Exhibit 10.11
ACTIVBIOTICS, INC.
RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and
entered into as of the _____th day of November, 2003 by and between
ActivBiotics, Inc., a Delaware corporation (the "Corporation") and Silicon
Valley Bank, a California chartered bank ("SVB").
RECITALS
WHEREAS, the Corporation and SVB have entered into a Loan and Security
Agreement of even date herewith (the "Loan Agreement"), pursuant to which the
Bank has agreed to loan to the Corporation up to $1,000,000 (the "Loan"); and
WHEREAS, in connection with the Loan, the Corporation has delivered to
SVB a Warrant to Purchase Stock of even date herewith (the "Warrant Agreement"),
pursuant to which SVB has the right to purchase up to 30,000 shares of the
Corporation's Series B Convertible Preferred Stock (the "Series B Shares"); and
WHEREAS, the Corporation and certain investors have entered into a
First Amended and Restated Stockholders' Agreement (the "Stockholders'
Agreement"), a copy of which is attached hereto as Exhibit A; and
WHEREAS, it is a condition to the consummation of the transactions
contemplated by the Loan Agreement that the Corporation deliver this Agreement
to provide for the registration of the Series B Shares in the event that the
Bank exercises its right to purchase the Series B Shares pursuant to the terms
of the Warrant Agreement.
NOW, THEREFORE, in consideration of the mutual premises and covenants
set forth herein, the parties hereto agree as follows:
1. DEFINITIONS.
Capitalized terms used and not otherwise defined herein shall have the
meanings given them in the Stockholders Agreement.
2. REGISTRATION RIGHTS.
2.1. Piggyback Registration. The Series B Shares and any other securities
of the Corporation acquired pursuant to the Warrant Agreement shall be deemed
Restricted Securities, and SVB shall have the same rights as those granted to
the holders of Restricted Securities in Sections 3.5, 3.7, 3.8, 3.9, 3.10 and
3.11 of the Stockholders' Agreement.
2.2. Other Provisions. SVB agrees to be bound by and shall be entitled to
the rights granted under the provisions of Section 2.5, Section 4 and Section 12
of the Stockholders' Agreement as of SVB were an "Investor" and as if the Series
B Shares held by SVB were Restricted Shares under the Stockholders Agreement,
provided however, that SVB shall not be
entitled to the rights granted to holders of Restricted Shares under Section 3.6
of the Stockholders' Agreement.
3. BRING-ALONG RIGHTS.
After the exercise of the warrant pursuant to the Warrant Agreement, SVB
agrees that it shall be bound by the provisions of Section 2.14 of the
Stockholders' Agreement with respect to any Series B Shares and any other
securities acquired by SVB pursuant to the Warrant Agreement.
4. MISCELLANEOUS.
4.1. Governing Law. This Agreement shall be governed in all respects by the
laws of the Commonwealth of Massachusetts, without giving effect to principles
of conflicts of law.
4.2. Successors and Assigns. Except as otherwise expressly provided herein,
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assignees of the parties; provided,
that written notice of such assignment is provided to the Corporation. Nothing
in this Agreement, express or implied, is intended to confer upon any party
other than the parties hereto or their respective successors and assignees any
rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
4.3. Entire Agreement; Amendment; Waiver. This Agreement constitutes the
full and entire understanding and agreement between the parties with regard to
the subjects hereof Neither this Agreement nor any term hereof may be amended,
waived, discharged or terminated, except by a written instrument signed by the
Corporation and SVB, provided however, that SVB shall be bound by any amendment
to or restatement of the Stockholders' Agreement to the extent that such
amendment is applicable to SVB under the terms of Sections 2 and 3 of this
Agreement and Section 12 of the Stockholders' Agreement.
4.4. Notices, etc. All notices, demands or other communications to be given
or delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally to the
recipient, sent to the recipient by reputable overnight courier service (charges
prepaid), or transmitted by facsimile or electronic mail (with request for
immediate confirmation of receipt in a manner customary for communications of
such type and with physical delivery of the communication being made by one of
the other means specified in this Section as promptly as practicable
thereafter). Such notices, demands and other communications shall be addressed
as follows:
If to the Corporation: ActivBiotics, Inc.
000 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxxxx
Attn: Xxxxx Xxxxxx, Chief Financial Officer
FAX:(000)000-0000
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with a copy to: Xxxxxxx XxXxxxxxx LLP
000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxx Vegas, Esquire
FAX:(000)000-0000
If to SVB: Silicon Valley Bank
One Newton Executive Park, Suite 200
0000 Xxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: R Xxxxx Xxxxx
Fax:(000)000-0000
with a copy to: Xxxxxx & Xxxxxxxxxx LLP
Xxxxx Xxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx, Esquire
FAX:(000)000-0000
4.5. 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 or interpreting this Agreement.
4.6. Severability. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, such provision shall be limited or
excluded from this Agreement to the minimum extent necessary and the balance of
the Agreement shall be interpreted as if such provision were so limited or
excluded and shall be enforceable in accordance with its terms.
4.7. 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.
[ADDITIONAL TEXT AND SIGNATURES APPEAR ON THE FOLLOWING PAGE]
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IN WITNESS WHEREOF, the parties hereto have executed this Rights Agreement
effective as of the day and year first above written.
ACTIVBIOTICS, INC.
By /s/ X. X. Xxxxxx
----------------------------------
Name: X. X. XXXXXX
Title: C.E.O.
SILICON VALLEY BANK
By /s/ R. Xxxxx Xxxxx
----------------------------------
Name: R. XXXXX XXXXX
Title: VICE PRESIDENT
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EXHIBIT A
FIRST AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
This FIRST AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT (the "Agreement"),
dated this 30th day of April 2003, is entered into by and among ACTIVBIOTICS,
INC., a Delaware corporation (the "Corporation"), those holders of common stock
of the Corporation listed on SCHEDULE 1 hereto (hereinafter referred to
collectively as the "Original Stockholders"), those holders of Series A
Preferred Stock of the Corporation listed on SCHEDULE 2 hereto (hereinafter
referred to collectively as the "Series A Stockholders") and those purchasers of
the Series B Preferred Stock of the Corporation listed on SCHEDULE 3 hereto
(hereinafter referred to collectively as the "Series B Purchasers" and together
with the Series A Stockholders as the "Investors"). This Agreement amends and
restates and replaces in its entirety that certain Stockholders' Agreement by
and among the Corporation, the Original Stockholders and the Series A
Stockholders dated September 28, 2001.
WITNESSETH:
WHEREAS, the Corporation and the Series B Purchasers are entering into a
Convertible Preferred Stock Purchase Agreement dated the date hereof (the "Stock
Purchase Agreement") in connection with which the Corporation has agreed to sell
shares of its Series B Convertible Preferred Stock, par value $0.01 per share,
and the Corporation desires to grant to the Series B Purchasers certain
registration and other rights with respect to such shares; and
WHEREAS, as a condition to the Series B Purchasers entering into the Stock
Purchase Agreement, the Original Stockholders have agreed to certain
restrictions on their rights to dispose of their shares of Common Stock, par
value $.01 per share, of the Corporation contained in this Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and undertakings of the Corporation and the Series B Purchasers
hereunder and under the Stock Purchase Agreement, the parties hereto do hereby
agree as follows:
SECTION 1. Definitions. As used herein, the following terms shall have the
following respective meanings:
Board or Board of Directors shall mean the Board of Directors of the
Corporation.
Budget shall have the meaning set forth in Section 2.8 hereof.
Certificate shall mean the Third Amended and Restated Certificate of
Incorporation of the Corporation.
Commission shall mean the U.S. Securities and Exchange Commission.
Common Stock shall mean the Common Stock, par value $0.01 per share, of the
Corporation.
Environmental Laws shall mean all applicable federal, state and local laws,
ordinances, rules and regulations that regulate, fix liability for, or otherwise
relate to, the handling, use (including use in industrial processes, in
construction, as building materials, or otherwise), storage and disposal of
hazardous and toxic wastes and substances, and to the discharge, leakage,
presence, migration, threatened release or release (whether by disposal, a
discharge into any water source or system or into the air, or otherwise) of any
pollutant or effluent. Without limiting the preceding sentence, the term
"Environmental Laws" shall specifically include the following federal and state
laws, as amended:
FEDERAL
Comprehensive Environmental Response, Compensation and Liability Act
of 1980, 42 U.S.C. 9601 et. seq.;
Resource Conservation and Recovery Act of 1976, 42 U.S.C, 6901 et.
seq.;
Federal Water Pollution Control Act, 33 U.S.C. 1251 et. seq.; and
Clean Air Act, 42 U.S.C. 7401 et. seq.
STATE
MASSACHUSETTS ENVIRONMENTAL STATUTES
Massachusetts Clean Waters Act, MassGen. L. Ch. 21, Section 26, et.
seq., and regulations thereto;
Massachusetts Solid Waste Disposal Laws, Mass. Gen. L, Ch. 16, Section
18, et. seq., and Ch. 111, Section 105A, and regulations thereto;
Massachusetts Oil and Hazardous Materials Release Prevention and
Response Act, Mass. Gen. L., Ch. 21E, Section 1, et. seq., and
regulations thereto;
Massachusetts Solid Waste Facilities Law, Mass. Gen. L. Ch. 21H,
Section 1, et. seq., and regulations thereto;
Massachusetts Toxic Use Reduction Act, Mass. Gen. L, Ch. 21I, Section
1, et. seq., and regulations thereto;
Massachusetts Litter Control Laws, Mass. Gen. L. Ch. 111, Section
150A, et. seq., and regulations thereto;
Massachusetts Wetlands Protection Laws, Mass, Gen. L. Ch. 130,
Section 105, et. seq., and regulations thereto;
Massachusetts Environmental Air Pollution Control Law, Mass Gen, L.
Ch. 101, Section 2B, et. seq., and regulations thereto;
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Massachusetts Environmental Policy Act, Mass Gen. L 30, Section 61,
et. seq., and regulations thereto; and
Massachusetts Hazardous Waste Laws, Mass Gen L. Ch. 21C, Section 1,
et. seq., and regulations thereto
Equity Percentage shall mean, as to any Investor, that percentage figure
which expresses the ratio that (a) the number of shares of issued and
outstanding Common Stock then owned by such Investor bears to (b) the aggregate
number of shares of issued and outstanding Common Stock then owned by all
Investors. For purposes solely of the computation set forth in clauses (a) and
(b) above and the right of oversubscription, all issued and outstanding
securities held by the Investors that are convertible into or exercisable or
exchangeable for shares of Common Stock (including any issued and outstanding
shares of Preferred Stock) or for any such convertible, exercisable or
exchangeable securities, shall be treated as having been so converted, exercised
or exchanged for such Common Stock or for such convertible, exercisable or
exchangeable securities (which shall be treated as having been further
converted, exercised or exchanged for such Common Stock) all at the rate(s) or
price(s) at which such securities are convertible, exercisable or exchangeable
(and, as applicable, further convertible, exercisable or exchangeable) for
shares of Common Stock in effect at the time in question (which, for purposes of
Section 2.3 of this Agreement, shall be at the time of delivery by the
Corporation of the Offer Notice contemplated by Section 2.3(b)), whether or not
such securities are at such time immediately convertible, exercisable or
exchangeable or, as applicable, further convertible, exercisable or
exchangeable.
Exchange Act shall mean the Securities Exchange Act of 1934, as amended.
Exchange Act Registration Statement shall have the meaning set forth in
Section 2.5 hereof.
Excess Securities shall have the meaning set forth in Section 2.3(d)
hereof.
Excess Securities Notice shall have the meaning set forth in Section 2.3(d)
hereof.
Excess Securities Period shall have the meaning set forth in Section 2.3(d)
hereof.
Excluded Forms shall have the meaning given such term in Section 3.5
hereof.
Excluded Securities shall have the meaning herein as the term "Excluded
Stock" is defined to have in Article III, Section A.7(d)(ii) of the Certificate.
Group shall mean: (i) as to an Investor that is a corporation: any and all
of the venture capital limited partnerships or corporations now existing or
hereafter formed that are affiliated with or under common control with one or
more of the controlling stockholders of such Investor and any predecessor or
successor thereto, (ii) in the case of HCV VI, the HCV Group, (iii) in the case
of MDS, the MDS Group and (iii) as to any Investor, any other Investor.
Hazardous Materials shall include without limitation, any flammable
explosives, petroleum products, petroleum byproducts, radioactive materials,
hazardous wastes, hazardous substances, toxic substances or other similar
materials regulated by Environmental Laws.
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HCV Director shall have the meaning set forth in Section 5.1 (b) hereof.
HCV Group shall mean, (i) HCV VI, (ii) any venture capital limited
partnership now existing or hereafter formed which is affiliated with or under
common control with one or more general partners of any general partner of HCV
VI (an "HCV Fund"); (iii) any limited partners or affiliates of HCV VI or any
other HCV Fund; and (iv) any successors or assigns of any of the foregoing.
HCV VI shall mean HealthCare Ventures VI, L.P., a Delaware limited
partnership, including any successor thereto or any assignee of the interest, in
whole or in part, of HCV IV under this Agreement.
Investors shall have the meaning (severally, but not jointly) set forth in
the preamble hereto.
MDS shall mean MDS Capital Corp.
MDS Group shall mean (i) MDS, (ii) any corporation, trust, partnership,
limited liability corporation, partnership or other form of business entity
which is an investment fund to which MDS or any of its affiliates provides
investment management and/or advisory services (which for greater certainty
currently includes, among others, MDS Life Sciences Technology Fund II NC
Limited Partnership, MDS Life Sciences Technology Fund II Quebec Limited
Partnership, MLII Co-Investment Fund NC Limited Partnership and SC Biotechnology
Development Fund LP (an "MDS Fund"); (iii) any limited partners or affiliates of
MDS or any MDS Fund; (iv) any venture capital limited partnership now existing
or hereafter formed which is affiliated with or under common control with one or
more general partners of any general partner of MDS and (iv) any successors or
assigns of any of the foregoing.
Notice of Acceptance shall have the meaning set forth in Section 2.3(c)
hereof.
Offer shall have the meaning set forth in Section 2.3(b) hereof.
Offered Securities shall mean (i) any shares of Common Stock, Preferred
Stock or any other equity security of the Corporation, (ii) any debt security or
capitalized lease with any equity feature with respect to the Corporation, or
(iii) any option, warrant or other right to subscribe for, purchase or otherwise
acquire any such equity security, debt security or capitalized lease but shall
not include the Excluded Securities, securities issued and outstanding as of the
date of this Agreement and the Series B Preferred Stock to be issued pursuant to
the Stock Purchase Agreement.
Option Shares shall have the meaning set forth in Section 5.2(a)(iii) of
the Stock Purchase Agreement.
Other Shares shall have the meaning set forth in Section 3.5(e) hereof.
Preferred Shares shall mean the Series A Preferred Shares and the Series B
Preferred Shares.
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Preferred Stock shall mean, collectively, the Series A Preferred Stock, par
value $0.01 per share, of the Corporation, and the Series B Preferred Stock, par
value $0.01 per share, of the Corporation.
Preferred Stockholders shall mean, collectively, all holders of shares of
Preferred Stock of the Corporation.
Property shall include, without limitation, land, buildings and laboratory
facilities owned or leased by the Corporation or as to which the Corporation now
has any duties, responsibilities (for clean-up, remedy or otherwise) or
liabilities under any Environmental Laws, or as to which the Corporation or any
subsidiary of the Corporation may have such duties, responsibilities or
liabilities because of past acts or omissions of the Corporation or any such
subsidiary or their predecessors, or because the Corporation or any such
subsidiary or their predecessors in the past was such an owner or operator of,
or bore some other relationship with, such land, buildings and/or laboratory
facilities.
Qualified Public Offering shall have the meaning set forth in Section 2.17
hereof.
Refused Securities shall have the meaning set forth in Section 2.3(f)
hereof.
Restricted Securities shall mean any of the Preferred Shares and the Common
Stock issued or issuable upon the conversion of the Preferred Shares, all shares
of Common Stock issued or issuable in respect thereof by way of stock splits,
stock dividends, stock combinations, recapitalizations or like occurrences, and
any other shares of Common Stock or other securities of the Corporation which
may be issued hereafter to any of the Investors or any member of their Group
which are convertible into or exercisable for shares of Common Stock (including,
without limitation, other classes or series of Convertible Preferred Stock,
warrants, options or other rights to purchase Common Stock or convertible
debentures or other convertible debt securities) and the Common Stock issued or
issuable upon such conversion or exercise of such other securities, which have
not been sold (a) pursuant to an effective registration statement filed pursuant
to the Securities Act, or (b) pursuant to Rule 144 or Rule 144A promulgated by
the Commission under the Securities Act.
Restricted Shares shall mean the shares of Common Stock issued or issuable
upon the conversion or exchange of the Restricted Securities or otherwise
constituting a portion of the Restricted Securities.
Securities Act shall mean the Securities Act of 1933, as amended.
Series A Directors shall mean the two members of the Board of Directors
designated by HCV VI pursuant to Section 5 hereof.
Series A Preferred Shares shall mean issued and outstanding shares of the
Series A Preferred Stock.
Series A Preferred Stock shall mean Series A Convertible Preferred Stock,
par value $01 per share, of the Corporation.
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Series B Director shall mean the member of the Board of Directors
designated by the members of the MDS Group then holding capital stock of the
Corporation pursuant to Section 5 hereof.
Series B Preferred Shares shall mean shares of Series B Preferred Stock
issued or issuable pursuant to the Stock Purchase Agreement.
Series B Preferred Stock shall mean Series B Convertible Preferred Stock,
par value $01 per share, of the Corporation.
Stock Purchase Agreement shall mean the Convertible Preferred Stock
Purchase Agreement, dated as of the date hereof, by and among the Corporation
and the Series B Purchasers.
Stockholders shall mean all holders of capital stock of the Corporation.
Target Month shall have the meaning set forth in Section 2.7(a) hereof.
20-Day Period shall have the meaning set forth in Section 2.3(b) hereof.
Transfer shall mean any disposition of any Restricted Securities or of any
interest therein which would constitute a sale thereof within the meaning of the
Securities Act.
SECTION 2. Certain Covenants of the Corporation.
2.1. Meetings of the Board of Directors. The Corporation shall call, and
use its best efforts to have, regular meetings of the Board not less often than
quarterly. The Corporation shall pay all reasonable and appropriately documented
travel expenses and other out-of-pocket expenses incurred by directors who are
not employed by the Corporation in connection with attendance at meetings to
transact the business of the Corporation or attendance at meetings of the Board
or any committee thereof.
2.2. Reservation of Shares of Common Stock and Preferred Stock, Etc. The
Corporation shall at all times have authorized and reserved out of its
authorized but unissued shares of Common Stock, a sufficient number of shares of
Common Stock to provide for the conversion of the Preferred Shares. Neither the
issuance of the Series B Preferred Shares nor the shares of Common Stock
issuable upon the conversion of the Preferred Shares shall be subject to a
preemptive right of any other Stockholder,
2 3. Right of First Refusal
(a) The Corporation shall not issue, sell or exchange, agree to issue,
sell or exchange, or reserve or set aside for issuance, sale or exchange, any
Offered Securities unless in each case the Corporation shall have first offered
to sell to the Investors all of such Offered Securities on the terms set forth
herein (the "Offer"). Each Investor shall be entitled to purchase up to its
Equity Percentage of the Offered Securities. In addition, each Investor shall
have a right of oversubscription ("Right of Oversubscription") such that if any
Investor fails to accept the Offer as to its Equity Percentage of the Offered
Securities, the remaining Investors shall, among
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them, have the right to purchase up to the balance of the Offered Securities not
so purchased. Such Right of Oversubscription may be exercised by an Investor (an
"Oversubscribing Investor") by accepting the Offer as to more than its Equity
Percentage of the Offered Securities. If as a result thereof, such
oversubscriptions exceed the total number of the Offered Securities available in
respect of such oversubscription privilege, the Oversubscribing Investors shall
be cut back with respect to their oversubscriptions on a pro rata basis. Each
Investor may delegate or assign its rights and obligations with respect to such
Offer to one or more members of its Group, which members shall thereafter be
deemed to be "Investors" for the purpose of applying this Section 2.3 to such
Offer.
(b) The Corporation shall deliver to each Investor written notice of
the Offer, specifying the price and terms and conditions of the Offer (the
"Offer Notice"). The Offer by its terms shall remain open and irrevocable for a
period of 20 days from the date of delivery of the Offer Notice to each Investor
(the "20-Day Period"), subject to extension to include the Excess Securities
Period (as such term is hereinafter defined).
(c) Each Investor shall evidence its intention to accept the Offer by
delivering a written notice signed by the Investor setting forth the number of
shares that the Investor elects to purchase (the "Notice of Acceptance"). The
Notice of Acceptance must be delivered to the Corporation not later than the
last day of the 20-Day Period.
(d) If any Investor fails to exercise its rights hereunder to purchase
all or any portion of its Equity Percentage of the Offered Securities, the
Corporation shall so notify the other Investors in a written notice (the "Excess
Securities Notice"). The Excess Securities Notice shall be given by the
Corporation promptly after it learns of any Investor's intention not to purchase
all or any portion of its Equity Percentage of the Offered Securities, but in no
event later than ten (10) days after the expiration of the 20 Day Period. The
Investors who or which have agreed to purchase their Equity Percentage of the
Offered Securities shall have the right to purchase the portion not purchased by
such other Investor(s) (the "Excess Securities"), on a pro rata basis, by giving
notice within ten (10) days after receipt of the Excess Securities Notice from
the Corporation. The twenty (20) day period during which (i) the Corporation
must give the Excess Securities Notice to the other Investors, and (ii) each of
the other Investors must give the Corporation notice of its intention to
purchase all or any portion of its pro rata share of its Excess Securities is
hereinafter referred to as the "Excess Securities Period."
(e) If the Investors tender their Notices of Acceptance prior to the
end of the 20-Day Period indicating their intention to purchase all of the
Offered Securities, or if prior to the termination of the Excess Securities
Period, the Investors tender Excess Securities Notices to purchase all of the
Excess Securities, the Corporation shall proceed to promptly schedule a closing
of the sale of all such Offered Securities at which closing each Investor shall
(i) purchase from the Corporation that portion of the Offered Securities
(including the Excess Securities) for which it tendered a Notice of Acceptance
and an Excess Securities Notice, if applicable, upon the terms specified in the
Offer Notice, and (ii) execute and deliver an agreement further restricting
transfer of such Offered Securities substantially as set forth in Section 3.1,
3.2 and 3.3 of this Agreement. In addition, with respect to the Offered
Securities being purchased by the Investors at such closing, the Corporation
shall provide each such Investor with the rights and benefits set forth in this
Agreement. The obligation of the Investors to purchase such Offered
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Securities at such closing is further conditioned upon the preparation of a
purchase agreement embodying the terms of the Offer, which shall be reasonably
satisfactory in form and substance to such Investor and the Investor's counsel
(f) In the event the Corporation does not sell all of the Offered
Securities pursuant to Section 2.3(e), the Corporation shall have ninety (90)
days from the expiration of 20 Day Period or, if applicable, the Excess
Securities Period to sell the portion of the Offered Securities (including the
Excess Securities) refused by the Investors (the "Refused Securities") to any
other person or persons, but only upon terms and conditions which are in all
material respects (including, without limitation, price and interest rate) no
more favorable to such other person or persons, and no less favorable to the
Corporation, than those set forth in the Offer Notice Upon and subject to the
closing of the sale of all of the Refused Securities (which shall include full
payment to the Corporation), each Investor shall (i) purchase from the
Corporation those Offered Securities (including the Excess Securities) for which
it tendered a Notice of Acceptance or an Excess Securities Notice, as
applicable, upon the terms specified in the Offer Notice, and (ii) execute and
deliver an agreement restricting transfer of such Offered Securities (including
the Excess Securities) substantially as set forth in Sections 3.1, 3.2 and 3.3
of this Agreement. In addition, with respect to the Offered Securities being
purchased by the Investors, the Corporation shall provide each such Investor
with the rights and benefits set forth in this Agreement. The Corporation
agrees, as a condition precedent to accepting payment for and making delivery of
any Refused Securities to any person other than an Investor, to have each and
every such person execute and deliver a Stock Restriction Agreement in the
capacity of a "Principal Stockholder" as defined therein, substantially in the
form attached hereto as Exhibit A, or as may be modified or amended from time to
time with the prior approval of the holders of a majority of the combined voting
power of the Preferred Shares then outstanding, calculated in accordance with
Section A.6(a) of Article III of the Certificate (but including in such
calculation, any outstanding Restricted Shares held by such holders), to the
extent such purchaser has not already executed such Agreement. The obligation of
the Investor to purchase such Offered Securities (including the Excess
Securities) is further conditioned upon the preparation of a purchase agreement
embodying the terms of the Offer; which shall be reasonably satisfactory in form
and substance to such Investor and the Investor's counsel.
(g) In each case, any Offered Securities not purchased either by the
Investors or by any other person in accordance with this Section 2.3 may not be
sold or otherwise disposed of until they are again offered to the Investors
under the procedures specified in Paragraphs (a), (b), (c), (d) (e) and (f)
hereof.
(h) Each Investor may, by prior written consent, waive its rights
under this Section 2.3. Such a waiver shall be deemed a limited waiver and shall
only apply to the extent specifically set forth in the written consent of such
Investor.
2.4. Negative Covenants.
(a) Supermajority Approvals. The Corporation shall not, directly or
indirectly, take any of the actions specified in Article III, Section
A.6(c)(iii) of the Certificate without (x) the prior written consent or vote of
the holders of at least a majority of the then outstanding shares of the Series
A Preferred Stock, voting or consenting as a separate class, and (y) the prior
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written consent or vote of the holders of at least two-thirds of the then
outstanding shares of the Series B Preferred Stock, voting or consenting as a
separate class.
(b) Majority Approvals. The Corporation shall not, directly or
indirectly, take any of the actions specified in Article III, Section A.6(c)(iv)
of the Certificate without the prior written consent or vote of the holders of
at least a majority of the then outstanding shares of the Series A Preferred
Stock and the then outstanding shares of the Series B Preferred Stock, voting or
consenting together as a single class.
(c) Registration Rights. The Corporation shall not hereafter grant to
any persons any rights to register or qualify stock of the Corporation under
federal or state securities laws, without the prior written consent or vote of
the holders of at least a majority of the then outstanding Restricted
Securities.
(d) Board Approvals. In addition to and not in limitation of the
provisions of Section 2.4(a) and (b) above, the Corporation shall not, directly
or indirectly, take any of the actions specified in Article V, Section A.2 of
the Certificate without the prior written consent or vote of the Board of
Directors.
2.5. Filing of Reports Under the Exchange Act
(a) The Corporation shall give prompt notice to the holders of
Preferred Stock of (i) the filing of any registration statement (an "Exchange
Act Registration Statement") pursuant to the Exchange Act, relating to any class
of equity securities of the Corporation, (ii) the effectiveness of such Exchange
Act Registration Statement, and (iii) the number of shares of such class of
equity securities outstanding, as reported in such Exchange Act Registration
Statement, in older to enable the Investors to comply with any reporting
requirements under the Exchange Act or the Securities Act. Upon the written
request of a majority in interest of the holders of the Series A Preferred
Shares or a majority in interest of the Series B Preferred Shares, the
Corporation shall, at any time after the Corporation has registered any shares
of Common Stock under the Exchange Act, file an Exchange Act Registration
Statement relating to any class of equity securities of the Corporation then
held by the holders of the Series A Preferred Shares or the Series B Preferred
Shares, as applicable, or issuable upon conversion or exercise of any class of
debt or equity securities or warrants or options of the Corporation then held by
the applicable Investors, whether or not the class of equity securities with
respect to which such request is made shall be held by the number of persons
which would requite the filing of a registration statement under Section
12(g)(l) of the Exchange Act.
(b) If the Corporation shall have filed an Exchange Act Registration
Statement or a registration statement (including an offering circular under
Regulation A promulgated under the Securities Act) pursuant to the requirements
of the Securities Act, which shall have become effective (and in any event, at
all times following the initial public offering of any of the securities of the
Corporation), then the Corporation shall comply with all of the reporting
requirements of the Exchange Act (whether or not it shall be required to do so)
and shall comply with all other public information reporting requirements of the
Commission as a condition to the availability of an exemption from the
Securities Act for the sale of any of the Restricted Shares by any holder of
Restricted Securities (including any such exemption pursuant to Rule 144 or
9
Rule 144A thereof, as amended from time to time, or any successor rule thereto
or otherwise) The Corporation shall cooperate with each holder of Restricted
Securities in supplying such information as may be necessary for such holder of
Restricted Securities to complete and file any information reporting forms
presently or hereafter required by the Commission as a condition to the
availability of an exemption from the Securities Act (under Rule 144 or Rule
144A thereunder or otherwise) for the sale of any of the Restricted Shares by
any holder of Restricted Securities.
2.6 Access to Records. The Corporation shall afford to each of the
Investors and such Investor's employees, counsel and other authorized
representatives, free and full access, at all reasonable times and for
reasonable periods of time, to all of the books, records and properties of the
Corporation and to all officers and employees of the Corporation.
2.7 Financial Reports. Until such time that the Corporation has a class of
its equity securities registered under the Exchange Act and is required to file
reports thereunder pursuant to Sections 13 or 15(d) of the Exchange Act, except
with respect to the obligation set forth in Section 2.7(e)(i) hereunder which
shall survive such time, the Corporation shall furnish each of the Investors
with the financial information described below:
(a) Within 20 days after the last day of each calendar month (or such
other calendar period as is approved by the Board), financial statements,
including a balance sheet as of the last date of such month, a statement of
income (or monthly operating expenses) for such month, together with a
cumulative statement of income from the first day of the fiscal year to the last
day of such month, which statements shall be prepared from the books and records
of the Corporation, a cash flow analysis, together with cumulative cash flow
analyses from the first day of the fiscal year to the last day of such month,
and a comparison between the actual monthly operating expenses and the projected
figures for such month and the comparable figures for the prior year, subject to
the provisions of Section 2.9 hereof.
(b) The Corporation shall deliver to each of the Investors, within 45
days after the end of each fiscal quarter, unaudited financial statements for
such fiscal quarter, certified by the Chief Financial Office or the Treasurer of
the Corporation as presenting fairly the financial condition and results of
operations of the Corporation and as having been prepared on a basis consistent
with the accounting principles reflected in the Corporation's annual audited
financial statements (subject to the absence of footnotes), accompanied by a
report, signed by the Chief Financial Officer or the Treasurer of the
Corporation, summarizing the operating and financial highlights of the
Corporation for such quarter, which report shall include (a) a comparison
between the actual quarterly operating and financial results, the Budget (as
defined in Section 2.8 hereof) and the results of that quarter for the prior
fiscal year of the Corporation, together with an explanation of material
variances from the Budget and such prior year quarter, as the case may be, and
(b) a narrative analysis of operations and trends in the business of the
Corporation during such quarter.
(c) Within 90 days after the end of each fiscal year of the
Corporation, audited financial statements of the Corporation, which shall
include an income statement and a statement of cash flow for such fiscal year
and a balance sheet as of the last day thereof, each prepared in accordance with
generally accepted accounting principles consistently applied, and accompanied
10
by the report of an independent accounting firm of national reputation as shall
have been approved by the Board.
(d) If for any period the Corporation shall have any subsidiary or
subsidiaries whose accounts are consolidated with those of the Corporation, then
the financial statements delivered for such period pursuant to paragraphs (a),
(b) and (c) of this Section 2.7 shall be the consolidated and consolidating
financial statements of the Corporation for all such consolidated subsidiaries.
(e) Promptly upon becoming available:
(i) copies of all financial statements, reports, press releases,
notices, proxy statements and other documents sent by the Corporation to its
Stockholders or released to the public and copies of all regular and periodic
reports, if any, filed by the Corporation with the Commission or any securities
exchange or self-regulatory organization; and
(ii) any other financial or other information available to
management of the Corporation that any of the Investors shall have reasonably
requested on a timely basis.
2.8. Budget and Operating Forecast. The Corporation shall prepare and
submit to the Board and each of the Investors an operating plan with monthly and
quarterly breakdowns (the "Budget") for each fiscal year at least 45 days prior
to the beginning of each fiscal year of the Corporation. The Budget shall be
deemed accepted as the Budget for such fiscal year only when it has been
approved by the Board. The Budget shall be reviewed by the Corporation
periodically and all changes therein, and all material deviations therefrom,
shall be reviewed by the Board on at least a quarterly basis.
2.9. System of Accounting. The Corporation shall maintain, and cause each
of its subsidiaries, when and if any shall exist, to maintain, its books of
accounts, related records and system of accounting in accordance with good
business practices and generally accepted accounting principles, and shall cause
the matters contained therein to be appropriately and accurately reflected in
the financial reports (which shall be prepared in accordance with generally
accepted accounting principles) furnished pursuant to this Agreement.
2.10. Restriction on Transfer Rights; Confidentiality. The rights granted
to each of the Investors pursuant to Sections 2.6 through 2.8 hereof shall not
be transferred or assigned by any Investor to, and shall not inure to the
benefit of, any successor, transferee or assignee of any Investor, while it is
engaged in any business directly competitive with the Corporation.
2.11. Confidentiality and Non-Competition Agreements for Key Employees. The
Corporation shall cause each person who is presently an employee of or a
consultant or independent contractor to the Corporation or who becomes an
employee of or a consultant to the Corporation subsequent to the date hereof and
who shall have or be proposed to have access to confidential or proprietary
information of the Corporation to execute a confidentiality and non-competition
agreement in form and substance attached hereto or otherwise approved by the
Board prior to the commencement of such person's employment by the Corporation
in such capacity.
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2.12. Stock Restriction Agreement for Chief Officers. The Corporation shall
cause Xxxxxx X. Xxxxxx, Xxxxx X. Xxxxxx, and Art Xxxxxxxxx to execute a First
Amended and Restated Stock Restriction Agreement substantially in the form
attached hereto as Exhibit A and maintain such agreement in full force and
effect.
2.13. Marketing and Promotional Material. Each of the Investors will have
the right to review and approve, in advance of publication, distribution or
dissemination, any reference to such Investor or any entity affiliated with such
Investor (other than the Corporation), contained in any document, instrument,
report or filing or in any advertising, marketing, promotional and similar
materials.
2.14. Bring-Along Rights.
(a) If, by vote or written consent, (i) the Board of Directors and
(ii) the holders of at least a majority of the then outstanding shares of the
Series A Preferred Stock and the then outstanding shares of the Series B
Preferred Stock, voting or consenting together as a single class (the "Approving
Investors"), approve a change of control of the Corporation pursuant to which
any bona fide unaffiliated third party proposes to acquire all or substantially
all of the assets or all or substantially all of the capital stock of the
Corporation, whether by purchase, merger, consolidation, share exchange, sale of
assets, exclusive license or otherwise (an "Approved Sale"), the Approving
Investors shall provide all other Investors who are not Approving Investors and
each Original Stockholder (collectively, the "Remaining Stockholders") at least
ten (10) days advance notice of such Approved Sale, which notice shall include a
reasonably detailed description of the Approved Sale, including the proposed
time and place of closing, the consideration to be received by the Remaining
Stockholders, and any other material terms. The Remaining Stockholders shall
consent to, vote for and raise no objections to the Approved Sale, and (i) the
Remaining Stockholders shall waive any dissenters rights, appraisal rights or
similar rights, if any, in connection with such merger, consolidation or asset
sale, or (ii) if the Approved Sale is structured as a sale of the stock of the
Corporation, the Remaining Stockholders shall agree to sell all of their shares
of Capital Stock on the terms and conditions approved by the Approving
Investors, provided such terms do not provide that the Remaining Stockholders
would receive less than the amount that would be distributed to such Remaining
Stockholders in the event the proceeds of the Approved Sale were distributed in
accordance with the Restated Certificate. The Remaining Stockholders shall take
all reasonably necessary and desirable actions requested by the Approving
Investors in connection with the consummation of the Approved Sale, including
the execution of such agreements and such instruments (collectively, the "Sale
Documents") and other actions reasonably necessary to (i) effectuate the
Approved Sale, including (only in the case that a third party requires both the
Corporation and all of the Approving Investors and the Remaining Stockholders to
individually sign such Sale Documents) making such customary representations,
warranties, indemnities, covenants, conditions, escrow agreements and other
customary agreements relating to such Approved Sale (provided that each
Remaining Stockholder's aggregate liability pursuant to the Sale Documents or
otherwise in connection with the Approved Sale shall be limited to the value of
the consideration received by each such Remaining Stockholder on account of the
Approved Sale) and (ii) effectuate the agreed-upon allocation and distribution
of the aggregate consideration upon the Approved Sale.
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(b) Each of the Remaining Stockholders hereby appoints the Approving
Investor holding the largest number of shares of the Preferred Stock for so long
as the provisions of Section 2.14(a) remain in effect, as such Remaining
Stockholder's attorney and proxy with full power of substitution, to vote, and
otherwise act (by written consent or otherwise) with respect to the capital
stock of the Corporation owned by such Remaining Stockholder, solely on the
matters and in the manner specified in Section 2.14(a).
(c) THE PROXIES AND POWER OF ATTORNEY GRANTED PURSUANT TO THE ABOVE
PARAGRAPH ARE IRREVOCABLE AND COUPLED WITH AN INTEREST. Each Remaining
Stockholder hereby revokes all other proxies and powers of attorney on the
matters specified in Section 2.14(a) with respect to the shares of capital stock
of the Corporation which such Remaining Stockholder may have heretofore
appointed or granted, and no subsequent proxy or power of attorney shall be
given or written consent executed (and if given or executed, shall not be
effective) by such Remaining Stockholder with respect thereto. All authority
herein conferred or agreed to be conferred shall survive the death or incapacity
of each Remaining Stockholder and any obligation of a Remaining Stockholder
under this Agreement shall be binding upon the heirs, personal representatives
and successors of such Remaining Stockholder.
2.15. Vesting of Stock. Unless otherwise approved by the Board of Directors
by vote or written consent in which the Series A Directors and the Series B
Director concur, all stock, stock options and other stock equivalents issued
after the date of this Agreement to employees, directors, consultants and other
service providers pursuant to a stock purchase or option plan or other employee
stock incentive program or otherwise ("Stock Awards") (i) shall be subject to a
minimum vesting schedule of at least four years, pursuant to which 25% of the
shares subject to any such Stock Award will vest no sooner than one year after
the date of the issuance or grant of such Stock Award, and 75% of the shares
subject to such Stock Award will vest no more frequently and no sooner than
monthly on a pro rata basis beginning on the first anniversary of the date of
issuance or grant of such Stock Award, (ii) shall provide for termination of
vesting and forfeiture of any unvested portion of such Stock Award upon
cessation of employment and (ii) shall provide that as a condition to issuance
of any shares, the recipient of such shares shall sign a written agreement in a
form approved by the Board providing the Corporation with a right of first
refusal on any transfer of such shares with certain exceptions for transfers to
immediate family members and to trusts of which the holder is the trustee.
2.16. Environmental Matters. All development, construction and operation of
property purchased, leased or otherwise acquired by the Corporation shall, in
all material respects, comply with, and shall be lawful, permitted and
conforming uses in all material respects under, all applicable building, fire,
safety, subdivision, zoning, sewer, environmental, securities, health, insurance
and other laws, ordinances, rules, regulations and plan approval conditions of
any governmental or public body or authority. The Corporation shall promptly
advise the Investors in writing of any pending or threatened claim, demand or
action by any governmental authority or third party relating to any Hazardous
Materials affecting the Property of which it has knowledge. The Corporation
shall not discharge, place, release, spill or dispose of any Hazardous Materials
or any other pollutants or effluents upon the Property or elsewhere (including,
but not limited to, underground injection of such substances), and the
Corporation shall not discharge into the air any emission which would require a
permit under the Clean Air
13
Act or its state counterparts or any other Environmental Laws, except in
compliance with the Environmental Laws. The Stockholders of the Corporation
shall have no control over, or authority with respect to, the waste disposal
operations of the Corporation. The Corporation hereby indemnifies, defends and
holds harmless the Investors from and against any and all manner of actions,
causes of action, suits, debts, accounts, controversies, judgments, claims,
demands, losses or liabilities of any nature (including reasonable attorneys'
fees) directly or indirectly arising out of or attributable to (a) any
misrepresentation or breach of the representations and covenants set forth in
Section 5.18 of the Stock Purchase Agreement, or (b) the use, generation,
storage, release, threatened release, discharge, disposal or presence of
Hazardous Materials on, under or about the Property by any person during the
period that the Corporation was the legal or equitable owner of the Property or
which occurred prior to such time and was otherwise actually known by, or should
have been known by, the Corporation. The obligation of the Corporation to
indemnify the Investors shall specifically cover and include, without
limitation, all fines and penalties imposed by federal, state or local
authorities, costs of removing or neutralizing the Hazardous Materials, injury
to the property adjoining the Property, injury to persons living or working on
or about the Property or adjoining or otherwise affecting property, and all
other indirect or consequential damages incurred by the Investors.
2.17. Duration of Section. Section 2.3 and Sections 2.6-2.14 and the rights
and obligations of the parties thereunder shall automatically terminate on the
consummation of a firm commitment underwritten public offering of Common Stock
registered under the Securities Act pursuant to which (X) Common Stock is
offered to the public at a price of at least $5.00 per share of Common Stock
(subject to adjustment for stock splits, stock dividends, stock combinations,
recapitalizations and like occurrences) and (Y) the net proceeds to the
Corporation are at least $40 million (a "Qualified Public Offering").
SECTION 3. Transfer of Securities.
3.1. Restriction on Transfer. The Restricted Securities shall not be
transferable, except upon the conditions specified in this Section 3, which
conditions are intended solely to ensure compliance with the provisions of the
Securities Act in respect of the Transfer thereof.
3.2. Restrictive Legend. Each certificate evidencing any Restricted
Securities and each certificate evidencing any such securities issued to
subsequent transferees of any Restricted Securities shall (unless otherwise
permitted by the provisions of Section 3.3 or 3.10 hereof) be stamped or
otherwise imprinted with a legend in substantially the following form;
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAW. THE SECURITIES MAY
NOT BE PLEDGED, HYPOTHECATED, SOLD OR TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE SECURITIES LAW OR AN
EXEMPTION THEREFROM
14
UNDER SUCH ACT OR LAW. ADDITIONALLY, THE TRANSFER OF THESE SECURITIES
IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE FIRST AMENDED AND
RESTATED STOCKHOLDERS' AGREEMENT DATED APRIL 30, 2003 AMONG
ACTIVBIOTICS, INC. AND CERTAIN OTHER SIGNATORIES THERETO, AND NO
TRANSFER OF SUCH SECURITIES SHALL BE VALID OR EFFECTIVE UNTIL SUCH
CONDITIONS HAVE BEEN FULFILLED. COPIES OF SUCH AGREEMENT MAY BE
OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF
THIS CERTIFICATE TO THE SECRETARY OF ACTIVBIOTICS, INC.
3.3. Notice of Transfer. By acceptance of any Restricted Securities, the
holder thereof agrees to give prior written notice to the Corporation of such
holder's intention to effect any Transfer and to comply in all other respects
with the provisions of this Section 3.3. Each such notice shall describe the
manner and circumstances of the proposed Transfer and shall be accompanied by:
(a) the written opinion of counsel for the holder of such Restricted Securities,
or, at such holder's option, a representation letter of such holder, addressed
to the Corporation (which opinion and counsel, or representation letter, as the
case may be, shall be reasonably acceptable to the Corporation), as to whether,
in the case of a written opinion, in the opinion of such counsel, such proposed
Transfer involves a transaction requiring registration of such Restricted
Securities under the Securities Act and applicable state securities laws or an
exemption thereunder is available, or, in the case of a representation letter,
such letter sets forth a factual basis for concluding that such proposed
transfer involves a transaction requiring registration of such Restricted
Securities under the Securities Act and applicable State Securities laws or an
exemption thereunder is available, or (b) if such registration is required and
if the provisions of Section 3.4 hereof are applicable, a written request
addressed to the Corporation by the holder of such Restricted Securities,
describing in detail the proposed method of disposition and requesting the
Corporation to effect the registration of such Restricted Securities pursuant to
the terms and provisions of Section 3.4 hereof; provided, however, that (y) in
the case of a Transfer by a holder to a member of such holder's Group, no such
opinion of counsel or representation letter of the holder shall be necessary,
provided that the transferee agrees in writing to be subject to Sections 3.1,
3.2, 3.3 and 3.10 hereof to the same extent as if such transferee were
originally a signatory to this Agreement, and (z) in the case of any holder of
Restricted Securities that is a partnership, no such opinion of counsel or
representation letter of the holder shall be necessary for a Transfer by such
holder to a partner of such holder, or a retired partner of such holder who
retires after the date hereof, or the estate of any such partner or retired
partner if, with respect to such Transfer by a partnership, (i) such Transfer is
made in accordance with the partnership agreement of such partnership, and (ii)
the transferee agrees in writing to be subject to the terms of Sections 3.1,
3.2, 3.3 and 3.10 hereof to the same extent as if such transferee were
originally a signatory to this Agreement. If in such opinion of counsel or as
reasonably concluded from the facts set forth in the representation letter of
the holder (which opinion and counsel, or representation letter, as the case may
be, shall be reasonably acceptable to the Corporation), the proposed Transfer
may be effected without registration under the Securities Act and any applicable
state securities laws or "blue sky" laws, then the holder of Restricted
Securities shall thereupon be entitled to effect such Transfer in accordance
with the
15
terms of the notice delivered by it to the Corporation. Each certificate or
other instrument evidencing the securities issued upon such Transfer (and each
certificate or other) instrument evidencing any such securities not
Transferred) shall bear the legend set forth in Section 3.2 hereof unless: (a)
in such opinion of such counsel or as can be concluded from the representation
letter of such holder (which opinion and counsel or representation letter shall
be reasonably acceptable to the Corporation) the registration of future
Transfers is not required by the applicable provisions of the Securities Act and
state securities laws, or (b) the Corporation shall have waived the requirement
of such legend; provided, however, that such legend shall not be required on any
certificate or other instrument evidencing the securities issued upon such
Transfer in the event such Transfer shall be made in compliance with the
requirements of Rule 144 (as amended from time to time or any similar or
successor rule) promulgated under the Securities Act. The holder of Restricted
Securities shall not effect any Transfer until such opinion of counsel or
representation letter of such holder has been given to and accepted by the
Corporation (unless waived by the Corporation) or until registration of the
Restricted Securities involved in the above-mentioned request has become
effective under the Securities Act. In the event that an opinion of counsel is
required by the registrar or transfer agent of the Corporation to effect a
transfer of Restricted Securities in the future, the Corporation shall seek and
obtain such opinion from its counsel, and the holder of such Restricted
Securities shall provide such reasonable assistance as is requested by the
Corporation (other than the furnishing of an opinion of counsel) to satisfy the
requirements of the registrar or transfer agent to effectuate such transfer.
3.4. Required Registration. At any time following the date that is the
earlier of (i) the fifth anniversary of the Stage IA Closing Date (as defined
under the Stock Purchase Agreement) and (ii) six months following the closing
of an initial public offering, if the Corporation shall be requested (i) by
holders of 15% or more of the outstanding Restricted Securities (on an
as-converted basis) to effect the registration under the Securities Act of
Restricted Shares, or (ii) after the first registration pursuant to this Section
3.4, by one or more of the holders of Restricted Securities, to effect the
registration under the Securities Act of Restricted Shares, then the Corporation
shall promptly give written notice of such proposed registration to all holders
of Restricted Securities, and thereupon the Corporation shall promptly use its
best efforts to effect the registration under the Securities Act of the
Restricted Shares that the Corporation has been requested to register for
disposition as described in the request of such holders of Restricted Securities
and in any response received from any of the holders of Restricted Securities
within 30 days after the giving of the written notice by the Corporation;
provided, however, that the Corporation shall not be obligated to effect any
registration under the Securities Act except in accordance with the following
provisions and Section 3.6:
(a) Subject to Section 3.6, the Corporation shall not be obligated to
file and cause to become effective more than an aggregate of four (4)
registration statements (a maximum of two (2) of which may be initiated by the
Series B Stockholders and two (2) of which may be initiated by the Series A
Stockholders) in which Restricted Shares are registered under the Securities Act
pursuant to this Section 3.4, if all of the Restricted Shares offered pursuant
to such registration statements are sold thereunder upon the price and terms
offered
(b) Notwithstanding the foregoing, the Corporation may include in each
such registration requested pursuant to this Section 3.4 any authorized but
unissued shares of
16
Common Stock (or authorized treasury shares) for sale by the Corporation or
any issued and outstanding shares of Common Stock for sale by others; provided,
however, that, if the number of shares of Common Stock so included pursuant to
this clause (b) exceeds the number of Restricted Shares requested by the holders
of Restricted Securities requesting such registration, then such registration
shall be deemed to be a registration in accordance with and pursuant to Section
3.5; and provided further, however, that in the event such registration is
pursuant to this Section 3.4, the inclusion of such previously authorized but
unissued shares by the Corporation or issued and outstanding shares of Common
Stock by others in such registration does not adversely affect, in the sole
opinion of the holders of Restricted Securities requesting such registration,
the ability of the holders of Restricted Securities requesting such registration
to market the entire number of Restricted Shares requested by them.
3.5 Piggyback Registration.
(a) Each time that the Corporation proposes for any reason to register
any of its securities under the Securities Act, other than the Corporation's
initial public offering or pursuant to a registration statement on Form S-4 or
Form S-8 or similar or successor forms (collectively, "Excluded Forms"), the
Corporation shall promptly give written notice of such proposed registration to
all holders of Restricted Securities, which shall offer such holders the
right to request inclusion of any Restricted Shares in the proposed
registration.
(b) Each holder of Restricted Securities shall have 30 days from the
receipt of such notice to deliver to the Corporation a written request
specifying the number of Restricted Shares such holder intends to sell and the
holder's intended method of disposition.
(c) In the event that the proposed registration by the Corporation is,
in whole or in part, an underwritten public offering of securities of the
Corporation, any request under Section 3.5(b) may specify that the Restricted
Shares be included in the underwriting (i) on the same terms and conditions as
the shares of Common Stock, if any, otherwise being sold through underwriters
under such registration, or (ii) on terms and conditions comparable to those
normally applicable to offerings of common stock in reasonably similar
circumstances in the event that no shares of Common Stock other than Restricted
Shares are being sold through underwriters under such registration.
(d) Upon receipt of a written request pursuant to Section 3 5(b), the
Corporation shall promptly use its best efforts to cause all such Restricted
Shares to be registered under the Securities Act, to the extent required to
permit sale or disposition as set forth in the written request,
(e) Notwithstanding the foregoing, if the managing underwriter of any
such proposed registration determines and advises in writing that the inclusion
of all Restricted Shares proposed to be included in the underwritten public
offering, together with any other issued and outstanding shares of Common
Stock proposed to be included therein by holders other than the holders of
Restricted Securities (such other shares hereinafter collectively referred to as
the "Other Shares"), would interfere with the successful marketing of the
Corporation's securities, then the total number of such securities proposed to
be included in such underwritten public offering shall be reduced. If such
proposed registration is in connection with an offering other
17
than a Qualified Public Offering, such reduction shall occur (i) first, by the
shares requested to be included in such registration by the holders of Other
Shares, and (ii) second, if necessary, (A) one-half by the securities proposed
to be issued by the Corporation, and (B) one-half by the Restricted Shares
proposed to be included in such registration by the holders thereof, on a pro
rata basis, based upon the number of Restricted Shares sought to be registered
by each such holder, provided however, that in no event shall the number of
Restricted Shares to be included in such offering be reduced to less than 15% of
the total shares to be included therein. The shares of Common Stock that are
excluded from the underwritten public offering pursuant to the preceding
sentence shall be withheld from the market by the holders thereof for a
period, not to exceed 180 days from the closing of such underwritten public
offering, that the managing underwriter reasonably determines as necessary in
order to effect such underwritten public offering.
3.6 Registrations on Form S-3 At such time as the Corporation shall have
qualified for the use of Form S-3 (or any successor form promulgated under
the Securities Act), each holder of Restricted Securities shall have the right
to request in writing an unlimited number of registrations on Form S-3; provided
that the Corporation shall not be required to file more than two such
Registration Statements on Form S-3 pursuant to this Section 3.6 in any twelve
month period. Each such request by a holder shall: (a) specify the number of
Restricted Shares which the holder intends to sell or dispose of, (b) state the
intended method by which the holder intends to sell or dispose of such
Restricted Shares, and (c) request registration of Restricted Shares (including
those Restricted Shares proposed to be registered by persons other than the
initiating holder) having a proposed aggregate offering price of at least
$1,000,000. Upon receipt of a request pursuant to this Section 3.6, the
Corporation shall use its best efforts to effect such registration or
registrations on Form S-3.
3.7. Preparation and Filing. If and whenever the Corporation is under an
obligation pursuant to the provisions of this Section 3 to use its best efforts
to effect the registration of any Restricted Shares, the Corporation shall, as
expeditiously as practicable:
(a) prepare and file with the Commission a registration statement with
respect to such securities and use its best efforts to cause such registration
statement to become and remain effective in accordance with Section 3.7(b)
hereof;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective
until the earlier of(i) the sale of all Restricted Shares covered thereby
or (ii) nine months, and to comply with the provisions of the Securities Act
with respect to the sale or other disposition of all Restricted Shares
covered by such registration statement;
(c) furnish to each holder whose Restricted Shares are being
registered pursuant to this Section 3 such number of copies of any summary
prospectus or other prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act and such other documents
as such holder may reasonably request in order to facilitate the public sale or
other disposition of such Restricted Shares;
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(d) use its best efforts to register or qualify the Restricted Shares
covered by such registration statement under the securities or blue sky laws of
such jurisdictions as each holder whose Restricted Shares are being registered
pursuant to this Section 3 shall reasonably request and do any and all other
acts or things which may be necessary or advisable to enable such holder to
consummate the public sale or other disposition in such jurisdictions of such
Restricted Shares; provided, however, that the Corporation shall not be required
to consent to general service of process for all purposes in any jurisdiction
where it is not then subject to process, qualify to do business as a foreign
corporation where it would not be otherwise required to qualify or submit to
liability for state or local taxes where it is not otherwise liable for such
taxes;
(e) at any time when a prospectus covered by such registration
statement and relating thereto is required to be delivered under the Securities
Act within the appropriate period mentioned in Section 3.7(b) hereof, notify
each holder whose Restricted Shares are being registered pursuant to this
Section 3 of the happening of any event as a result of which the prospectus
included in such registration, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the light
of the circumstances then existing and, at the request of such holder, prepare,
file and furnish to such holder 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 in
the light of the circumstances then existing;
(f) if the Corporation has delivered preliminary or final prospectuses
to the holders of Restricted Shares that are being registered pursuant to this
Section 3 and after having done so the prospectus is amended to comply with the
requirements of the Securities Act, the Corporation shall promptly notify such
holders and, if requested, such holders shall immediately cease making offers of
Restricted Shares and return all prospectuses to the Corporation. The
Corporation shall promptly provide such holders with revised prospectuses and,
following receipt of the revised prospectuses, such holders shall be free to
resume making offers of the Restricted Shares; and
(g) furnish, at the request of any holder whose Restricted Shares are
being registered pursuant to this Section 3, on the date that such Restricted
Shares are delivered to the underwriters for sale in connection with a
registration pursuant to this Section 3, if such securities are being sold
through underwriters, or, on the date that the registration statement with
respect to such securities becomes effective, if such securities are not being
sold through underwriters, (i) an opinion, dated such date, of the counsel
representing the Corporation for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the holder or holders
making such request, and (ii) a letter dated such date, from the independent
certified public accountants of the Corporation, in form and substance as is
customarily given by independent certified public accountants to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and to
the holder or holders making such request.
Notwithstanding the foregoing, if, after a registration statement becomes
effective, the Corporation becomes engaged in any activity which, in the good
faith determination of the
19
Board, involves information that would have to be disclosed in the registration
statement but which the Corporation desires to keep confidential for valid
business reasons, then the Corporation may at its option by notice to such
holders of Restricted Shares that have included shares in such registration
statement, require that such holders cease sales of such shares under such
registration statement for a period not in excess of ninety days from the date
of such notice, such right to be exercised by the Corporation not more than once
in any 12-month period. If in connection therewith, the Corporation considers it
appropriate for such registration statement to be amended, the Corporation shall
so amend such registration statement as promptly as practicable and such holders
shall suspend any further sales of their shares until the Corporation advises
them that such registration statement has been amended. The time periods
referred to herein during which such registration statement must be kept
effective shall be extended for an additional number of days equal to the number
of days during which the right to sell shares was suspended pursuant to this
paragraph.
3.8. Expenses. The Corporation shall pay all expenses incurred by the
Corporation in complying with this Section 3, including, without limitation, all
registration and filing fees (including all expenses incident to filing with the
National Association of Securities Dealers, Inc.), fees and expenses of
complying with the securities and blue sky laws of all such jurisdictions in
which the Restricted Shares are proposed to be offered and sold, printing
expenses and fees and disbursements of counsel (including with respect to each
registration effected pursuant to Sections 3.4, 3.5 and 3.6, the reasonable fees
and disbursements of one counsel for the holders of Restricted Securities who
may be chosen by a majority in interest of the Restricted Shares being
registered in such offering); provided, however, that all underwriting discounts
and selling commissions applicable to the Restricted Shares covered by
registrations effected pursuant to Section 3.4, 3.5 or 3.6 hereof shall be borne
by the seller or sellers thereof, in proportion to the number of Restricted
Shares sold by each such seller or sellers
3.9. Indemnification.
(a) (i) In the event of any registration of any Restricted Shares
under the Securities Act pursuant to this Section 3 or registration or
qualification of any Restricted Shares pursuant to Section 3.7(d) hereof, the
Corporation shall indemnify and hold harmless the seller of such shares, each
underwriter of such shares, if any, each broker or any other person acting on
behalf of such seller and each other person, if any, who controls any of the
foregoing persons, within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which any of the foregoing
persons may become subject under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in any registration statement under which such
Restricted Shares were registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, or any document incident to registration or qualification of any
Restricted Shares pursuant to Section 3.7(d) hereof, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading or, with respect to any prospectus, necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, or any violation by the Corporation of the Securities Act or any
state securities or blue sky laws applicable to the Corporation and relating to
action or inaction
20
required of the Corporation in connection with such registration or
qualification under the Securities Act or such state securities or blue sky
laws. The Corporation shall reimburse on demand such seller, underwriter, broker
or other person acting on behalf of such seller and each such controlling person
for any legal or any other expenses reasonably incurred by any of them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Corporation shall not be liable
in any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon (1) an untrue statement or alleged untrue
statement or omission or alleged omission made in said registration statement,
preliminary or final prospectus or amendment or supplement thereto or any
document incident to registration or qualification of any Restricted Shares
pursuant to Section 3.7(d) hereof, in reliance upon and in conformity with
written information furnished to the Corporation by such seller, underwriter,
broker, other person or controlling person specifically for use in the
preparation thereof, or (2) if the Corporation provides an amended prospectus
which corrects any misstatement or omission, any use of a prospectus which does
not contain such correction after such correction is made and the prospectus is
provided to such seller.
(ii) In the event of any registration of any Restricted Shares
under the Securities Act pursuant to this Section 3 or registration or
qualification of any Restricted Shares pursuant to Section 3.7(d) hereof, the
Investors severally, but not jointly, shall indemnify and hold harmless the
Corporation and its directors, officers, employees, agents and affiliates and
any other person, if any, who controls any of the foregoing persons, within the
meaning of the Securities Act, against any losses, claims, damages or
liabilities (or actions in respect thereof) which arise out of or are based upon
an untrue statement or alleged untrue statement of a material fact contained in
any registration statement under which such Restricted Shares were registered
under the Securities Act, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereto, or any document
incident to registration or qualification of any Restricted Shares pursuant to
Section 3.7(d) hereof, or arise out of or based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading or, with respect to any
prospectus, necessary to make statements therein, in light of the circumstances
under which they were made, not misleading, or any violation of the Securities
Act or any state securities or applicable blue sky laws relating to action or
inaction required of the Corporation in connection with such registration or
qualification under the Securities Act or such state securities or blue sky laws
arising out of or based upon written information furnished to the Corporation by
any such Investor specifically for use in the preparation thereof
Notwithstanding anything herein to the contrary, no Investor shall have any
obligation hereunder to pay any amount in excess of the net proceeds received by
any such Investor in connection with the registration of Restricted Shares.
(b) Before Restricted Shares held by any prospective seller shall be
included in any registration pursuant to this Section 3, such prospective seller
and any underwriter acting on its behalf shall have agreed to indemnify and hold
harmless (in the same manner and to the same extent as set forth in paragraph
(a)) the Corporation, each director of the Corporation, each officer of the
Corporation who signs such registration statement and any person who controls
the Corporation within the meaning of the Securities Act, with respect to any
untrue statement or omission from such registration statement, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, if such untrue statement or omission was made in reliance upon and in
conformity with written information furnished to the
21
Corporation through an instrument duly executed by such seller or such
underwriter specifically for use in the preparation of such registration
statement, preliminary prospectus, final prospectus or amendment or supplement;
provided, however, that the maximum amount of liability in respect of such
indemnification shall be limited, in the case of each prospective seller, to an
amount equal to the net proceeds actually received by such prospective seller
from the sale of Restricted Shares effected pursuant to such registration
(c) Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in Section 3.9(a) or
(b) hereof, such indemnified party will, if a claim in respect thereof is to be
made against the indemnifying party under this Section 3.9, give written notice
to the latter of the commencement of such action. In case any such action is
brought against an indemnified party, the indemnifying party will be entitled to
participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and, after notice to
such indemnified party from the indemnifying party of its election to assume the
defense thereof, the indemnifying party shall be responsible for any legal or
other expenses subsequently incurred by the latter in connection with the
defense thereof; provided, however, that, if any indemnified party shall have
reasonably concluded that there may be one or more legal defenses available to
such indemnified party which are different from, or additional to those
available to the indemnifying party, or that such claim or litigation involves
or could have an effect upon matters beyond the scope of the indemnity agreement
provided in this Section 3.9, the indemnifying party shall not have the right to
assume the defense of such action on behalf of such indemnified party, and such
indemnifying party shall reimburse such indemnified party and any person
controlling such indemnified party for the fees and expenses of counsel retained
by the indemnified party which are reasonably related to the matters covered by
the indemnity agreement provided in this Section 3.9. The indemnifying party
shall not make any settlement of any claims indemnified against hereunder
without the written consent of the indemnified party or parties, which consent
shall not be unreasonably withheld.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any holder of
Restricted Securities exercising rights under this Agreement, or any controlling
person of any such holder, makes a claim for indemnification pursuant to this
Section 3.9, but it is judicially determined (by the entry of a final judgment
or decree by a court of competent jurisdiction and the expiration of time to
appeal or the denial of the last right of appeal) that such indemnification may
not be enforced in such case notwithstanding the fact that this Section 3.9
provides for indemnification in such case, or (ii) contribution under the
Securities Act may be required on the part of any such holder or any such
controlling person in circumstances for which indemnification is provided under
this Section 3.9; then, in each such case, the Corporation and such holder will
contribute to the aggregate losses, claims, damages or liabilities to which they
may be subject as is appropriate to reflect the relative fault of the
Corporation and such holder in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities, it being understood
that the parties acknowledge that the overriding equitable consideration to be
given effect in connection with this provision is the ability of one party or
the other to correct the statement or omission which resulted in such losses,
claims, damages or liabilities, and that it would not be just and equitable if
contribution pursuant hereto were to be determined by pro rata allocation or by
any other
22
method of allocation which does not take into consideration the foregoing
equitable considerations. Notwithstanding the foregoing, (i) no such holder will
be required to contribute any amount in excess of the proceeds to it of all
Restricted Shares sold by it pursuant to such registration statement, and (ii)
no person or entity guilty of fraudulent misrepresentation, within the meaning
of Section 11(f) of the Securities Act, shall be entitled to contribution from
any person or entity who is not guilty of such fraudulent misrepresentation.
(e) Notwithstanding any of the foregoing, if, in connection with an
underwritten public offering of any Restricted Shares, the Corporation, the
holders of such Restricted Shares and the underwriters enter into an
underwriting or purchase agreement relating to such offering which contains
provisions covering indemnification among the parties, then the indemnification
provision of this Section 3.9 shall be deemed inoperative for purposes of such
offering.
3.10. Removal of Legends, Etc. Notwithstanding the foregoing provisions of
this Section 3, the restrictions imposed by this Section 3 upon the
transferability of any Restricted Securities shall cease and terminate when (a)
any such Restricted Shares are sold or otherwise disposed of in accordance with
the intended method of disposition by the seller or sellers thereof set forth in
a registration statement or such other method contemplated by Section 3.3 hereof
that does not require that the securities transferred bear the legend set forth
in Section 3.2 hereof, including a Transfer pursuant to Rule 144 or a successor
rule thereof (as amended from time to time), or (b) the holder of Restricted
Securities has met the requirements for transfer of such Restricted Securities
pursuant to subparagraph (k) of Rule 144 or a successor rule thereof (as amended
from time to time) promulgated by the Commission under the Securities Act.
Whenever the restrictions imposed by this Section 3 have terminated, a holder of
a certificate for Restricted Securities as to which such restrictions have
terminated shall be entitled to receive from the Corporation, without expense, a
new certificate not bearing the restrictive legend set forth in Section 3.2
hereof and not containing any other reference to the restrictions imposed by
this Section 3.
3.11. Initial Public Offering.
(a) In the event the Corporation undertakes an initial public
offering, the registration statement for which is first filed with the
Commission one year or more after the Stage IA Closing Date, and to the extent
permitted by applicable law, rules and regulations, the Corporation shall grant,
or cause the managing underwriter of such offering to grant, to each Series B
Stockholder a right to purchase all or part of its pro rata portion of an
aggregate of 10% of the shares of Common Stock offered by the Corporation in the
initial public offering. A Series B Stockholder's pro rata portion, for purposes
of this Section 3.11, shall equal a fraction, the numerator of which is the
number of shares of Common Stock then held by such Series B Stockholder (giving
effect to the conversion of all shares of Series B Stock then held by such
Series B Stockholder, but not giving effect to the conversion of any options,
warrants or other derivative securities then outstanding), and the denominator
of which is the total number of shares of Common Stock then held by all of the
Series B Stockholders (giving effect to the conversion of all shares of Series B
Stock then held by all of the Series B Stockholders, but not giving effect to
the conversion of any options, warrants or other derivative securities then
outstanding).
23
(b) In the event the Corporation undertakes an initial public
offering, the registration statement for which is first filed with the
Commission prior to one year after the Stage IA Closing Date, or if the
Corporation is prohibited by applicable laws, rules or regulations from offering
initial public offering shares to the Series B Stockholders pursuant to Section
3.11(a), then in lieu thereof, the Corporation shall issue to each Series B
Stockholder a warrant to purchase the number of shares of Common Stock that is
equal to the number of shares of Common Stock that such Series B Stockholder
otherwise would have been entitled to purchase under Section 3.11(a). Each
warrant issued pursuant to this Section 3.11(b) shall have an exercise price
equal to the price at which shares of Common Stock are offered to the public in
the initial public offering and shall be exercisable in full for a period of
five years commencing six months after the closing of the initial public
offering. All such warrants shall be issued to the Series B Stockholders as soon
as practicable after the closing of the initial public offering and shall carry
equivalent registration rights to those rights provided in Section 3 hereof with
respect to Restricted Shares.
(c) Each Investor, if requested by the Corporation and the managing
underwriter of initial public offering, shall enter into an agreement not to
sell or otherwise transfer or dispose of any Restricted Securities or other
securities of the Corporation (excluding securities acquired in the initial
public offering or in the public market after such offering) held by such
Investor for a period not to exceed 180 days following the effective date of the
initial public offering registration statement; provided that:
(i) all officers, directors and holders of 1% or more of the
outstanding shares of Common Stock (on an as-converted basis) of the Corporation
enter into similar agreements;
(ii) the Corporation use its best efforts to ensure that such
agreements provide for periodic early releases of the securities subject thereto
based upon specified events; and
(iii) the Corporation use its best efforts to ensure that such
agreements provide that any discretionary waiver or termination of the
restrictions of such agreements by the Corporation or the managing underwriter
and any early release of shares from the restrictions of such agreements shall
apply to all persons subject to such agreements on a pro rata basis, based upon
the number of Common Shares (on an as-converted basis) held by such persons.
SECTION 4. Securities Act Registration Statements. Except for securities of
the Corporation registered on Excluded Forms, the Corporation shall not file any
registration statement under the Securities Act covering any securities unless
it shall first have given each holder of Restricted Securities written notice
thereof. The Corporation further covenants that each holder of Restricted
Securities shall have the right, at any time when it may be deemed to be a
controlling person of the Corporation, within the meaning of the Securities Act,
to participate in the preparation of such registration statement and to request
the insertion therein of material furnished to the Corporation in writing which
in such holder's judgment should be included. In connection with any
registration statement referred to in this Section 4, the Corporation shall
indemnify, to the extent permitted by law, each holder of Restricted Securities,
its officers, partners and directors and each person, if any, who controls any
such holder within
24
the meaning of the Securities Act in the same manner and to the same extent as
the Corporation is required to indemnify a seller of Restricted Shares in
Section 3.9 hereof. If, in connection with any such registration statement, any
holder of Restricted Securities shall furnish written information to the
Corporation expressly for use in the registration statement, then such holder
shall indemnify the Corporation, each director of the Corporation, each officer
of the Corporation who signs such registration statement and each person, if
any, who controls the Corporation within the meaning of the Securities Act to
the same extent as a seller of Restricted Shares is required to indemnify such
persons in Section 3.9 hereof.
SECTION 5. Election of Directors.
5.1 Voting for Directors. At each annual meeting of the stockholders of the
Corporation and at each special meeting of the stockholders of the Corporation
called for the purposes of electing directors of the Corporation, and at any
time at which stockholders of the Corporation shall have the right to, or shall,
vote for or consent to the election of directors, then, in each such event,
each Original Stockholder and each Investor shall vote all shares of Preferred
Stock and any other shares of voting stock of the Corporation then owned (or
controlled as to voting rights) by it or him, whether by purchase, exercise of
rights, warrants or options, stock dividends or otherwise as follows:
(a) to fix and maintain the number of directors on the Board of
Directors of the Corporation at nine (9);
(b) as to Series A Stockholders, pursuant to Paragraph A.6(b)(iii) of
Article III of the Certificate, to elect to the Board two (2) directors
designated by HCV VI (each, an "HCV Director"), one of whom must be a
biotechnology industry expert not affiliated with HCV or any member of the HCV
Group (the "Unaffiliated HCV Director"); the HCV Director who is not the
Unaffiliated HCV Director shall also serve on each committee of the Board of
Directors;
(c) as to Series B Stockholders, pursuant to Paragraph A.6(b)(i) of
Article III of the Certificate, to elect to the Board one (1) director
designated by the members of the MDS Group then holding capital stock of the
Corporation (the "MDS Director"), who shall also serve on the Compensation
Committee of the Board of Directors; and
(d) to elect to the Board one (1) director (the "Bio Ventures
Director") designated by Bio Ventures Investors Limited Partnership II
("Bio Ventures Investors") so long as Bio Ventures Investors shall own at least
50% of the Series B Preferred Shares that it owns on the date of this
Agreement.
5.2 Post-Closing Board State. Following the Stage IA Closing (as defined in
the Stock Purchase Agreement) of the issue and sale of the Series B Preferred
Stock, the Board of Directors shall be constituted as follows:
(a) Xxx Xxxxxxx, Chairman of the Board;
(b) Xxxxxx Xxxxxx, President and Chief Executive Officer;
(c) Xxxx Xxxxxxxxxxx, as an HCV Director;
25
(d) Xxxxxx Xxxxxxx, as the BioVentures Director;
(e) Xxxx Xxxxxxxx;
(f) Xxxx Xxxxxxx;
(g) Xxxxx Xxxxx, as the MDS Director; and
(h) on or before July 30, 2003, two independent directors with
significant pharmaceutical industry experience, one of which shall be the
Unaffiliated HCV Director.
5.3. Cooperation of the Corporation. The Corporation shall use its best
efforts to effectuate the purposes of this Section 5, including promoting the
adoption of any necessary amendment of the By-laws of the Corporation and the
Certificate.
5.4. Notices. The Corporation shall provide the Investors with at least
twenty (20) days' prior notice in writing of any intended mailing of notice to
the Investors of the Corporation for a meeting at which directors are to be
elected, and such notice shall include the names of the persons designated by
the Corporation pursuant to this Section 5. HCV VI and the relevant members of
the MDS Group shall each notify the Corporation in writing at least three (3)
days prior to such mailing of the person(s) respectively designated by it
pursuant to Paragraphs A.6(b)(iii) and A.6(b)(i) of Article III of the
Certificate, as applicable, and Section 5.1 above as nominees for election to
the Board. In the absence of any notice from HCV VI or those members of the MDS
Group, the director(s) then serving and previously designated by HCV VI or
members of the MDS Group, as applicable, shall be renominated.
5.5. Removal. Except as otherwise provided in this Section 5, no Investor
or Original Stockholder shall vote to remove any member of the Board designated
in accordance with the foregoing provisions of this Section 5 unless the party
who designated such director (the "Designating Party") shall so vote or
otherwise consent, and, if the Designating Party shall so vote or otherwise
consent, then the non-designating stockholders shall likewise so vote. Any
vacancy on the Board created by the resignation, removal, incapacity or death of
any person designated under the foregoing provisions of this Section 5 shall be
filled by another person designated by the original Designating Party. Each
Series A Stockholder shall vote all voting shares of Series A Stock and all
other shares of voting stock of the Corporation owned or controlled by such
Series A Stockholder for such subsequent designee where the original Designating
Party was the Series A Stockholders and each Series B Stockholder shall vote all
voting shares of Series B Stock and all other shares of voting stock of the
Corporation owned or controlled by such Series B Stockholder for such subsequent
designee where the original Designating Party was the Series B Stockholders,
each in accordance with each such new designation, and no such vacancy shall be
filled in the absence of a new designation by the original Designating Party.
5.6 Duration of Section. This Section 5 and the rights and obligations of
the parties hereunder shall automatically terminate on the consummation of a
Qualified Public Offering. Prior to such termination the rights and
obligations of any Investor under this Section 5 shall terminate upon the date
on which such Investor no longer owns any Preferred Stock, whereupon
26
the obligations of the remaining Investors to vote in favor of the designee of
such Investor shall also terminate.
SECTION 6. Indemnification and Insurance.
6.1. Indemnification of Investors. In the event that any Investor or any
director, officer, employee, affiliate or agent thereof (the "Indemnitees")
become involved in any capacity in any action, proceeding, investigation or
inquiry other than a claim by the Corporation against such Indemnitee in
connection with or arising out of any matter related to the Corporation or any
Indemnitee's role or position with the Corporation, the Corporation shall
reimburse each Indemnitee for its legal and other expenses (including the cost
of any investigation and preparation) as they are incurred by such Indemnitee in
connection therewith. The Corporation also agrees to indemnify each Indemnitee,
pay on demand and protect, defend, save and hold harmless from and against any
and all liabilities, damages, losses, settlements, claims, actions, suits,
penalties, fines, costs or expenses (including, without limitation, attorneys'
fees) (any of the foregoing, a "Claim") incurred by or asserted against any
Indemnitee of whatever kind or nature, arising from, in connection with or
occurring as a result of this Agreement or the matters contemplated by this
Agreement. The foregoing agreement shall be in addition to any rights that any
Indemnitee may have at common law or otherwise. Notwithstanding the foregoing,
the Corporation shall not be required to indemnify any Indemnitee who is found
to have acted in a manner demonstrating willful misconduct or in connection with
any claim that such Indemnitee breached this Agreement unless it is determined
that the Indemnitee did not breach this Agreement.
6.2. Advancement of Expenses. The Corporation shall advance all expenses
reasonably incurred by or on behalf of the Indemnitees in connection with any
Claim or potential Claim within twenty (20) days after the receipt by the
Corporation of a statement or statements from the Indemnitee requesting such
advance payment or payments from time to time.
6.3. Life Insurance. The Corporation shall procure and maintain a key man
life insurance policy on the life of Xxxxxx X. Xxxxxx in the face amount of
$1,000,000 00, with the Corporation as the named insured on such policy,
effective as of the date hereof and continuing until such time as such person no
longer serves as a director, officer, employee or consultant of the Corporation.
SECTION 7. Remedies. In case any one or more of the covenants and/or
agreements set forth in this Agreement shall have been breached by any party
hereto, the party or parties entitled to the benefit of such covenants or
agreements may proceed to protect and enforce its or their rights, either by
suit in equity and/or action at law, including, but not limited to, an action
for damages as a result of any such breach and/or an action for specific
performance of any such covenant or agreement contained in this Agreement.
Notwithstanding the generality of the foregoing, in the event that the
Corporation breaches any of its covenants and/or agreements set forth herein,
the Investors shall have the additional remedy, in their sole discretion,
provided that such breach has not been cured by the later to occur of 15 days
after receipt of notice of such breach by the Corporation or 30 days after
the occurrence of such breach, of electing to immediately exercise their right
of redemption set forth in Article III, Section A.5 of the Certificate, as
provided therein, irrespective of whether such light of redemption otherwise is
27
mature. The rights, powers and remedies of the parties under this Agreement are
cumulative and not exclusive of any other right, power or remedy which such
parties may have under any other agreement or law. No single or partial
assertion or exercise of any light, power or remedy of a party hereunder shall
preclude any other or further assertion or exercise thereof.
SECTION 8. Successors and Assigns. Except as otherwise expressly provided
herein, this Agreement shall bind and inure to the benefit of the Corporation
and each of the Investors and the respective successors and assigns of the
Corporation and each of the Investors, Subject to the requirements of Section 3
hereof, this Agreement and the rights and duties of the Investors set forth
herein may be freely assigned, in whole or in part (i) by each Investor to any
member of such Investor's Group and (ii) to any other person or entity acquiring
Restricted Securities including any Restricted Securities that are convertible
into Common Stock, equal to no less than 100,000 shares of Common Stock. Any
transferee (other than an Investor) to whom rights under Section 3 are
transferred shall, as a condition to such transfer, deliver to the Corporation a
written instrument by which such transferee identifies itself, gives the
Corporation notice of the transfer of such rights, identifies the securities of
the Corporation owned or acquired by it and agrees to be bound by the
obligations imposed hereunder to the same extent as if such transferee were an
Investor hereunder. A transferee to whom rights are transferred pursuant to this
Section 8 will be thereafter deemed to be an Investor for the purpose of the
execution of such transferred rights and may not again transfer such rights to
any other person or entity, other than as provided in this Section 8. Neither
this Agreement nor any of the rights or duties of the Corporation set forth
herein shall be assigned by the Corporation, in whole or in part, without having
first received the written consent or vote of a majority of the then outstanding
shares of the Preferred Stock, voting together as a single class, on an
as-converted basis.
SECTION 9. Duration of Agreement. Except as otherwise set forth herein, the
rights and obligations of the Corporation and each Investor set forth herein
shall survive indefinitely, unless and until, by their respective terms, they
are no longer applicable or except as specifically set forth herein.
SECTION 10. Entire Agreement. This Agreement, together with the other
writings referred to herein or delivered pursuant hereto which form a part
hereof, contains the entire agreement among the parties with respect to the
subject matter hereof and amends, restates and supersedes all prior and
contemporaneous arrangements or understandings with respect thereto.
SECTION 11. Notices. All notices, requests, consents and other
communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in person or duly sent by first
class registered, certified or overnight mail, postage prepaid, or telecopied
with a confirmation copy by regular mail, addressed or telecopied, as the case
may be, to such party at the address or telecopier number, as the case may be,
set forth below or such other address or telecopier number, as the case may be,
as may hereafter be designated in writing by the addressee to the addressor
listing all parties:
(i) If to the Corporation, to: ActivBiotics, Inc.
000 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Attention: Chief Executive Officer
28
Telecopier: (000)000-0000
with a copy to: Xxxxxxx XxXxxxxxx LLP
000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxx, Esq.
Telecopier: (000)000-0000
(ii) If to the Original Stockholders, as set forth on Schedule 1;
(iii) If to the Series A Stockholders, as set forth on Schedule 2,
with a copy to: XxXxxxxx & English, LLP
Four Gateway Center
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Telecopier: (000)000-0000
(iv) If to the Series B Purchasers, as set forth on Schedule 3,
with a copy to: Xxxxxx & Dodge LLP
000 Xxxxxxxxxx Xxxxxx
Xxxxxx, XX 00000-0000
Attention: Xxxxx X Xxxxxxx, Esq.
Telecopier: (000)000-0000
All such notices, requests, consents and communications shall be deemed to
have been received (a) in the case of personal delivery, on the date of such
delivery, (b) in the case of mailing, on the third business day following the
date of such mailing, (c) in the case of overnight mail, on the first business
day following the date of such mailing, and (d) in the case of facsimile
transmission, when confirmed by facsimile machine report.
SECTION 12. Changes. The terms and provisions of this Agreement may not be
modified or amended, or any of the provisions hereof waived, temporarily or
permanently, except pursuant to the written consent of the Corporation and the
holders of a majority of the then outstanding shares of the Preferred Stock,
voting together as a single class, on an as-converted basis, provided, however,
that any such modification, amendment or waiver which materially and adversely
affects one or more holders of any class or series of the capital stock of the
Corporation (the "Affected Holders") in a manner different than other holders of
that class or series of the capital stock of the Corporation shall require the
written consent of each such Affected Holder, and provided further, that any
such modification, amendment or waiver of any provision of Section 2.14 shall
require the written consent of each holder of then outstanding shares of
Preferred Stock. Notwithstanding the foregoing, and without any action by any of
the parties hereto, any person who purchases shares of the Series B Preferred
Stock at the Stage IB Closing (as defined in the Stock Purchase Agreement) shall
be added as a party to this Agreement by signing a counterpart signature page
hereto, upon the execution of which such
29
person shall become a "Series B Purchaser" hereunder, entitled to all the
benefits and subject to all of the obligations of a "Series B Purchaser"
hereunder.
SECTION 13. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
SECTION 14. Headings. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be a part of this Agreement.
SECTION 15. Nouns and Pronouns. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of names and pronouns shall include the
plural and vice-versa.
SECTION 16. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 17. Governing Law. Except to the extent that any provision of this
Agreement is contrary to any mandatory provision of the Delaware General
Corporation Law (in which case such mandatory statutory provision shall apply),
this Agreement shall be governed by and construed in accordance with the laws of
the Commonwealth of Massachusetts and the laws of the United States applicable
therein (without giving effect to any choice or conflict of laws provision or
rule that would cause the application of the laws of any other jurisdiction) and
shall be treated in all respects as a Massachusetts contract.
SECTION 18. Effectiveness. Notwithstanding any other provision of this
Agreement, this Agreement shall not be effective until the Stage IA Closing (as
such term is defined in the Stock Purchase Agreement).
30
IN WITNESS WHEREOF the parties hereto have executed this First Amended and
Restated Stockholders' Agreement on the date first above written,
THE CORPORATION:
ACTIVBIOTICS, INC.
By:
------------------------------------
Xxxxxx X. Xxxxxx M.D., Ph.D.
Title: Chief Executive Officer
THE INVESTORS:
MDS LIFE SCIENCES TECHNOLOGY FUND II
NC LIMITED PARTNERSHIP
By: MDS LSTF II (NCGP) Inc., its General
Partner
By:
------------------------------------
Name:
Title:
MDS LIFE SCIENCES TECHNOLOGY FUND II
QUEBEC LIMITED PARTNERSHIP
By: MDS LSTF II (QGP) Inc., its General
Partner
By:
------------------------------------
Name:
Title:
MLII CO-INVESTMENT FUND NC LIMITED
PARTNERSHIP
By: MLII (NCGP) Inc., its General
Partner
By:
------------------------------------
Name:
Title:
31
SC BIOTECHNOLOGY DEVELOPMENT FUND LP
By: SC (GP) Inc, its General Partner
By:
------------------------------------
Name:
Title:
HEALTHCARE VENTURES VI, L.P.
By: HealthCare Partners VI, L.P.
its General Partner
By:
------------------------------------
Xxxxxxx X. Xxxxxxxxx
Title: Administrative Partner
DELPHI VENTURES V, L.P.
By: Delphi Management Partners V, L.L.C.
General Partner
By:
------------------------------------
Name:
Title: Managing Member
DELPHI BIOINVESTMENTS V, L.P.
By: Delphi Management Partners V, L.L.C.
General Partner
By:
------------------------------------
Name:
Title: Managing Member
32
XXXXXXX & XXXXXXX DEVELOPMENT
CORPORATION
By:
------------------------------------
Ting Pau Oei
Title: Vice President
VANDERBILT UNIVERSITY
By:
------------------------------------
Name:
Title:
CHINA DEVELOPMENT INDUSTRIAL BANK INC
By:
------------------------------------
Name: Tze-Xxxxx Xxxx
Title: President
CDIB BIOTECH USA INVESTMENT CO., LTD.
By:
------------------------------------
Name: Xxxx Xxxx
Title: Chairman
DC 1998 NFA TRUST
By:
------------------------------------
Xxx Xxxxx, as Trustee
33
BIOVENTURES INVESTORS LIMITED
PARTNERSHIP II
By: BioVentures Investors II, LLC,
its General Partner
By:
------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Managing Director
NEW ENGLAND PARTNERS CAPITAL, L.P.
By: NEP Capital, LLC, its General
Partner
By:
------------------------------------
Name:
Title:
----------------------------------------
Xxxxxx X. Xxxxxxxx
----------------------------------------
Xxxxx X. Xxxxx
----------------------------------------
Xxxxxxxx X. Xxxxxxxxxxx
----------------------------------------
Xxxxxxxx X. Xxxxxxxx
----------------------------------------
Xxxxxx Xxx-Xxxxxxxx
----------------------------------------
Xxxxxxx Xxxx
----------------------------------------
Xxxx Xxxxxx
34
ROCHE FINANCE LTD
Xxxxxxxxxxxxxxxxx 000
XX-0000 Xxxxx
Xxxxxxxxxxx
By:
------------------------------------
Name:
Title:
35
THE ORIGINAL STOCKHOLDERS:
----------------------------------------
Xxxxxxx Xxxxxxx
----------------------------------------
Xxxxx Xxxxxxxxxx
----------------------------------------
Xxxx Xxxxxx
----------------------------------------
Xxxxxx Xxxxxxx
----------------------------------------
G. Xxxx Xxxxxxx
----------------------------------------
Xxxxxx X. Xxxxxx
----------------------------------------
Xxxx Xxxxxxx
----------------------------------------
Xxxxxxx Xxxxxxxxx
----------------------------------------
Art Xxxxxxxxx
----------------------------------------
Xxxxx Xxxxx
36
