EXHIBIT 10.5
COLLATERAL THERAPEUTICS, INC.
------------------------
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
June 30, 1997
TABLE OF CONTENTS
Page
SECTION 1
RESTRICTIONS ON TRANSFERABILITY OF
SECURITIES; REGISTRATION RIGHTS . . . . . . . . . 1
1.1 Certain Definitions. . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Requested Registration . . . . . . . . . . . . . . . . . . . . . . 3
1.3 Company Registration . . . . . . . . . . . . . . . . . . . . . . . 5
1.4 Expenses of Registration . . . . . . . . . . . . . . . . . . . . . 6
1.5 Registration on Form S-3 . . . . . . . . . . . . . . . . . . . . . 7
1.6 Registration Procedures. . . . . . . . . . . . . . . . . . . . . . 7
1.7 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.8 Information by Holder. . . . . . . . . . . . . . . . . . . . . . . 11
1.9 Limitations on Registration of Issues of Securities. . . . . . . . 11
1.10 Rule 144 Reporting . . . . . . . . . . . . . . . . . . . . . . . . 11
1.11 Transfer or Assignment of Registration Rights. . . . . . . . . . . 12
1.12 Restrictions on Transfer . . . . . . . . . . . . . . . . . . . . . 12
1.13 "Market Stand-Off" Agreement . . . . . . . . . . . . . . . . . . . 13
1.14 Allocation of Registration Opportunities . . . . . . . . . . . . . 14
1.15 Delay of Registration. . . . . . . . . . . . . . . . . . . . . . . 15
1.16 Termination of Registration Rights . . . . . . . . . . . . . . . . 15
1.17 Limitations on Subsequent Registration Rights. . . . . . . . . . . 15
SECTION 2
COVENANTS OF THE COMPANY. . . . . . . . . . . 15
2.1 Basic Financial Information. . . . . . . . . . . . . . . . . . . . 15
2.2 Additional Information and Rights. . . . . . . . . . . . . . . . . 16
2.3 Right of First Offer . . . . . . . . . . . . . . . . . . . . . . . 17
2.4 Grant of Rights to Third Parties . . . . . . . . . . . . . . . . . 19
2.5 Termination of Covenants . . . . . . . . . . . . . . . . . . . . . 19
SECTION 3
COVENANTS OF THE INVESTORS . . . . . . . . . . 19
3.1 Increase in Size of Option Pool. . . . . . . . . . . . . . . . . . 19
3.2 Right of First Refusal . . . . . . . . . . . . . . . . . . . . . . 19
3.3 Grant of Rights to New Investors . . . . . . . . . . . . . . . . . 21
SECTION 4
MISCELLANEOUS. . . . . . . . . . . . . . 22
4.1 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.2 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . 22
4.3 Entire Agreement; Amendment; Waiver. . . . . . . . . . . . . . . . 22
4.4 Notices, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(i)
4.5 Delays or Omissions. . . . . . . . . . . . . . . . . . . . . . . . 22
4.6 Rights; Separability . . . . . . . . . . . . . . . . . . . . . . . 23
4.7 Information Confidential . . . . . . . . . . . . . . . . . . . . . 23
4.8 Titles and Subtitles . . . . . . . . . . . . . . . . . . . . . . . 23
4.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.10 Restatement of Prior Agreement.. . . . . . . . . . . . . . . . . . 23
4.11 Observer Rights. . . . . . . . . . . . . . . . . . . . . . . . . . 23
EXHIBIT A - Schedule of Investors
Attachment A
(ii)
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
------------------------------------------------
This Amended and Restated Investors' Rights Agreement (this "Agreement") is
made and entered into as of the 30th day of June, 1997 by and among COLLATERAL
THERAPEUTICS, INC., a California corporation (the "Company") and each of the
entities and individuals identified on EXHIBIT A attached hereto (the
"Investors").
RECITALS
WHEREAS, the Company and Schering Berlin Venture Corp. ("Schering") are
parties to a certain Investor Rights Agreement dated as of May 7, 1996, as
amended through the date hereof (the "Prior Agreement"), pursuant to which
Schering possesses registration rights, information rights, rights of first
refusal and other rights, and the Company is obligated thereunder;
WHEREAS, the Company and certain of the Investors are parties to the
Series C Preferred Stock Purchase Agreement dated the date hereof (the "Series C
Agreement"); and
WHEREAS, in order to induce the Company to enter into the Series C
Agreement and to induce such Investors to purchase shares of the Company's
Series C Preferred Stock (the "Series C Preferred") pursuant to the Series C
Agreement, the Investors and the Company hereby agree that this Agreement shall
amend and restate the Prior Agreement so that this Agreement shall govern the
obligations of the Company to register the resale of shares of Common Stock
issuable to the Investors upon conversion of their shares of the Company's
Series A Preferred Stock (the "Series A Preferred"), Series B Preferred Stock
(the "Series B Preferred") and/or Series C Preferred, and certain other matters
as set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, all parties hereto further agree as follows:
SECTION 1
RESTRICTIONS ON TRANSFERABILITY OF
SECURITIES; REGISTRATION RIGHTS
1.1 CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following respective meanings:
(a) "COMMISSION" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
1
(b) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, or any similar successor federal statute and the rules and regulations
thereunder, all as the same shall be in effect from time to time.
(c) "HOLDER" shall mean any Investor who holds Registrable Securities
and any holder of Registrable Securities to whom the registration rights
conferred by this Agreement have been transferred in compliance with
Section 1.11 hereof.
(d) "INITIAL OFFERING" shall mean the Company's first firm commitment
underwritten public offering of its Common Stock registered under the Securities
Act.
(e) "INITIATING HOLDERS" shall mean any Holder or Holders who in the
aggregate hold not less than fifty percent (50%) of the outstanding Registrable
Securities. For purposes of such calculation, Holders of Shares shall be
considered to hold the shares of Common Stock then issuable upon conversion of
such Shares.
(f) "OTHER SHAREHOLDERS" shall mean persons other than Holders who,
by virtue of agreements with the Company, are entitled to include their
securities in certain registrations.
(g) "REGISTRABLE SECURITIES" shall mean (i) shares of Common Stock
issued or issuable pursuant to the conversion of the Shares and (ii) any Common
Stock issued as (or issuable upon the conversion or exercise of any warrant,
right or other security which is issued as) a dividend or other distribution
with respect to or in exchange for or in replacement of the shares referenced in
(i) above; PROVIDED, HOWEVER, that Registrable Securities shall not include any
such securities sold by a person to the public either pursuant to a registration
statement or Rule 144 or sold in a private transaction in which the transferor's
rights under this Section 1 are not assigned.
(h) The terms "register", "registered" and "registration" shall refer
to a registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
(i) "REGISTRATION EXPENSES" shall mean all expenses incurred in
effecting any registration pursuant to this Agreement, including, without
limitation, all registration, qualification and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel for the Company, fees and
disbursements of one counsel for the Holders, blue sky fees and expenses,
expenses of any regular or special audits incident to or required by any such
registration, but shall not include Selling Expenses and fees and disbursements
of counsel for the Holders other than the one counsel referred to above (but
excluding the compensation of regular employees of the Company, which shall be
paid in any event by the Company).
2
(j) "RULE 144" shall mean Rule 144 as promulgated by the Commission
under the Securities Act, as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.
(k) "RULE 145" shall mean Rule 145 as promulgated by the Commission
under the Securities Act, as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.
(l) "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, or any similar successor federal statute and the rules and regulations
thereunder, all as the same shall be in effect from time to time, corresponding
to such act.
(m) "SELLING EXPENSES" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities and all
fees and disbursements of counsel for any Holder (other than the fees and
disbursements of counsel included in Registration Expenses).
(n) "SHARES" shall mean the Company's Series A Preferred, Series B
Preferred Stock and Series C Preferred Stock.
1.2 REQUESTED REGISTRATION.
(a) REQUEST FOR REGISTRATION. If the Company shall receive from
Initiating Holders at any time or times not earlier than the earlier of (i) five
(5) years after the date of this Agreement or (ii) six (6) months after the
effective date of the registration statement filed by the Company covering its
Initial Offering, a written request specifying that it is made pursuant to this
Section 1.2 that the Company effect a registration with respect to all or a part
of the Registrable Securities having a reasonably anticipated aggregate offering
price of at least $10,000,000, the Company will:
(i) promptly give written notice of the proposed
registration to all other Holders; and
(ii) as soon as practicable, use its diligent best efforts
to effect such registration (including, without limitation, filing
post-effective amendments, appropriate qualifications under applicable blue sky
or other state securities laws and appropriate compliance with the Securities
Act) as would permit or facilitate the sale and distribution of all or such
portion of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any Holder or
Holders joining in such request as are specified in a written request received
by the Company within twenty (20) days after such written notice from the
Company is effective.
The Company shall not be obligated to effect, or to take any
action to effect, any such registration pursuant to this Section 1.2:
3
(A) In any particular jurisdiction in which the
Company would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance, unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act; or
(B) After the Company has effected one (1) such
registration pursuant to this Section 1.2(a) and such registration has been
declared or ordered effective; or
(C) During the period starting with the date sixty
(60) days prior to the Company's good faith estimate of the date of filing of,
and ending on a date one hundred twenty (120) days after the effective date of,
a registration pursuant to Section 1.3 hereof; PROVIDED that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective; or
(D) If the Initiating Holders propose to dispose of
shares of Registrable Securities that may be immediately registered on Form S-3
pursuant to a request made under Section 1.5 hereof.
(b) Subject to the foregoing Section 1.2(a)(ii)(A) through (D), the
Company shall file a registration statement covering the Registrable Securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Initiating Holders; provided, however, that if (i) in
the good faith judgment of the Board of Directors of the Company, such
registration would be seriously detrimental to the Company and the Board of
Directors of the Company concludes, as a result, that it is essential to defer
the filing of such registration statement at such time, and (ii) the Company
shall furnish to such Holders a certificate signed by the president of the
Company stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company for such registration
statement to be filed in the near future and that it is, therefore, essential to
defer the filing of such registration statement, then the Company shall have the
right to defer such filing for the period during which such disclosure would be
seriously detrimental, provided, that the Company may not defer the filing for a
period of more than one hundred twenty (120) days after receipt of the request
of the Initiating Holders, and, provided further, that (except as provided in
Section 1.2(a)(ii)(C) above) the Company shall not defer its obligation in this
manner more than once in any twelve-month period.
The registration statement filed pursuant to the request of the
Initiating Holders may, subject to the provisions of Section 1.2(b) and 1.14
hereof, include other securities of the Company and may include securities of
the Company being sold for the account of the Company.
(c) UNDERWRITING. If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
Section 1.2 and the Company
4
shall include such information in the written notice referred to in Section
1.2(a)(i) above. The right of any Holder to registration pursuant to Section
1.2 shall be conditioned upon such Holder's participation in such underwriting
and the inclusion of such Holder's Registrable Securities in the underwriting
(unless otherwise mutually agreed by a majority in interest of the Initiating
Holders and such Holder with respect to such participation and inclusion) to the
extent provided herein. A Holder may elect to include in such underwriting all
or a part of the Registrable Securities it holds.
(d) PROCEDURES. If the Company shall request inclusion in any
registration pursuant to Section 1.2 of securities being sold for its own
account, or if Other Shareholders shall request inclusion in any registration
pursuant to Section 1.2, the Initiating Holders shall, on behalf of all Holders,
offer to include such securities in the underwriting and may condition such
offer on their acceptance of the further applicable provisions of this Section 1
(including Section 1.13). The Company shall (together with all Holders, and
other persons proposing to distribute their securities through such
underwriting) enter into an underwriting agreement in customary form with the
representative of the underwriter or underwriters selected for such underwriting
by the Company, which underwriter(s) are reasonably acceptable to a majority in
interest of the Initiating Holders. Notwithstanding any other provision of this
Section 1.2, if the representative of the underwriters advises the Initiating
Holders in writing that marketing factors require a limitation on the number of
shares to be underwritten, the number of shares to be included in the
underwriting or registration shall be allocated as set forth in Section 1.14
hereof. If the person who has requested inclusion in such registration as
provided above does not agree to the terms of any such underwriting, such person
shall be excluded therefrom by written notice from the Company, the underwriter
or the Initiating Holders. The securities so excluded shall also be withdrawn
from registration. Any Registrable Securities or other securities excluded
shall also be withdrawn from such registration. If shares are so withdrawn from
the registration and if the number of shares to be included in such registration
was previously reduced as a result of marketing factors pursuant to this Section
1.2(d), then the Company shall offer to all holders who have retained rights to
include securities in the registration the right to include additional
securities in the registration in an aggregate amount equal to the number of
shares withdrawn, with such shares to be allocated among such Holders requesting
additional inclusion in accordance with Section 1.14.
1.3 COMPANY REGISTRATION.
(a) COMPANY REGISTRATION. If the Company shall determine to register
any of its securities either for its own account or the account of a security
holder or holders exercising their respective demand registration rights (other
than pursuant to Section 1.2 hereof), other than a registration relating solely
to employee benefit plans, a registration relating solely to a Commission Rule
145 transaction, a registration on any registration form which does not permit
secondary sales or the first registration under the Securities Act filed by the
Company for its Initial Offering, the Company will:
5
(i) promptly give to each Holder written notice thereof;
and
(ii) use its best efforts to include in such registration
(and any related qualification under blue sky laws or other compliance), except
as set forth in Section 1.3(b) below, and in any underwriting involved therein,
all the Registrable Securities specified in a written request or requests, made
by any Holder within twenty (20) days after the written notice from the Company
described in Section 1.3(a)(i) above is effective. Such written request may
specify all or a part of a Holder's Registrable Securities for inclusion.
(b) UNDERWRITING. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 1.3(a)(i). In such event the right of any Holder to
registration pursuant to Section 1.3 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
(together with the Company and the holders of other securities of the Company
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the representative of the
underwriter or underwriters selected by the Company.
Notwithstanding any other provision of this Section 1.3, if the
representative of the underwriters advises the Company in writing that marketing
factors require a limitation on the number of shares to be underwritten, the
representative may (subject to the limitations set forth below) exclude all
Registrable Securities from, or limit the number of Registrable Securities to be
included in, the registration and underwriting. The Company shall so advise all
holders of securities requesting registration, and the number of shares of
securities that are entitled to be included in the registration and underwriting
shall be allocated first to the Company for securities being sold for its own
account and thereafter as set forth in Section 1.14. If any person does not
agree to the terms of any such underwriting, he or she shall be excluded
therefrom by written notice from the Company or the underwriter. Any
Registrable Securities or other securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration.
If shares are so withdrawn from the registration or if the number
of shares of Registrable Securities to be included in such registration was
previously reduced as a result of marketing factors, the Company shall then
offer to all persons who have retained the right to include securities in the
registration the right to include additional securities in the registration in
an aggregate amount equal to the number of shares so withdrawn, with such shares
to be allocated among the persons requesting additional inclusion in accordance
with Section 1.14 hereof.
1.4 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Section 1.3 hereof and the first registrations pursuant to Sections 1.2 and 1.5
hereof shall be borne by the Company;
6
provided, however, that if the Holders bear the Registration Expenses for any
registration proceeding begun pursuant to Section 1.2 and subsequently withdrawn
by the Holders registering shares therein, such registration proceeding shall
not be counted as a requested registration pursuant to Section 1.2 hereof,
except in the event that such withdrawal is based upon material adverse
information relating to the Company that is different from the information known
or available (upon request from the Company or otherwise) to the Holders
requesting registration at the time of their request for registration under
Section 1.2, in which event such registration shall not be treated as a counted
registration for purposes of Section 1.2 hereof, even though the Holders do not
bear the Registration Expenses for such registration. All Selling Expenses
relating to securities so registered shall be borne by the holders of such
securities pro rata on the basis of the number of shares of securities so
registered on their behalf.
1.5 REGISTRATION ON FORM S-3.
(a) FORM S-3. After the Initial Offering, the Company shall use its
best efforts to qualify for registration on Form S-3 or any comparable or
successor form or forms. After the Company has qualified for the use of Form
S-3, in addition to the rights contained in the foregoing provisions of this
Section 1, the Holders of Registrable Securities shall have the right to request
registrations on Form S-3 (such requests shall be in writing and shall state the
number of shares of Registrable Securities to be disposed of and the intended
methods of disposition of such shares by such Holder or Holders), provided,
however, that the Company shall not be obligated to effect any such registration
if (i) the Holders, together with the holders of any other securities of the
Company entitled to inclusion in such registration, propose to sell Registrable
Securities and such other securities (if any) on Form S-3 at an aggregate price
to the public of less than $1,000,000, or (ii) in the event that the Company
shall furnish the certification described in Section 1.2(b) (but subject to the
limitations set forth therein), or (iii) in a given twelve (12)-month period,
after the Company has effected one (1) such registration in any such period, or
(iv) the registration is in any jurisdiction in which the Company would be
required to qualify to do business or execute a general consent to service of
process to effect such registration.
(b) APPLICABILITY OF OTHER SECTIONS. If a request complying with the
requirements of Section 1.5(a) hereof is delivered to the Company, the
provisions of Sections 1.2(a)(i) and (ii) and Section 1.2(b) hereof shall apply
to such registration. If the registration is for an underwritten offering, the
provisions of Sections 1.2(c) and 1.2(d) hereof shall apply to such
registration.
1.6 REGISTRATION PROCEDURES. In the case of each registration effected by
the Company pursuant to Section 1, the Company will keep each Holder advised in
writing as to the initiation of each registration and as to the completion
thereof. At its expense, the Company will use its best efforts to:
7
(a) REGISTRATION EFFECTIVE. Keep such registration effective for a
period of one hundred twenty (120) days or until the Holder or Holders have
completed the distribution described in the registration statement relating
thereto, whichever first occurs; provided, however, that (i) such 120-day period
shall be extended for a period of time equal to the period the Holder refrains
from selling any securities included in such registration at the request of an
underwriter of Common Stock (or other securities) of the Company; and (ii) in
the case of any registration of Registrable Securities on Form S-3 which are
intended to be offered on a continuous or delayed basis, such 120-day period
shall be extended, if necessary, to keep the registration statement effective
until all such Registrable Securities are sold, provided that Rule 415, or any
successor rule under the Securities Act, permits an offering on a continuous or
delayed basis, and provided further that applicable rules under the Securities
Act governing the obligation to file a post-effective amendment permit, in lieu
of filing a post-effective amendment which (I) includes any prospectus required
by Section 10(a)(3) of the Securities Act or (II) reflects facts or events
representing a material or fundamental change in the information set forth in
the registration statement, the incorporation by reference of information
required to be included in (I) and (II) above to be contained in periodic
reports filed pursuant to Section 13 or 15(d) of the Exchange Act in the
registration statement;
(b) FILE AMENDMENTS. Prepare and file with the Commission such
amendments and supplements to such registration statement and the prospectus
used in connection with such registration statement as may be necessary to
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement;
(c) FURNISH DOCUMENTS. Furnish such number of prospectuses and other
documents incident thereto, including any preliminary prospectus or amendment of
or supplement to the prospectus, as a Holder from time to time may reasonably
request;
(d) NOTIFY SELLERS. Notify each seller of Registrable Securities
covered by such registration statement at any time when a prospectus relating
thereto is required to be delivered under the Securities Act of the happening of
any event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or incomplete in the light of the
circumstances then existing, and at the request of any such seller, prepare and
furnish to such seller a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such shares, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading or
incomplete in the light of the circumstances then existing;
(e) LISTING. Cause all such Registrable Securities registered
pursuant hereunder to be listed on each securities exchange on which similar
securities issued by the Company are then listed;
8
(f) TRANSFER AGENT. Provide a transfer agent and registrar for all
Registrable Securities registered pursuant hereunder and a CUSIP number for all
such Registrable Securities, in each case not later than the effective date of
such registration;
(g) EARNINGS STATEMENTS. Otherwise use its best efforts to comply
with all applicable rules and regulations of the Commission, and make available
to its security holders, as soon as reasonably practicable, an earnings
statement covering the period of at least twelve (12) months, but not more than
eighteen (18) months, beginning with the first month after the effective date of
the Registration Statement, which earnings statement shall satisfy the
provisions of Section II(a) of the Securities Act; and
(h) UNDERWRITING AGREEMENT. In connection with any underwritten
offering pursuant to a registration statement filed pursuant to Section 1.2
hereof, the Company will enter into an underwriting agreement reasonably
necessary to effect the offer and sale of Common Stock, provided such
underwriting agreement contains customary underwriting provisions and provided
further that if the underwriter so requests the underwriting agreement will
contain customary contribution provisions.
1.7 INDEMNIFICATION.
(a) The Company will indemnify each Holder, each of its officers,
directors and partners, legal counsel and accountants and each person
controlling such Holder within the meaning of Section 15 of the Securities Act,
with respect to which registration, qualification or compliance has been
effected pursuant to this Section 1, and each underwriter, if any, and each
person who controls within the meaning of Section 15 of the Securities Act any
underwriter, against all expenses, claims, losses, damages and liabilities (or
actions, proceedings or settlements in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular or other document (including any
related registration statement, notification or the like) incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by the
Company of the Securities Act or any rule or regulation thereunder applicable to
the Company and relating to action or inaction required of the Company in
connection with any such registration, qualification or compliance, and will
reimburse each such Holder, each of its officers, directors, partners, legal
counsel and accountants and each person controlling such Holder, each such
underwriter and each person who controls any such underwriter, for any legal and
any other expenses reasonably incurred in connection with investigating and
defending or settling any such claim, loss, damage, liability or action,
provided that the Company will not be liable in any such case to the extent that
any such claim, loss, damage, liability or expense arises out of or is based on
any untrue statement or omission based upon written information furnished to the
Company by such Holder or underwriter and stated to be specifically for use
therein. It is agreed that the indemnity agreement contained in this Section
1.7(a) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such
9
settlement is effected without the consent of the Company (which consent has not
been unreasonably withheld).
(b) Each Holder will, if Registrable Securities held by him are
included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors,
officers, partners, legal counsel and accountants and each underwriter, if any,
of the Company's securities covered by such a registration statement, each
person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act, each other such Holder and Other Shareholder
and each of their officers, directors and partners, and each person controlling
such Holder or Other Shareholder, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company and such Holders, Other Shareholders,
directors, officers, partners, legal counsel and accountants, persons,
underwriters or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by such Holder; provided, however, that the obligations
of such Holder hereunder shall not apply to amounts paid in settlement of any
such claims, losses, damages or liabilities (or actions in respect thereof) if
such settlement is effected without the consent of such Holder (which consent
shall not be unreasonably withheld); and, PROVIDED, FURTHER, that in no event
shall any Holder be liable pursuant to this Section 1.7(b) for an amount greater
than the lesser of (i) such Holder's pro rata portion of any amounts to be paid
pursuant to this Section 1.7(b) and (ii) an amount equal to the proceeds
actually received by such Holder pursuant to such registration.
(c) Each party entitled to indemnification under this Section 1.7
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 1, to the extent such
failure is not prejudicial. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party of
10
a release from all liability in respect to such claim or litigation. Each
Indemnified Party shall furnish such information regarding itself or the claim
in question as an Indemnifying Party may reasonably request in writing and as
shall be reasonably required in connection with defense of such claim and
litigation resulting therefrom.
(d) If the indemnification provided for in this Section 1.7 is held
by a court of competent jurisdiction to be unavailable to an Indemnified Party
with respect to any loss, liability, claim, damage or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party hereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage or expense
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the other in
connection with the statements or omissions which resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in conflict
with the foregoing provisions, the provisions in the underwriting agreement
shall control.
1.8 INFORMATION BY HOLDER. Each Holder of Registrable Securities shall
furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company may reasonably request in
writing and as shall be reasonably required in connection with any registration,
qualification or compliance referred to in this Section 1.
1.9 LIMITATIONS ON REGISTRATION OF ISSUES OF SECURITIES. From and after
the date of this Agreement, the Company shall not, without the prior written
consent of a majority in interest of the Holders, enter into any agreement with
any holder or prospective holder of any securities of the Company giving such
holder or prospective holder any registration rights the terms of which are more
favorable than the registration rights granted to the Holders hereunder.
1.10 RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission which may permit the sale of the
Registrable Securities to the public without registration, the Company agrees to
use its best efforts to:
(a) Make and keep public information available as those terms are
understood and defined in Rule 144 under the Securities Act, at all times from
and after
11
ninety (90) days following the effective date of the first registration under
the Securities Act filed by the Company for an offering of its securities to the
general public;
(b) File with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act
at any time after it has become subject to such reporting requirements;
(c) So long as a Holder owns any Registrable Securities, furnish to
the Holder forthwith upon written request a written statement by the Company as
to its compliance with the reporting requirements of Rule 144 (at any time from
and after ninety (90) days following the effective date of the first
registration statement filed by the Company for an offering of its securities to
the general public), and of the Securities Act and the Exchange Act (at any time
after it has become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents so filed as a Holder may reasonably request in availing itself of any
rule or regulation of the Commission allowing a Holder to sell any such
securities without registration.
1.11 TRANSFER OR ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause
the Company to register securities granted to a Holder by the Company under
Sections 1.2, 1.3 and 1.5 may be transferred or assigned by a Holder only to a
transferee or assignee of not less than ten percent (10%) of the Registrable
Securities then held by the Holder (provided such securities have a fair market
value of not less than $250,000), and only provided that the Company is given
written notice at the time of or within a reasonable time after said transfer or
assignment, stating the name and address of said transferee or assignee and
identifying the securities with respect to which such registration rights are
being transferred or assigned, and provided further that the transferee or
assignee of such rights assumes the obligations of such Holder under this
Section 1.
1.12 RESTRICTIONS ON TRANSFER.
(a) Each Holder agrees not to transfer or dispose of all or any
portion of the Registrable Securities unless and until the proposed transferee
has agreed in writing for the benefit of the Company to be bound by this Section
1.12, provided and to the extent this Section 1.12 is then applicable and:
(i) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or
(ii) (A) Such Holder shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (B) if
requested by the Company, such Holder shall have furnished the Company with an
opinion of counsel, reasonably
12
satisfactory to the Company, to the effect that such disposition will not
require registration of such shares under the Securities Act.
Notwithstanding the provisions of subsections (i) and (ii) above, no such
registration statement or opinion of counsel shall be necessary for a transfer
(A) by a Holder which is a partnership to its partners or retired partners in
accordance with partnership interests, (B) to a Holder's family member or trust
for the benefit of an individual Holder, provided that the transferee will be
subject to the terms of this Section 1.12 to the same extent as if it were an
original Holer hereunder, or (C) pursuant to Rule 144(k); provided, however,
that the Company must be satisfied in its reasonable discretion that the
proposed sale of securities fully qualifies with all Rule 144 requirements.
(b) Each certificate representing Registrable Securities shall
(unless otherwise permitted by the provisions of this Agreement) be stamped or
otherwise imprinted with a legend substantially similar to the following (in
addition to any legend required under applicable state securities laws):
"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER
SUCH ACT OR COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH
ACT, OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT
SUCH REGISTRATION IS NOT REQUIRED."
1.13 "MARKET STAND-OFF" AGREEMENT. Each Holder hereby agrees that, during
the period of duration specified by the Company and an underwriter of common
stock or other securities of the Company, following the effective date of a
registration statement of the Company filed under the Securities Act, it shall
not, to the extent requested by the Company and such underwriter, directly or
indirectly sell, offer to sell, contract to sell (including, without limitation,
any short sale), grant any option to purchase or otherwise transfer or dispose
of (other than to donees who agree to be similarly bound) any securities of the
Company held by it at any time during such period except common stock included
in such registration; PROVIDED, HOWEVER, that:
(a) such agreement shall not exceed 180 days for the first such
registration statement of the Company which covers Common Stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
13
(b) such agreement shall not exceed 90 days for any subsequent
registration statement of the Company which covers Common Stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
and
(c) all executive officers and directors of the Company enter
into similar agreements.
In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Registrable Securities of
each Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period. Notwithstanding the
foregoing, the obligations described in this Section 1.13 shall not apply to a
registration relating solely to employee benefit plans on Form S-8 or similar
forms which may be promulgated in the future, or a registration relating solely
to a Rule 145 transaction on Form S-4 or similar forms which may be promulgated
in the future.
1.14 ALLOCATION OF REGISTRATION OPPORTUNITIES. In any circumstance in
which all of the Registrable Securities and other shares of Common Stock of the
Company (including shares of Common Stock issued or issuable upon conversion of
shares of any currently unissued series of Preferred Stock of the Company) with
registration rights (the "Other Shares") requested to be included in a
registration on behalf of the Holders or other selling shareholders cannot be so
included as a result of limitations of the aggregate number of shares of
Registrable Securities and Other Shares which may be so included, the number of
shares of Registrable Securities and Other Shares which may be so included shall
be allocated among the Holders and other selling shareholders requesting
inclusion of shares pro rata on the basis of the number of shares of Registrable
Securities and Other Shares that would be held by such Holders and other selling
shareholders, assuming conversion; provided, however, that, so that such
allocation shall not operate to reduce the aggregate number of Registrable
Securities and Other Shares to be included in such registration, if any Holder
or other selling shareholder does not request inclusion of the maximum number of
shares of Registrable Securities and Other Shares allocated to him pursuant to
the above-described procedure, the remaining portion of his allocation shall be
reallocated among those requesting Holders and other selling shareholders whose
allocations did not satisfy their requests pro rata on the basis of the number
of shares of Registrable Securities and Other Shares that would be held by such
Holders and other selling shareholders, assuming conversion, and this procedure
shall be repeated until all of the shares of Registrable Securities and Other
Shares that may be included in the registration on behalf of the Holders and
other selling shareholders have been so allocated; PROVIDED, FURTHER, that the
number of Registrable Securities to be included in a registration pursuant to
Section 1.2 hereof shall not be limited pursuant to this Section 1.14. The
Company shall not limit the number of Registrable Securities to be included in a
registration pursuant to this Agreement in order to include shares held by
shareholders with no registration rights or to include shares of stock issued to
employees, officers, directors or consultants pursuant to the Company's stock
option plan, or with respect to registrations under Sections 1.2 or 1.5 hereof,
in order to include in such registration securities registered for the Company's
own account.
14
1.15 DELAY OF REGISTRATION. No Holder shall have any right to take any
action to restrain, enjoin, or otherwise delay any registration as the result of
any controversy that might arise with respect to the interpretation or
implementation of this Section 1.
1.16 TERMINATION OF REGISTRATION RIGHTS. The right of any Holder to
request registration or inclusion in any registration pursuant to this Sections
1.2, 1.3 or 1.5 shall terminate on the earlier of (i) the fifth anniversary of
the closing of the Initial Offering or (ii) such date after the closing of the
Initial Offering as all shares of Registrable Securities held or entitled to be
held upon conversion by such Holder may immediately be sold under Rule 144
during any 90-day period.
1.17 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after the
date of this Agreement, the Company may, without the consent of any Holder,
enter into an agreement with any holder or prospective holder of any securities
of the Company which would allow such holder to have registration rights with
respect to securities of the Company so long as such registration rights are not
superior during the period ending on the fifth anniversary of the closing of the
Initial Offering to those granted hereunder. The (a) grant of piggyback
registration rights, (b) the grant of rights to request registration on Form S-3
or (c) the grant of any registration rights covering Registrable Securities
issued for Warrants or other convertible securities exercised after the fifth
anniversary of the closing of the Initial Offering, shall be deemed to not be
superior to those rights granted hereunder. The prior written consent of the
Holders of a majority of the outstanding Registrable Securities shall be
required only for the grant of registration rights from and after the date of
this Agreement if such registration rights are superior to those granted
hereunder.
SECTION 2
COVENANTS OF THE COMPANY
The Company hereby covenants and agrees, so long as any Holder owns any
Registrable Shares as follows:
2.1 BASIC FINANCIAL INFORMATION. The Company will furnish the following
reports to each Investor, so long as such Investor (or its representative) owns
at least 200,000 Shares, or such number of shares of Common Stock issued upon
conversion of 200,000 or more Shares, or any combination thereof (as presently
constituted and subject to subsequent adjustment for stock splits, stock
dividends, reverse stock splits, recapitalizations and the like) (a "Significant
Holder") (or a representative of any Significant Holder):
(a) As soon as practicable after the end of each fiscal year of the
Company, and in any event within ninety (90) days thereafter, a consolidated
balance sheet of the Company and its subsidiaries, if any, as at the end of such
fiscal year, and consolidated statements of income and sources and applications
of funds of the Company and its
15
subsidiaries, if any, for such year, prepared in accordance with generally
accepted accounting principles consistently applied and setting forth in each
case in comparative form the figures for the previous fiscal year, all in
reasonable detail and certified by independent public accountants of recognized
national standing selected by the Company.
(b) As soon as practicable after the end of the first, second, and
third quarterly accounting periods in each fiscal year of the Company, and in
any event within forty-five (45) days thereafter, a consolidated balance sheet
of the Company and its subsidiaries, if any, as of the end of each such
quarterly period, and consolidated statements of income and sources and
applications of funds of the Company and its subsidiaries for such period and
for the current fiscal year to date, prepared in accordance with generally
accepted accounting principles consistently applied and setting forth in
comparative form the figures for the corresponding periods of the previous
fiscal year, subject to changes resulting from normal year-end audit
adjustments, all in reasonable detail and certified by the principal financial
or accounting officer of the Company, except that such balance sheet need not
contain the notes required by generally accepted accounting principles.
2.2 ADDITIONAL INFORMATION AND RIGHTS.
(a) The Company will permit any Significant Holder (or a
representative of any Significant Holder) to visit and inspect any of the
properties of the Company, including its books of account and other records (and
make copies thereof and take extracts therefrom), and to discuss its affairs,
finances and accounts with the Company's officers and its independent public
accountants, all at such reasonable times and as often as any such person may
reasonably request.
(b) The provisions of Section 2.1 and this Section 2.2 shall not be
in limitation of any rights which any Holder or Significant Holder may have with
respect to the books and records of the Company and its subsidiaries, or to
inspect their properties or discuss their affairs, finances and accounts, under
the laws of the jurisdictions in which they are incorporated.
(c) Anything in Section 2 to the contrary notwithstanding, no Holder
or Significant Holder by reason of this Agreement shall have access to any trade
secrets or classified information of the Company. Each Significant Holder
hereby agrees to hold in confidence and trust and not to misuse or disclose any
confidential information provided pursuant to this Section 2.2.
(d) Each Holder who represents to the Company that it is a "venture
capital operating company" for purposes of Department of Labor Regulation
Section 2510.3-101 shall in addition have the right to consult with and advise
the officers of the Company as to the management of the Company.
16
2.3 RIGHT OF FIRST OFFER. The Company hereby grants to Schering,
Wellcome, Xxxxx X. Xxxxxxxx, and any permitted transferee or assignee of
Schering or Wellcome to whom the rights conferred by this Agreement have been
transferred or assigned (collectively, the "Schering/Wellcome Holders"), if such
Schering/Wellcome Holder owns any Shares or any shares of Common Stock issued
upon conversion of the Shares, the right of first offer to purchase a Pro Rata
Share (as defined in this Section 2.3) of New Securities (as defined in this
Section 2.3) which the Company may, from time to time, propose to sell and
issue. A Schering/Wellcome Holder's Pro Rata Share, for purposes of this right
of first offer, is the ratio of the number of shares of Common Stock owned by
such Schering/Wellcome Holder immediately prior to the issuance of New
Securities, assuming full conversion of the Shares, to the total number of
shares of Common Stock outstanding immediately prior to the issuance of New
Securities, assuming full conversion of the Shares and exercise of all
outstanding rights, options and warrants to acquire Common Stock of the Company.
Each Schering/Wellcome Holder shall have a right of over-allotment such that if
any Schering/Wellcome Holder fails to exercise its right hereunder to purchase
its Pro Rata Share of New Securities, the other Schering/Wellcome Holders may
purchase the non-purchasing Schering/Wellcome Holder's portion on a pro rata
basis within ten (10) days from the date such non-purchasing Schering/Wellcome
Holder fails to exercise its right hereunder to purchase its Pro Rata Share of
New Securities. This right of first offer shall be subject to the following
provisions:
(a) "NEW SECURITIES" shall mean any capital stock (including Common
Stock and/or Preferred Stock) of the Company whether now authorized or not, and
rights, options or warrants to purchase such capital stock, and securities of
any type whatsoever that are, or may become, convertible into capital stock;
provided that the term "New Securities" does not include (i) securities
purchased under the Series C Agreement; (ii) the securities purchased under that
certain Preferred Stock Purchase Agreement between the Company and Schering
dated May 7, 1996 (iii) securities issued upon conversion of the Shares; (iv)
securities issued pursuant to the acquisition of another business entity or
business segment of any such entity by the Company by merger, purchase of
substantially all the assets or other reorganization whereby the Company will
own not less than fifty-one percent (51%) of the voting power of such business
entity or business segment of any such entity; (v) any borrowings, direct or
indirect, from financial institutions or other persons by the Company, whether
or not presently authorized, including any type of loan or payment evidenced by
any type of debt instrument, provided such borrowings do not have any equity
features including warrants, options or other rights to purchase capital stock
and are not convertible into capital stock of the Company; (vi) securities
issued to employees, consultants, officers or directors of the Company pursuant
to any stock option, stock purchase or stock bonus plan, agreement or
arrangement approved by the Board of Directors; (vii) securities issued to
vendors or customers or to other persons in similar commercial situations with
the Company if such issuance is approved by the Board of Directors; (viii)
securities issued in connection with obtaining lease financing, whether issued
to a lessor, guarantor or other person; (ix) securities issued in a firm
commitment underwritten public offering pursuant to a registration under the
Securities Act with an aggregate offering price to the public in excess of
$7,500,000; (x) securities issued in
17
connection with any stock split, stock dividend or recapitalization of the
Company; and (xi) any right, option or warrant to acquire any security
convertible into the securities excluded from the definition of New Securities
pursuant to subsections (i) through (x) above.
(b) In the event the Company proposes to undertake an issuance of New
Securities, it shall give each Schering/Wellcome Holder written notice of its
intention, describing the type of New Securities, and their price and the
general terms upon which the Company proposes to issue the same. Each
Schering/Wellcome Holder shall have twenty (20) days after any such notice is
effective to agree to purchase such Schering/Wellcome Holder's Pro Rata Share of
such New Securities for the price and upon the terms specified in the notice by
giving written notice to the Company and stating therein the quantity of New
Securities to be purchased.
(c) In the event the Schering/Wellcome Holders fail to exercise fully
the right of first offer within said twenty (20)-day period and after the
expiration of the ten (10)-day period for the exercise of the over-allotment
provisions of this Section 2.3, the Company shall have one hundred twenty (120)
days thereafter to sell or enter into an agreement (pursuant to which the sale
of New Securities covered thereby shall be closed, if at all, within one hundred
twenty (120) days from the date of said agreement) to sell the New Securities
respecting which the Schering/Wellcome Holders' right of first offer option set
forth in this Section 2.3 was not exercised, at a price and upon terms no more
favorable to the purchasers thereof than specified in the Company's notice to
Schering/Wellcome Holders pursuant to Section 2.3(b). In the event the Company
has not sold within said one hundred twenty (120)-day period or entered into an
agreement to sell the New Securities within said one hundred twenty (120)-day
period (or sold and issued New Securities in accordance with the foregoing
within one hundred twenty (120) days from the date of said agreement), the
Company shall not thereafter issue or sell any New Securities, without first
again offering such securities to the Schering/Wellcome Holders in the manner
provided in Section 2.3(b) above.
(d) The right of first offer granted under this Agreement shall
expire upon, and shall not be applicable to, the earlier to occur of (i) first
sale of Common Stock of the Company to the public effected pursuant to a
registration statement filed with, and declared effective by, the Commission
under the Securities Act, with aggregate net proceeds of more than $10,000,000
or (ii) with respect to such Investor, such Investor's failure to purchase its
Pro Rata Share in an offering of New Securities which closes at least one (1)
year following the effective date of this Agreement.
(e) The right of first offer set forth in this Section 2.3 may not be
assigned or transferred, except that (i) such right is assignable by each
Schering/Wellcome Holder to any wholly-owned subsidiary or parent of, or to any
corporation or entity that is, within the meaning of the Securities Act,
controlling, controlled by or under common control with, any such
Schering/Wellcome Holder.
18
2.4 GRANT OF RIGHTS TO THIRD PARTIES. The Company hereby agrees that in
the event that it grants any contractual rights to any third party which rights
are solely associated with stock ownership, Schering and Wellcome shall have the
option, in their sole discretion, to obtain identical rights conditioned upon
the agreement by Schering to be similarly bound by any additional restrictions
or obligations accepted by the third party in connection with such contractual
rights.
2.5 TERMINATION OF COVENANTS. The covenants set forth in this Section 2
shall terminate and be of no further force and effect after the time of
effectiveness of the Company's first firm commitment underwritten public
offering registered under the Securities Act, unless earlier terminated by the
terms hereof.
SECTION 3
COVENANTS OF THE INVESTORS
3.1 INCREASE IN SIZE OF OPTION POOL. The Investors shall not unreasonably
withhold their consent to a request to amend the Company's Amended and Restated
Articles of Incorporation (the "Restated Articles") to increase the number of
shares issuable under a stock option agreement or plan or restricted stock
agreement or plan approved by the Board of Directors, as set forth in Article
III(B)3(d)(F)(2) of the Restated Articles (or any successor section), so long as
such increase does not increase the number of shares so issuable to greater than
twenty-five (25%) percent of the Company's total capitalization on a
fully-diluted basis.
3.2 RIGHT OF FIRST REFUSAL. Each Investor hereby grants to the Company
rights of first refusal (the "First Refusal Right"), exercisable in connection
with any proposed transfer of the Shares. For purposes of this Section 3.2, the
term "transfer" shall include any sale, assignment, pledge, encumbrance or other
disposition for value of the Shares intended to be made by an Investor.
(a) NOTICE OF INTENDED DISPOSITION. In the event any Investor (the
"Selling Investor") desires to accept a bona fide third-party offer for the
transfer of any or all of the Shares (the shares subject to such offer to be
hereinafter called the "Target Shares"), such Selling Investor shall promptly
(i) deliver to the Corporate Secretary of the Company written notice (the
"Disposition Notice") of the terms and conditions of the offer, including the
purchase price and the identity of the third-party offeror, and (ii) provide
satisfactory proof that the disposition of the Target Shares to such third-party
offeror would not be in contravention of the provisions set forth in Section
1.12 of this Agreement.
(b) EXERCISE OF RIGHT. The Company (or its assignees) shall, for a
period of twenty-five (25) days following receipt of the Disposition Notice,
have the right to repurchase any or all of the Target Shares specified in the
Disposition Notice upon the same terms and conditions specified therein or upon
terms and conditions which do not materially vary from
19
those specified therein. Such right shall be exercisable by delivery of written
notice (the "Exercise Notice") to the Selling Investor prior to the expiration
of the twenty-five (25)-day exercise period. If such right is exercised with
respect to all the Target Shares specified in the Disposition Notice, then the
Company (or its assignees) shall effect the repurchase of the Target Shares,
including payment of the purchase price, not more than five (5) business days
after delivery of the Exercise Notice; and at such time the Selling Investor
shall deliver to the Company the certificates representing the Target Shares to
be repurchased, each certificate to be properly endorsed for transfer.
(c) NON-EXERCISE OF RIGHT. In the event the Exercise Notice is not
given to the Selling Investor within twenty-five (25) days following the date of
the Company's receipt of the Disposition Notice, the Selling Investor shall have
a period of thirty (30) days thereafter in which to sell or otherwise dispose of
the Target Shares to the third-party offeror identified in the Disposition
Notice upon terms and conditions (including the purchase price) no more
favorable to such third-party offeror than those specified in the Disposition
Notice; PROVIDED, however, that any such sale or disposition must not be
effected in contravention of the provisions of this Agreement. The acquired
shares shall remain subject to (i) the securities law restrictions of Section
1.12 and (ii) the market stand-off provisions of Section 1.13. In the event the
Selling Investor does not effect such sale or disposition of the Target Shares
within the specified thirty (30)-day period, the Company's First Refusal Right
shall continue to be applicable to any subsequent disposition of the Target
Shares by such Selling Investor until such right lapses in accordance with
Section 3.2(f).
(d) PARTIAL EXERCISE OF RIGHT. In the event the Company (or its
assignees) makes a timely exercise of the First Refusal Right with respect to a
portion, but not all, of the Target Shares specified in the Disposition Notice,
the Selling Investor shall have the option, exercisable by written notice to the
Company delivered within thirty (30) days after the date of the Disposition
Notice, to effect the sale of the Target Shares pursuant to one of the following
alternatives:
(i) sale or other disposition of all the Target Shares to the
third-party offeror identified in the Disposition Notice, but in full compliance
with the requirements of Section 3.2(c), as if the Company did not exercise the
First Refusal Right hereunder; or
(ii) sale to the Company (or its assignees) of the portion of the
Target Shares which the Company (or its assignees) has elected to purchase, such
sale to be effected in substantial conformity with the provisions of Section
3.2(b).
Failure of the Selling Investor to deliver timely notification to the
Company under this Section 3.2(d) shall be deemed to be an election by the
Selling Investor to sell the Target Shares pursuant to alternative (i) above.
20
(e) RECAPITALIZATION/MERGER.
(i) In the event of any stock dividend, stock split,
recapitalization or other transaction affecting the Company's outstanding Common
Stock as a class effected without receipt of consideration, then any new,
substituted or additional securities or other property which is by reason of
such transaction distributed with respect to the Shares shall be immediately
subject to the Company's First Refusal Right hereunder, but only to the extent
the Purchased Shares are at the time covered by such right.
(ii) The Company's First Refusal Right shall remain in full force
and effect and shall apply to the new capital stock or other property received
in exchange for the Shares in consummation of the transaction but only to the
extent the Shares are at the time covered by such right in the event of any of
the following transactions: (A) a merger or consolidation in which the Company
is not the surviving entity, (B) a sale, transfer or other disposition of all or
substantially all of the Company's assets, (C) reverse merger in which the
Company is the surviving entity but in which the Company's outstanding voting
securities are transferred in whole or in part to person or persons other than
those who held such securities immediately prior to the merger, or
(D) any transaction effected primarily to change the State in which the Company
is incorporated, or to create a holding company structure.
(f) LAPSE. The First Refusal Right under this Section 3.2 shall
lapse and cease to have effect upon the EARLIEST to occur of (i) the first date
on which shares of the Company's Common Stock are held of record by more than
five hundred (500) persons, (ii) a determination is made by the Company's Board
of Directors that a public market exists for the outstanding shares of the
Company's Common Stock, or (iii) a firm commitment underwritten public offering
pursuant to an effective registration statement under the 1933 Act, covering the
offer and sale of the Company's Common Stock in the aggregate amount of at least
$10,000,000. However, the market stand-off provisions of Section 1.13 shall
continue to remain in full force and effect following the lapse of the First
Refusal Right hereunder.
3.3 GRANT OF RIGHTS TO NEW INVESTORS. The Investors hereby agree that the
Company shall have the right to offer to future investors in the Company the
benefits of the right of first offer pursuant to Section 2.3 of this Agreement
and the co-sale rights pursuant to that certain Amended and Restated Co-Sale
Agreement of even date on a pro rata basis.
21
SECTION 4
MISCELLANEOUS
4.1 GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of California, as if entered into by and between
California residents exclusively for performance entirely within California.
4.2 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
4.3 ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement (including the
Exhibits hereto) constitutes the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof. The terms
of Sections 2.1, 2.2, 2.3 (but only insofar as the rights of Wellcome would be
disproportionately and adversely affected or removed), and 4.3 of this Agreement
may be amended, waived, discharged or terminated only by a written instrument
signed by the Company and the holders of at least seventy percent (70%) of the
Registrable Securities while the remainder of the terms of this Agreement may be
amended, waived, discharged or terminated only by a written instrument signed by
the Company and the holders of at least fifty percent (50%) of the Registrable
Securities and any such amendment, waiver, discharge or termination shall be
binding on all the Holders, but in no event shall the obligation of any Holder
hereunder be materially increased, except upon the written consent of such
Holder.
4.4 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by United States
first-class mail, postage prepaid, or delivered personally addressed by hand or
special courier (a) if to a Holder, as indicated on the list of Holders attached
hereto as Exhibit A, or at such other address as such Investor or permitted
assignee shall have furnished to the Company in writing, or (b) if to the
Company, at 0000 Xxxxx Xxxxxx Xxxxx, Xxx Xxxxx, Xxxxxxxxxx 00000, or at such
other address as the Company shall have furnished to each holder in writing.
All such notices and other written communications shall be effective (i) if
mailed, five (5) days after mailing and (ii) if delivered, upon delivery.
4.5 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to any Holder, upon any breach or default of the
Company under this Agreement shall impair any such right, power or remedy of
such Holder nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any Holder of any breach or default under this Agreement or any
waiver on the part of any Holder of any provisions or conditions of this
Agreement must be made in writing and shall
22
be effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
Holder, shall be cumulative and not alternative.
4.6 RIGHTS; SEPARABILITY. Unless otherwise expressly provided herein, a
Holder's rights hereunder are several rights, not rights jointly held with any
of the other Holders. In case any provision of the Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
4.7 INFORMATION CONFIDENTIAL. Each Holder acknowledges that the
information received by them pursuant hereto may be confidential and for its use
only, and it will not use such confidential information in violation of the
Exchange Act or reproduce, disclose or disseminate such information to any other
person (other than its employees or agents having a need to know the contents of
such information, and its attorneys), except in connection with the exercise of
rights under this Agreement, unless the Company has made such information
available to the public generally or such Holder is required to disclose such
information by a governmental body.
4.8 TITLES AND SUBTITLES. The titles of the paragraphs and subparagraphs
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
4.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
4.10 RESTATEMENT OF PRIOR AGREEMENT. This Agreement constitutes a
restatement in its entirety of the Prior Agreement. Upon the effectiveness of
this Agreement, the Prior Agreement shall be terminated and of no further force
or effect, and neither the Company nor any other party to such Prior Agreement
shall have any further rights or obligations under such Prior Agreement.
4.11 OBSERVER RIGHTS. At such times as the holders of the Series C
Preferred, voting as separate class, do not have the right to elect a member of
the Company's Board of Directors, the Company shall (i) provide to each holder
of Series C Preferred copies of all notices, minutes, consents and other
material that it provides to the members of its Board of Directors, and (ii)
allow a designee of the holders of the Series C Preferred to attend each meeting
of the Company's Board of Directors and each committee thereof.
[Remainder of This Page Intentionally Left Blank]
23
IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Investors' Rights Agreement effective as of the day and year first
above written.
COLLATERAL THERAPEUTICS, INC.
By: /s/ Xxxx X. Xxxxx, Ph.D.
----------------------------------
Title: President & C.E.O.
------------------------------
INVESTORS:
SCHERING BERLIN VENTURE CORP.
By: /s/ Illegible
----------------------------------
Title: Treasurer
-------------------------------
Subject to ATTACHMENT A hereto, THE WELLCOME TRUST
LIMITED, AS TRUSTEE OF THE WELLCOME TRUST
By: /s/ Xxxxx Xxxxx
----------------------------------
Xxx Xxxxx Xxxxx, Chairman
Address: 000 Xxxxxx Xxxx, Xxxxxx XX0 0XX
---------------------------------
/s/ Xxxxx X. Xxxxxxxx
--------------------------------
Xxxxx X. Xxxxxxxx
[SIGNATURE PAGE TO INVESTOR RIGHTS AGREEMENT]
24
EXHIBIT A
SCHEDULE OF INVESTORS
Schering Berlin Venture Corp.
The Wellcome Trust Limited
Xxxxx X. Xxxxxxxx
The Wellcome Trust Limited
as trustee of
the Wellcome Trust
ATTACHMENT A
TO
COLLATERAL THERAPEUTICS, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
With respect to its signatory capacity and liability, as trustee of the Trust,
the Trustee enters into and delivers this Amended and Restated Investors' Rights
Agreement (the "Agreement") in its capacity as the trustee for the time being of
The Wellcome Trust but not otherwise and it is hereby agreed and declared that
notwithstanding anything to the contrary contained or implied in this Agreement
or any related agreement:
(a) the obligations incurred by the Trustee under or in consequence of this
Agreement or any related agreement shall be enforceable against it or the
other trustees of The Wellcome Trust from time to time; and
(b) the liabilities of the Trustee (or such other trustees as are referred to
in paragraph (a) above) in respect of such obligations shall be limited to
such liabilities as can, and may lawfully and properly, be met out of the
assets of The Wellcome Trust for the time being in the hands or under the
control of the Trustee or such other trustees.
Attachment A
