Purchaser to purchase and pay for the Series B Preferred Shares being
purchased by such Purchaser at a Closing is subject to the satisfaction, on or before the
applicable Closing Date, of the following conditions, any of which may be waived in whole or in
part in writing by the particular Purchaser:

5.1 Certificate of Good Standing. A certificate of good standing for the Company dated no
earlier than fifteen (15) days prior to the applicable Closing Date shall have been provided to
the Purchasers.

5.2 Legal Opinion. Delivery to the Purchasers of an opinion of legal counsel for the
Company, dated as of the applicable Closing Date, reasonably satisfactory to the Purchasers.

5.3 Representations and Warranties to be True_and Correct. The representations and
warranties contained in Section 3 hereof shall be true, complete and correct on and as of the

 

 

- 24 -

applicable Closing Date with the same force and effect as though such representations and
warranties had been made on and as of such date (provided that in connection with Closings after
the First Closing such representations and warranties may be qualified by any supplement to the
Disclosure Schedule resulting from any event occurring after the First Closing) and the President
and Treasurer of the Company shall, on behalf of the Company, deliver to the Purchasers at each
such Closing, a certificate to such effect dated as of the applicable Closing Date.

5.4 Business and Assets. The business and assets of the Company shall not have been
adversely affected prior to the applicable Closing; and the President and Treasurer of the Company
shall, on behalf of the Company, deliver to the Purchasers at such Closing Date a certificate to
such effect, dated as of the applicable Closing Date.

5.5 Secretary’s
Certificate. The Purchasers shall have received from the Company’s
Secretary a certificate having attached thereto (i) the Amended and Restated Certificate of
Incorporation, (ii) the by-laws as in effect at the time of the applicable Closing, (iii)
resolutions approved by the Board of Directors authorizing the transactions contemplated hereby and
(iv) resolutions approved by the Company’s stockholders authorizing the transactions contemplated
hereby.

5.6 Certificate of
Incorporation. No amendments to the Amended and Restated Certificate of
Incorporation shall have been effected or approved and the Amended and Restated Certificate of
Incorporation shall be of the form attached hereto as
Schedule 3.3.

5.7 Performance. The Company shall have performed and complied with all obligations,
conditions and agreements contained herein required to be performed or complied with by it on or
prior to the applicable Closing Date, and the President and Treasurer of the Company shall, on
behalf of the Company, deliver to the Purchasers at such Closing Date a certificate to such effect,
dated as of the applicable Closing Date.

5.8 Pre-emptive Rights. Any pre-emptive, first refusal or other rights with respect to the
issuance of the Series B Preferred Shares or the Conversion Shares shall have been appropriately
honoured or irrevocably waived.

5.9 Stockholders’ Agreement. The Stockholders’ Agreement, in the form attached hereto as
Schedule_5.9 (the “Stockholders’ Agreement”) shall have been executed by the Company, the
Founder Investors and the holders of Series A Shares and shall be delivered to the Purchasers for
execution contemporaneously herewith.

5.10 Registration Rights Agreement. The Registration Rights Agreement, in the form
attached hereto as Schedule 5.10 (the “Registration Rights Agreement”) shall have been
executed by the Company and the holders of Series A Shares and shall be delivered to the Purchasers
for execution contemporaneously herewith.

5.11 Board of Directors. As of the applicable Closing Date, the number of directors
constituting the Board of Directors shall have been set at nine (9) and as of the First Closing the
following persons shall have been elected to the Board of Directors: Dr. Kenneth C. Carter, Dr.
Alan G. Walton, Bradley G. Lorimier, Dr. William Scott, Dr. Ivor Royston, Dr. Luc Marengere,
Patrick Van Beneden and Raymond Whitaker. The ninth (9th) member of the board shall be appointed in
accordance with the Stockholders Agreement.

 

 

- 25 -

5.12 Governmental Consents & Approvals. Except for the notices required or permitted
to be filed after the applicable Closing Date with certain federal and state securities
commissions, which notices the Company will file on a timely basis, the Company shall have obtained
all approvals of any Governmental Body that are required in connection with the lawful sale and
issuance of the Series B Preferred Stock.

5.13 Third-Party and Existing Shareholders’ Consent. The Company shall have obtained any
consents or waivers necessary to execute and deliver this Agreement, the Stockholders’ Agreement
and the Registration Rights Agreement and to carry out the transactions contemplated hereby and
thereby, and such consents and waivers shall be in full force and effect at the applicable Closing.

5.14 Maryland Department of Business and Economic Development. With respect only to the
Closing at which the Maryland Department of Business and Economic Development (“MDBED”) becomes a
Purchaser, the Company shall have executed and delivered to MDBED such documents (including without
limitation an application affidavit, an investment certification, and a stock repurchase agreement)
as MDBED may reasonably request in order to implement the terms and conditions set forth in the
Commitment Letter of MDBED to the Company dated February 26, 2001, all of which documents shall be
in form and substance satisfactory to MDBED.

5.15 Legality of Transaction. The purchase of the Series B Preferred Stock by the other
Purchasers hereunder shall be legally permitted by all laws and regulations to which such other
Purchasers are subject.

5.16 Due Diligence. Each Purchaser shall have had the opportunity to conduct a customary
due diligence review of all books, records, properties, and personnel of the Company and any other
information reasonable requested by such Purchaser, all to its full satisfaction.

5.17 All Proceedings to be Satisfactory. All corporate and other proceedings to be taken by
the Company in connection with the transactions contemplated hereby and all documents and
instruments incident thereto shall be reasonably satisfactory in form and substance to the
Purchasers and their counsel and the Purchasers and their counsel shall have received all such
counterpart originals or certified or other copies of such documents
as they may reasonable request.

5.18 Minimum Commitment. The Company shall receive at the First Closing a minimum of
$38,000,000, of which a minimum of $15,000,000 shall be from holders of Series A Preferred Stock
and a minimum of $23,000,000 shall be from Persons who are not stockholders of the Company on the
date hereof (provided that one such Person other than Sofinov purchases at least $5,000,000 of
Series B Preferred Stock).

5.19 Key-Person Life Insurance. The Company shall have taken out key-person life
insurance from an insurer of recognized responsibility in an amount of at least $1,000,000 on the
life of Dr. Kenneth C. Carter, the proceeds of such policies being payable to the Company as
beneficiary.

5.20 Budgets, Operational Plan and Corporate Objectives. The Company shall have
submitted to the Purchasers a detailed budget and operational plan and corporate objectives

 

 

- 26 -

through the end of 2002, copies of which are attached hereto as Schedule 5.20
(collectively, the “Plan”).

	6.  	INDEMNIFICATION
	 
	6.1  	Definitions. As used in this Section 6:
	 
	6.1.1  	“Claim” means any act, omission or state of facts and any demand, action, suit, proceeding,
investigation, arbitration, trial, claim, assessment, judgment, settlement or compromise
relating thereto which may give rise to a right to indemnification under Sections 6.2 or 6.3
hereof;
	 
	6.1.2  	“Direct Claim” means any Claim by an Indemnified Party against an Indemnifying Party which
does not result from a Third Party Claim;
	 
	6.1.3  	“Indemnifying Party” means any party obligated to provide indemnification under this
Agreement;
	 
	6.1.4  	“Indemnified Party” means any party entitled to indemnification under this
Agreement;
	 
	6.1.5  	“Indemnity Payment” means the amount of each Loss required to be paid pursuant to Sections
6.2 or 6.3 hereof;
	 
	6.1.6  	“Loss” means any and all loss (including diminution in value), liability, damage, cost,
expense, charge, fine, penalty or assessment, resulting from or arising out of any Claim,
including the costs and expenses of any action, suit, proceeding, demand, assessment,
judgment, settlement or compromise relating thereto and all interest, fines and penalties and
reasonable attorneys’, accountants’ and experts’ fees and expenses incurred in connection
therewith; except that “Loss” shall not include any special, incidental, indirect, punitive or
consequential damages; and
	 
	6.1.7  	“Third Party Claim” means any Claim asserted against an Indemnified Party by any Person who
is not a party to this Agreement.

6.2 Indemnification by the Company. The Company hereby agrees to indemnify and save and hold
harmless the Purchasers from and against any Loss suffered or incurred, directly or indirectly, by
the Purchasers as a result of, arising out of or relating to:

	6.2.1  	any violation, contravention or breach of any covenant, agreement or obligation of the
Company under or pursuant to this Agreement, as well as any Claim by any Person containing
allegations which, if true, would constitute such an event; and
	 
	6.2.2  	any breach of any representation or warranty made by the Company in this Agreement, as
well as any Claim by any Person containing allegations which, if true, would constitute such
an event.

6.3 Indemnification by Purchasers. Each Purchaser hereby agrees, severally and not jointly, to
indemnify and save and hold harmless the Company from and against any Loss

 

 

- 27 -

suffered or incurred, directly or indirectly, by the Company as a result of, arising out of
or relating to:

	6.3.1  	any violation, contravention or breach of any covenant, agreement or obligation of such
Purchaser under or pursuant to this Agreement, as well as any Claim by any Person containing
allegations which, if true, would constitute such an event; and
	 
	6.3.2  	any breach of any representation or warranty made by such Purchaser in this Agreement, as
well as any Claim by any Person containing allegations which, if true, would constitute such
an event.

6.4 Payment and Interest. The Indemnifying Party shall reimburse, on demand, to the Indemnified
Party the amount of each Loss suffered or incurred by the Indemnified Party, as of the date that
the Indemnified Party incurs such Loss, together with interest thereon from the aforesaid date
until payment in full at a rate per annum equal to the Prime Rate, plus three (3) percentage
points.

6.5 Notification. Promptly upon obtaining knowledge thereof, the Indemnified Party shall
notify the Indemnifying Party of each Claim which the Indemnified Party has determined has given or
could give rise to indemnification under this Section 6, describing such Claim in reasonable
detail. In circumstances where the Indemnifying Party is notified of such Claim but not promptly,
the Indemnifying Party shall not be relieved from any duty to indemnify and save and hold harmless
which otherwise might exist with respect to such Claim unless (and only to that extent) the
omission to notify promptly materially prejudices the ability of the Indemnifying Party to exercise
its right to defend provided in this Section 6.

6.6 Defense of Third Party Claims. The Indemnifying Party shall have the right, after
receipt of the Indemnified Party’s notice under Section 6.5 hereof with respect to a Third Party
Claim and upon giving written notice to the Indemnified Party within ten (10) Business Days of such
receipt, and subject to the rights of any insurer or other Person having potential liability
therefor, to defend the Third Party Claim at its own cost and expense with counsel of its own
selection, provided that:

	6.6.1  	the Indemnified Party shall at all times have the right to fully participate in the defense
at its own expense and in any event shall be consulted with and apprised of the ongoing status
of the Third Party Claim and provided reasonable particulars relating thereto and the defense
thereof;
	 
	6.6.2  	the Third Party Claim seeks only monetary damages and does not seek any injunctive or other
relief against the Indemnified Party;
	 
	6.6.3  	the Indemnifying Party unconditionally acknowledges in writing its obligation to indemnify
and save and hold the Indemnified Party harmless with respect to the Third Party Claim;
	 
	6.6.4  	legal counsel chosen by the Indemnifying Party is satisfactory to the Indemnified Party,
acting reasonably; and

 

 

- 28 -

	6.6.5  	amounts payable by the Indemnifying Party pursuant to a Third Party Claim shall be
paid in accordance with the terms of the settlement or judgment, as applicable, but in any
event prior to the expiry of any delay for a judgment to become executory.
	 
	6.7  	Settlement of a Third Party Claim. The Indemnifying Party shall not be permitted to
compromise and settle or to cause a compromise and settlement of any Third Party Claim, without the
prior written consent of the Indemnified Party.

	6.8  	Waiver of Right to Defend Third Party Claims. If the Indemnifying Party fails:
	 
	6.8.1  	within fifteen (15) Business Days from receipt of the notice of a Third Party Claim to give
notice of its intention to defend the Third Party Claim in accordance with Section 6.6 hereof,
or
	 
	6.8.2  	to comply at any time with any of subsections 6.6.1 through 6.6.5 (inclusively) hereof,

the Indemnifying Party shall be deemed to have waived its right to defend the Third Party Claim
and the Indemnified Party shall have the right (but not the obligation) to undertake the defense
of the Third Party Claim and compromise and settle the Third Party Claim on behalf, for the
account and at the risk and expense of the Indemnifying Party.

	6.9  	Direct Claims. If the Indemnifying Party fails to respond in writing to any written notice of a
Direct Claim given by the Indemnified Party pursuant to Section 6.5 hereof, and make an Indemnity
Payment to the Indemnified Party within ten (10) Business Days thereof, the Indemnifying Party
shall be deemed to have rejected such Direct Claim, in which event the Indemnified Party shall be
free to pursue such rights, recourses and remedies as may be available to it.
	 
	6.10  	De Minimis. Notwithstanding anything contained herein to the contrary:
	 
	6.10.1  	none of the Purchasers shall be entitled to indemnification for any Loss suffered or
incurred, directly or indirectly, by it as a result of, arising out of or relating to any
breach of any representation or warranty made by the Company in this Agreement, or with
respect to any Claim by any Person containing allegations which, if true, would constitute a
breach of any such representation or warranty made by the Company in this Agreement (“Company
Breaches”), unless the aggregate of all amounts payable by the Company to the Purchasers in
connection therewith exceeds $150,000. The Company acknowledges and agrees that the said sum
of $150,000 is not a deductible and that once the aggregate of all amounts payable by the
Company to the Purchasers for Company Breaches exceeds $150,000, each Purchaser shall be
entitled to recover from the Company the full amount payable in connection therewith;
	 
	6.10.2  	the Company shall not be entitled to indemnification for any Loss suffered or incurred,
directly or indirectly, by the Company as a result of, arising out of or relating to any
breach of any representation or warranty made by a particular Purchaser in this Agreement, or
with respect to any Claim by any Person containing allegations which, if true, would
constitute a breach of any such representation or warranty made by such particular purchaser
in this Agreement (“Purchaser Breaches”), unless the aggregate of all amounts payable by such
particular Purchaser to the Company in connection therewith exceeds $20,000. Each Purchaser
acknowledges and agrees that the said

 

 

- 29 -

	   	sum of $20,000 is not a deductible and that once the aggregate of all amounts payable by
it to the Company for its Purchaser Breaches exceeds $20,000, the Company shall be
entitled to recover from it the full amount payable in connection therewith.

6.11 Cumulative Rights. The rights, recourses and remedies provided to an Indemnified
Party under this Section 6 are cumulative with any other right, recourse and remedy such
Indemnified Party may have or may hereafter acquire under Applicable Law, and any right, recourse
or remedy of such Indemnified Party may be asserted completely against the indemnifying Party,
without regard to the rights, recourses or remedies the Indemnified Party may have against any
other Person.

6.12 Disclaimer of Third Party Beneficiaries. Subject to Section 8.5 hereof, it is not
the purpose, intent or effect of this Agreement, or any part hereof, to create any rights, claims
or cause of action in favour of any persons or entities who are not named parties to this
Agreement. The parties to this Agreement specifically agree that this Agreement is intended solely
for the benefit of the parties hereto and that there are no third party beneficiaries to this
Agreement.

7. COVENANTS OF THE COMPANY

7.1 Financial Statements,
Reports, etc. The Company covenants and agrees with each
Purchaser that so long as such Purchaser owns, together with its Affiliates, at least two hundred
and fifty thousand (250,000) shares of Common Stock issued or issuable upon conversion of the
Series B Preferred Shares (as adjusted from time to time in the event of a stock split,
consolidation, stock dividend, distribution, reclassification or other similar event with respect
thereto):

	7.1.1  	the Company shall furnish to such Purchaser, within one hundred and twenty (120) days after
the end of each fiscal year of the Company, a consolidated balance sheet of the Company and
its subsidiaries, if any, as of the end of such fiscal year and the related consolidated
statements of operations, stockholders’ equity and cash flows for the fiscal year then ended,
prepared in accordance with Generally Accepted Accounting Principles and audited by a firm
of independent public accountants reasonably acceptable to the Purchasers;
	 
	7.1.2  	as soon as available, but in any event not later than forty-five (45) days after the end of
each of the first three quarters of each fiscal year, the Company shall furnish to such
Purchaser the unaudited balance sheet of the Company as at the end of each such period and the
related unaudited consolidated statement of operations, stockholders’ equity and cash flows of
the Company for such quarterly period and for the elapsed period in such fiscal year, all in
reasonable detail and stating in comparative form the figures as at the end of and for the
comparable periods of the preceding fiscal year and to the current year’s budget;
	 
	7.1.3  	as soon as available, but in any event not later than twenty (20) days after the end of each
of month, the Company shall furnish to such Purchaser the unaudited summary balance sheet of
the Company as at the end of each such month and the related unaudited summary consolidated
statement of operations, stockholders’ equity and cash flows of the Company for such month;

 

 

- 30 -

	7.1.4  	as soon as available, but in any event not later than thirty (30) days prior to the end of
each fiscal year of the Company, the Company shall furnish to such Purchaser the financial
plan of the Company for the next succeeding fiscal year, including but not limited to a cash
flow projection, operating budget and balance sheet calculated monthly, as contained in its
operating plan approved by the Board of Directors;
	 
	7.1.5  	the obligations of the Company to furnish financial information to the Purchasers pursuant
to this Section 7.1 shall terminate upon the earlier of (i) the completion of a firm
commitment underwritten public offering of the Company’s securities pursuant to which the
price per share is not less than $7,0552 (as adjusted from time to time in the event of a
stock split, consolidation, stock dividend, distribution, reclassification or other similar
event) and the aggregate price paid by the public for the purchase of securities is at least
$40,000,000 (a “Qualified IPO”) and (ii) such time as the Company becomes subject to the
periodic reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
as amended.

7.2 Reserve for Conversion of Shares. The Company shall at all times reserve and keep
available out of its authorized but unissued shares of Common Stock, for the purpose of effecting
the conversion of the Series B Preferred Shares and otherwise complying with the terms of this
Agreement, such number of its duly authorized shares of Common Stock as shall be sufficient to
effect the conversion of the Series B Preferred Shares from time to time outstanding or otherwise
to comply with the terms of this Agreement. If at any time the number of authorized but unissued
shares of Common Stock shall not be sufficient to effect the conversion of the Series B Preferred
Shares or otherwise to comply with the terms of this Agreement, the Company will forthwith take
such corporate action as may be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purposes. The Company will obtain
any authorization, consent, approval or other action by or make any filing with any Governmental
Body that may be required under Applicable Law in connection with the issuance of shares of Common
Stock upon conversion of the Series B Preferred Shares.

7.3 1999 Plan Pool. The Company shall ensure that at no time may the number of Common
Stock that have been or may be acquired pursuant to the exercise of options granted under the 1999
Plan or under any other similar plan adopted by the Board of Directors exceed fifteen percent (15%)
of the then outstanding Common Stock (including any Common Stock that may be issued pursuant to the
exercise of any and all (a) options, warrants or similar rights granted from time to time to
acquire the Commons Stock of the Company and (b) conversion rights attached to the Preferred Shares
or any other convertible securities that may be issued by the Company from time to time).

7.4 Amendments to 1999 Plan. The Company shall use its Best Efforts to amend, in a manner
acceptable to the Board of Directors, within ninety (90) days of the First Closing Date, the 1999
Plan, retroactively to the date of its inception, so as to include the following:

	7.4.1  	a requirement that each Option Stockholder be prohibited from selling its shares of Common
Stock acquired under the 1999 Plan during the one hundred and eighty (180) days following the
filing of a registration statement pursuant to the Securities Act;

 

 

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	7.4.2  	the obligation of each Option Stockholder to sell all of the shares of Common Stock acquired
under the 1999 Plan in the event of a sale by stockholders of a majority of the shares of
stock of the Company (drag-along right); and
	 
	7.4.3  	a right of first refusal in favour of the Company and the holders of Preferred Stock in
respect of the sale by each Option Stockholder of its shares of Common Stock acquired under
the 1999 Plan, which right shall be consistent with the by-laws of the Company.

7.5 Agreement with Psychiatric Genomics, Inc. The Company shall use its Best Efforts to
conclude an agreement within ninety (90) days of the First Closing Date with Psychiatric Genomics,
Inc., defining their relationship in connection with their co-occupancy of the Premises, on terms
and conditions acceptable to the Board of Directors.

7.6 Inspection, Consultation and Advice. The Company shall permit and cause each of its
subsidiaries (if any) to permit each Purchaser that holds, together with its Affiliates, at least
two hundred and fifty thousand (250,000) shares of Common Stock issued or issuable upon conversion
of the Series B Preferred Shares (as adjusted from time to time in the event of a stock split,
consolidation, stock dividend, distribution, reclassification or other similar event with respect
thereto) (and such professional advisers as any such Purchaser may designate) reasonable access at
reasonable frequency during normal business hours to visit and inspect any of the properties of the
Company and its subsidiaries, to examine their Books and Records and to take copies and extracts
therefrom, to discuss the affairs, finances and accounts of the Company and its subsidiaries with
their officers, employees and public accountants (and the Company hereby authorizes said
accountants to discuss with such Purchaser and such representatives and designees such affairs,
finances and accounts), and to consult with and advise the management of the Company and its
subsidiaries as to its affairs, finances and accounts; provided, however, that, in conducting its
visits and inspections, such Purchaser and its representatives and designees shall undertake
reasonable efforts to avoid interference with the ordinary operation of the Company’s business; and
provided, further, that the Company may require, as a condition to the disclosure of any of the
Company’s confidential or proprietary information to any such Purchaser or any representative or
designee of such Purchaser, that such Purchaser and such representative or designee execute a
non-disclosure agreement in form reasonably acceptable to the Company. The rights provided for in
this Section 7.5 shall terminate on a Qualified IPO.

7.7 Books and Records. The Company shall keep and maintain complete and accurate Books and
Records and Tax Returns.

7.8 Taxes. The Company shall pay and discharge all Taxes due by it when due.

7.9 Compliance. The Company shall comply with all Applicable Laws.

7.10 Equipment. The Company shall keep its Equipment in good working order and operating
condition and regularly serviced and properly maintained, and keep the Assets insured in the manner
provided herein.

7.11 Existence: IP Rights. The Company shall properly maintain and protect its corporate existence
and Intellectual Property Rights.

 

 

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7.12 Confidentiality
Agreements. The Company shall ensure that all its officers, employees
and consultants are bound by confidentiality agreements adequate to protect the Company’s
confidential Intellectual Property Rights.

7.13 Restrictive
Agreements Prohibited. Neither the Company nor any of its subsidiaries
(if any) shall become a party to any agreement which by its terms restricts the Company’s
performance of this Agreement or conflicts with the Amended and Restated Certificate of
Incorporation.

7.14 Use of Proceeds. The Company shall use the proceeds from the sale of the Series B
Preferred Shares hereunder as set forth in the Plan.

7.15 Restrictions on Borrowing and Capital Expenditures. The Company shall not, without the
prior consent of a majority of the Board of Directors, (i) incur any single debt obligation in
excess of $100,000, or (ii) incur, in any fiscal year, debt in an aggregate amount in excess
$200,000, or (iii) make any single capital expenditure in excess of $100,000, or (iv) make, in any
fiscal year, capital expenditures in an aggregate amount in excess of $200,000.

7.16 Key Person Life Insurance. The Company shall maintain in force, an insurance policy
from an insurer of recognized responsibility in the amount of at least $1,000,000 on the life of
each of the Chief Executive Officer, Chief Financial Officer and Chief Scientific Officer,
respectively, of the Company, with the proceeds of such policies payable to the Company as
beneficiary, and all premiums, fees or charges when due thereon shall be promptly paid in full.

7.17 Directors and Officers Insurance. The Company shall maintain in full force a
directors’ and officers’ (including employment practices) liability insurance policy from an
insurer of recognized responsibility, for a minimum amount of $4,000,000 and all premiums, fees or
charges when due thereon shall be promptly paid in full.

8. MISCELLANEOUS

8.1 Preamble. The preamble hereto shall form an integral part hereof.

8.2 Expenses. Each party hereto will pay its own expenses in connection with the
transactions contemplated hereby, whether or not such transactions shall be consummated; provided,
however, that (a) the Company shall pay the reasonable fees and expenses of Lapointe Rosenstein,
counsel to the Purchasers, in connection with the transactions contemplated hereby, as
well as the reasonable fees and expenses incurred by Sofinov in connection with its intellectual
property and technology due diligence, (b) the Company shall pay the reasonable fees and expenses
(not to exceed $5,000) of Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C., counsel to the
Series A Shareholders, in connection with the transactions contemplated hereby, and (c) if and only
if the Closing occurs, the Company will reimburse the Placement Agent for expenses pursuant to the
Engagement Letter.

8.3 Survival of Agreements. All covenants and agreements made herein or in any
agreement, certificate or instrument delivered to the Purchasers pursuant to or in connection with
this Agreement shall survive execution and delivery of this Agreement indefinitely, notwithstanding
any investigation concluded by any of the parties hereto. The representations and warranties set
forth herein or in any agreement, certificate or instrument delivered to the Purchasers pursuant to
or in connection with this Agreement shall survive execution and

 

 

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delivery of this Agreement, notwithstanding any investigation concluded by any of the parties
hereto, until the fifth (5th) anniversary of the First Closing Date,
other than:

	8.3.1  	the representations and warranties relating to any Tax Claim as set out in Section 3.30 or
3.33 hereof, which shall survive execution and delivery of this Agreement until the later of
(a) the date upon which the liability to which any such Tax Claim may relate is barred by all
applicable statues of limitation or (b) the date upon which any claim for refund or credit
related to such Tax Claim is barred by all applicable statutes of limitations, and
	 
	8.3.2  	the representations and warranties contained in Sections 3.1, 3.2, 3.3, 3.4, 3.5, 3.6,
3,7, 3.8, 3.9, 3.14, 3.17, 3.18, 3.21, 3.24, 3.26, 3,27 and 3.39, which shall survive the
date hereof indefinitely.

The representations and warranties of the Purchasers set forth in Section 4 of this Agreement
shall survive execution and delivery of this Agreement indefinitely.

8.4 Brokerage. The Company will indemnify and hold the Purchasers harmless against and in respect
of any claim for brokerage or other commissions relative to this Agreement or to the transactions
contemplated hereby, based in any way on agreements, arrangements or understandings made or claimed
to have been made by the Company with any third party.

8.5 Parties in Interest. Except as otherwise provided for herein, this Agreement shall bind
and inure to the benefit of the parties hereto and their respective successors, assigns and legal
representatives.

8.6 Notices. All notices, requests, consents and other communications hereunder shall be in
writing and shall be (i) delivered in person, or (ii) mailed by certified or registered mail,
return receipt requested, or (iii) sent by a recognized overnight courier service, addressed as
follows:

	8.6.1  	if to the Company, at:

	 	   	Avalon Pharmaceuticals, inc.

19 Firstfield Road

Gaithersburg, Maryland 20878
Attention: President

	8.6.2  	if to a Purchaser, at the address of such Purchaser set forth on Schedule i hereto.
	 
	8.6.3  	in the case of the Company, with a copy to:

	 	   	Schmeltzer, Aptaker & Shepard, PC
 2600
Virginia Avenue
The Watergate
Suite 1000

Washington, DC 20037
Attention: Mark I. Gruhin, Esq.

	8.6.4  	in the case of Sofinov Société Financiére d’lnnovation Inc., with a copy to:

 

 

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	 	   	Lapointe Rosenstein

1250 René-Lévesque Blvd. West

Suite 1400

Montreal (Quebec)

H3B 5E9

Attention: Perry Kliot

or, in any such case, at such other address as shall have been furnished in writing, in the same
manner as contemplated above, by the addressee to the others. Notices shall be effective (i) upon
delivery, if delivered in person, (ii) five (5) days after deposit in the mail, if mailed, and
(iii) on the day following deposit with the courier service, if sent by overnight courier.

8.7 Currency. Unless otherwise specified, all references to dollar amounts in this Agreement are
to the lawful currency of the United States of America.

8.8 Governing Law, Jurisdiction. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without application of the conflicts of laws
principles thereof. The Purchasers hereby agree that this Agreement shall be enforced by them only
in courts located within the United States and such courts shall have venue and exclusive subject
matter and personal jurisdiction and consent to service of process by registered mail, return
receipt requested, or by any other manner provided by law. Notwithstanding anything contained
herein to the contrary, the Purchasers shall have the right to take any and all actions and
institute any and all proceedings in connection with this Agreement with any Governmental Body in
any jurisdiction anywhere in the world to recognize and give full force and effect to any
judgement rendered in the United States, and in the event that any such judgement is not
recognized and given full force and effect in any jurisdiction outside the United States, the
Purchasers shall have the right to take any and all actions and institute any and all proceedings
in connection with this Agreement with any Governmental Body in such
jurisdiction.

8.9 Entire Agreement. This Agreement constitutes the sole and entire agreement of the
parties with respect to the subject matter hereof.

8.10 Counterparts. This Agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same instrument.
Signatures delivered by facsimile transmission shall be deemed to be originals notwithstanding the
failure subsequently to deliver a hard copy thereof.

8.11 Amendments and Waivers. This Agreement may be amended or modified, and provisions
hereof may be waived, only with the written consent of the Company and of Purchasers holding, in
the aggregate, at least sixty percent (60%) of the Common Stock issued or issuable upon the
conversion of the Series B Preferred Shares held by all Purchasers. Any amendment or waiver
effected in accordance with this paragraph shall be binding upon each Purchaser. Notwithstanding
anything contained herein to the contrary, the provisions of this Section 8.11 shall not be
amended, modified or waived without the written consent of all the parties hereto.

8.12 Acknowledgement Regarding MDBED. The parties hereto acknowledge that neither is it
their intention that this Agreement cause nor shall this Agreement be interpreted in any manner as
causing any amendment to the stock repurchase agreement dated April 11, 2000 between the Company
and MDBED.

 

 

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8.13 Severability. If any provision of this Agreement shall be declared void or unenforceable by
any judicial or administrative authority, the validity of any other provision and of the entire
Agreement shall not be affected thereby.

8.14 Titles and Subtitles. The titles and subtitles used in this Agreement are for convenience
only and are not to be considered in construing or interpreting any term or provision of this
Agreement.

8.15 No Waiver; Cumulative Remedies. No failure or delay on the part of any party to this
Agreement in exercising any right, power or remedy hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy hereunder. The
remedies herein provided are cumulative and not exclusive of any remedies provided by law.

IN WITNESS WHEREOF, the Company and the Purchasers have executed this Agreement as of the day and
year first above written.

AVALON PHARMACEUTICALS, INC.

	 	 	 	 	 
	Per:
	 	/s/  Kenneth C. Carter, Ph. D.	 	 
	

	 	 	 	 
	

	 	Kenneth C. Carter, Ph.D.

President & CEO

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