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EXHIBIT 4.3
ARENA PHARMACEUTICALS INC.
AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
THIS INVESTOR RIGHTS AGREEMENT (the "Agreement") is entered into as of
the ____ day of November, 1997, by and between ARENA PHARMACEUTICALS INC., a
Delaware corporation (the "Company"), TRIPOS, INC., a Utah corporation
("Tripos"), and EACH OF THOSE PERSONS, severally and not jointly, whose names
are set forth on the Schedule of Investors attached hereto as Schedule A (such
persons and entities, including Tripos, are hereinafter collectively referred as
"Investors" and each individually as "Investors"). This Agreement shall be
amended without further action by the parties hereof in order to include as
"Registrable Securities" (as hereinafter defined) the additional shares of
Series A Preferred Stock issued pursuant to that certain Series A Purchase
Agreement dated June 30, 1997 ("Series A Purchase Agreement") and the additional
shares of Series B Preferred Stock issued pursuant to that certain Series B
Stock Purchase Agreement of even date the ("Series B Purchase Agreement")
(together, the "Purchase Agreements") and the holders of such shares as an
"Investor" and parties hereto upon the execution of this Agreement by the
additional purchasers of Series A Preferred Stock and Series B Preferred Stock
pursuant to the Purchase Agreements.
RECITALS
WHEREAS, the Company has sold and issued Two Hundred Forty Five Thousand
(245,000) shares of its Series A Preferred Stock and a convertible note in the
principal amount of $755,000 (the "Series A Note") pursuant to the Series A
Purchase Agreement dated June 30, 1997;
WHEREAS, the Company proposes to sell and issue up to Two Million Four
Hundred Thousand (2,400,000) shares of its Series B Preferred Stock pursuant to
the Series B Purchase Agreement of even date herewith; and
WHEREAS, as a condition of entering into the Purchase Agreements, the
Investors have requested that the Company extend to them registration rights,
information rights and other rights as set forth below.
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement and in the Purchase Agreements, the parties mutually agree as follows:
SECTION 1. GENERAL
1.1 DEFINITIONS. As used in this Agreement the following terms shall
have the following respective meanings:
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
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"FORM S-3" means such form under the Securities Act as in effect
on the date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
"HOLDER" means any person owning of record Registrable Securities
that have not been sold to the public or any assignee of record of such
Registrable Securities in accordance with Section 2.10 hereof.
"INITIAL OFFERING" means the Company's first firm commitment
underwritten public offering of its Common Stock registered under the Securities
Act.
"REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of
effectiveness of such registration statement or document.
"REGISTRABLE SECURITIES" means (a) Common Stock of the Company
issued or issuable upon conversion of the Shares; and (b) any Common Stock of
the Company issued as (or issuable upon the conversion or exercise of any
warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, such
above-described securities. Notwithstanding the foregoing, Registrable
Securities shall not include any securities sold by a person to the public
either pursuant to a registration statement or Rule 144 or sold in a private
transaction in which the transferror's rights under Section 2 of this Agreement
are not assigned.
"REGISTRABLE SECURITIES THEN OUTSTANDING" shall be the number of
shares determined by calculating the total number of shares of the Company's
Common Stock that are Registrable Securities and either (a) are then issued and
outstanding or (b) are issuable pursuant to then exercisable or convertible
securities.
"REGISTRATION EXPENSES" shall mean all expenses incurred by the
Company in complying with Sections 2.2, 2.3 and 2.4 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, reasonable fees and disbursements not
to exceed Fifteen Thousand Dollars ($15,000) of a single special counsel for the
Holders, blue sky fees and expenses and the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company which shall be paid in any event by the
Company).
"SEC" or "COMMISSION" means the Securities and Exchange
Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
"SELLING EXPENSES" shall mean all underwriting discounts and
selling commissions applicable to the sale.
"SERIES A INVESTOR" means an Investor that has purchased Series A
Preferred Stock pursuant to the Series A Purchase Agreement.
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"SHARES" shall mean the Company's Series A Preferred Stock and
Series B Preferred Stock issued pursuant to the Purchase Agreements and issuable
pursuant to the Notes and held by the Investors and its permitted assigns.
SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER.
2.1 RESTRICTIONS ON TRANSFER.
(a) Each Holder agrees not to make any disposition of all or
any portion of the Shares or Registrable Securities unless and until:
(i) There is then in effect a registration statement
under the Securities Act covering such proposed disposition and such disposition
is made in accordance with such registration statement; or
(ii) (A) The transferee has agreed in writing to be
bound by the terms of this Agreement, (B) such Holder shall have notified the
Company of the proposed disposition and shall have furnished the Company with a
detailed statement of the circumstances surrounding the proposed disposition,
and (C) if reasonably requested by the Company, such Holder shall have furnished
the Company with an opinion of counsel, reasonably satisfactory to the Company,
that such disposition will not require registration of such shares under the
Securities Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144.
(iii) Notwithstanding the provisions of paragraphs (i)
and (ii) above, no such registration statement or opinion of counsel shall be
necessary for a transfer by a Holder which is (A) a partnership to its partners
or former partners in accordance with partnership interests, (B) a corporation
to its shareholders in accordance with their interest in the corporation, (C) a
limited liability company to its members or former members in accordance with
their interest in the limited liability company, or (D) to the Holder's family
member or trust for the benefit of an individual Holder; provided that in each
case the transferee will be subject to the terms of this Agreement to the same
extent as if he were an original Holder hereunder.
(b) Each certificate representing Shares or Registrable
Securities shall (unless otherwise permitted by the provisions of the Agreement)
be stamped or otherwise imprinted with a legend substantially similar to the
following (in addition to any legend required under applicable state securities
laws or as provided elsewhere in this Agreement):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE AACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED.
(c) The Company shall be obligated to reissue promptly
unlegended certificates at the request of any holder thereof if the holder shall
have obtained an opinion of counsel (which counsel may be counsel to the
Company) reasonably acceptable to the Company to the effect that
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the securities proposed to be disposed of may lawfully be so disposed of without
registration, qualification or legend.
(d) Any legend endorsed on an instrument pursuant to
applicable state securities laws and the stop-transfer instructions with respect
to such securities shall be removed upon receipt by the Company of an order of
the appropriate blue sky authority authorizing such removal.
2.2 DEMAND REGISTRATION.
(a) Subject to the conditions of this Section 2.2, if the
Company shall receive a written request from the Holders of more than a majority
of the Registrable Securities then outstanding (the "Initiating Holders") that
the Company file a registration statement under the Securities Act covering the
registration of Registrable Securities having an aggregate offering price to the
public in excess of $2,500,000 (a "Qualified Public Offering"), then the Company
shall, within thirty (30) days of the receipt thereof, give written notice of
such request to all Holders, and subject to the limitations of this Section 2.2,
use its best efforts to effect, as soon as practicable, the registration under
the Securities Act of all Registrable Securities that the Holders request to be
registered.
(b) If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
this Section 2.2 or any request pursuant to Section 2.4 and the Company shall
include such information in the written notice referred to in Section 2.2(a) or
Section 2.4(a), as applicable. In such event, the right of any Holder to include
its Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall enter into an underwriting agreement in customary form
with the underwriter or underwriters selected for such underwriting by a
majority in interest of the Initiating Holders (which underwriter or
underwriters shall be reasonably acceptable to the Company). Notwithstanding any
other provision of this Section 2.2 or Section 2.4, if the underwriter advises
the Company that marketing factors require a limitation of the number of
securities to be underwritten (including Registrable Securities) then the
Company shall so advise all Holders of Registrable Securities which would
otherwise be underwritten pursuant hereto, and the number of shares that may be
included in the underwriting shall be allocated to the Holders of such
Registrable Securities on a pro rata basis based on the number of Registrable
Securities held by all such Holders (including the Initiating Holders). Any
Registrable Securities excluded or withdrawn from such underwriting shall be
withdrawn from the registration.
(c) The Company shall not be required to effect a registration
pursuant to this Section 2.2:
(i) prior to the earlier of the fourth anniversary of
the date of the Series A Purchase Agreement or the Company's Initial Offering;
or
(ii) after the Company has effected two (2)
registrations pursuant to this Section 2.2, and such registrations have been
declared or ordered effective; or
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(iii) during the period starting with the date of filing
of, and ending on the date one hundred eighty (180) days following the effective
date of the registration statement pertaining to the Initial Offering; provided
that the Company makes reasonable good faith efforts to cause such registration
statement to become effective; or
(iv) if within thirty (30) days of receipt of a written
request from Initiating Holders pursuant to Section 2.2(a), the Company gives
notice to the Holders of the Company's intention to make its Initial Offering
within ninety (90) days in which case the Company shall use its best efforts to
make its Initial Offering within such period.
2.3 PIGGYBACK REGISTRATIONS. The Company shall notify all Holders of
Registrable Securities in writing at least thirty (30) days prior to the filing
of any registration statement under the Securities Act for purposes of a public
offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, but excluding registration statements relating to employee benefit
plans or with respect to corporate reorganizations or other transactions under
Rule 145 of the Securities Act) and will afford each such Holder an opportunity
to include in such registration statement all or part of such Registrable
Securities held by such Holder. Each Holder desiring to include in any such
registration statement all or any part of the Registrable Securities held by it
shall, within fifteen (15) days after the above-described notice from the
Company, so notify the Company in writing. Such notice shall state the intended
method of disposition of the Registrable Securities by such Holder. If a Holder
decides not to include all of its Registrable Securities in any registration
statement thereafter filed by the Company, such Holder shall nevertheless
continue to have the right to include any Registrable Securities in any
subsequent registration statement or registration statements as may be filed by
the Company with respect to offerings of its securities, all upon the terms and
conditions set forth herein.
(a) UNDERWRITING. If the registration statement under which
the Company gives notice under this Section 2.3 is for an underwritten offering,
the Company shall so advise the Holders of Registrable Securities. In such
event, the right of any such Holder to be included in a registration pursuant to
this Section 2.3 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of the Agreement, if the underwriter determines in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the underwriting
shall be allocated, first, to the Company; second, to the Holders on a pro rata
basis based on the total number of Registrable Securities held by the Holders;
and third, to any stockholder of the Company (other than a Holder) on a pro rata
basis. In no event will shares of any other selling shareholder be included in
such registration which would reduce the number of shares which may be included
by Holders without the written consent of Holders of not less than a majority of
the Registrable Securities proposed to be sold in the offering.
(b) RIGHT TO TERMINATE REGISTRATION. The Company shall have
the right to terminate or withdraw any registration initiated by it under this
Section 2.3 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration.
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The Registration Expenses of such withdrawn registration shall be borne by the
Company in accordance with Section 2.5 hereof.
2.4 FORM S-3 REGISTRATION. In case the Company shall receive from any
Holder or Holders of Registrable Securities a written request or requests that
the Company effect a registration on Form S-3 (or any successor to Form S-3) or
any similar short-form registration statement and any related qualification or
compliance with respect to all or a part of the Registrable Securities owned by
such Holder or Holders, the Company will:
(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders of Registrable
Securities; and
(b) as soon as practicable, effect such registration and all
such qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of such Holder's
or Holders' Registrable Securities as are specified in such request, together
with all or such portion of the Registrable Securities of any other Holder or
Holders joining in such request as are specified in a written request given
within fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 2.4:
(i) if Form S-3 (or any successor or similar form) is
not available for such offering by the Holders, or
(ii) if the Holders, together with the holders of any
other securities of the Company entitled to inclusion in such registration,
propose to sell Registrable Securities and such other securities (if any) at an
aggregate price to the public of less than $250,000, or
(iii) if the Company has, within the twelve (12) month
period preceding the date of such request, already effected two (2)
registrations on Form S-3 for the Holders pursuant to this Section 2.4, or
(iv) in any particular jurisdiction in which the Company
would be required to qualify to do business or to execute a general consent to
service of process in effecting such registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a Form
S-3 registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after receipt of
the request or requests of the Holders.
2.5 EXPENSES OF REGISTRATION. Except as specifically provided herein,
all Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 2.2 or any registration under
Section 2.3 or Section 2.4 herein shall be borne by the Company. All Selling
Expenses incurred in connection with any registrations hereunder, shall be borne
by the holders of the securities so registered pro rata on the basis of the
number of shares so registered. The Company shall not, however, be required to
pay for expenses of any registration proceeding begun pursuant to Section 2.2 or
2.4, the request of which has been subsequently withdrawn by the Initiating
Holders unless (a) the withdrawal is based upon material adverse information
concerning the Company of which the Initiating Holders were not aware at the
time of
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such request or (b) the Holders of a majority of Registrable Securities agree to
forfeit their right to one requested registration pursuant to Section 2.2 or
Section 2.4, as applicable, in which event such right shall be forfeited by all
Holders). If the Holders are required to pay the Registration Expenses, such
expenses shall be borne by the holders of securities (including Registrable
Securities) requesting such registration in proportion to the number of shares
for which registration was requested. If the Company is required to pay the
Registration Expenses of a withdrawn offering pursuant to clause (a) above, then
the Holders shall not forfeit their rights pursuant to Section 2.2 or Section
2.4 to a demand registration.
2.6 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use all reasonable efforts to
cause such registration statement to become effective, and, upon the request of
the Holders of a majority of the Registrable Securities registered thereunder,
keep such registration statement effective for up to ninety (90) days or, if
earlier, until the Holder or Holders have completed the distribution related
thereto.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
(d) Use all reasonable efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Furnish, at the request of a majority of the Holders
participating in the registration, on the date that such Registrable Securities
are delivered to the underwriters for sale, if such securities are being sold
through underwriters, or, if such securities are not being sold through
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underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated as of such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering and reasonably satisfactory to a majority in interest of the Holders
requesting registration, addressed to the underwriters, if any, and to the
Holders requesting registration of Registrable Securities and (ii) a letter
dated as of such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering and
reasonably satisfactory to a majority in interest of the Holders requesting
registration, addressed to the underwriters, if any, and if permitted by
applicable accounting standards, to the Holders requesting registration of
Registrable Securities.
2.7 TERMINATION OF REGISTRATION RIGHTS. All registration rights
granted under this Section 2 shall terminate and be of no further force and
effect six (6) years after the date of the Company's Initial Offering. In
addition, a Holder's registration rights shall expire if (a) the Company has
completed its Initial Offering and is subject to the provisions of the Exchange
Act, and (b) all Registrable Securities held by and issuable to such Holder (and
its affiliates, partners and former partners) may be sold under Rule 144 during
any ninety (90) day period.
2.8 DELAY OF REGISTRATION; FURNISHING INFORMATION.
(a) No Holder shall have any right to obtain or seek an
injunction restraining or otherwise delaying any such registration as the result
of any controversy that might arise with respect to the interpretation or
implementation of this Section 2.
(b) It shall be a condition precedent to the obligations of
the Company to take any action pursuant to Section 2.2, 2.3 or 2.4 that the
selling Holders shall furnish to the Company such information regarding
themselves, the Registrable Securities held by them and the intended method of
disposition of such securities as shall be required to effect the registration
of their Registrable Securities.
(c) The Company shall have no obligation with respect to any
registration requested pursuant to Section 2.2 or Section 2.4 if, due to the
operation of subsection 2.2(b), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's obligation
to initiate such registration as specified in Section 2.2 or Section 2.4,
whichever is applicable.
2.9 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under Sections 2.2, 2.3 or 2.4:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, the partners, officers, directors and legal
counsel of each Holder, any underwriter (as defined in the Securities Act) for
such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Securities Act or the Exchange Act, against any
losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Securities Act, the Exchange Act or other federal or
state law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any of the
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following statements, omissions or violations (collectively a "Violation") by
the Company: (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, or (iii) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act, any state securities law or any
rule or regulation promulgated under the Securities Act, the Exchange Act or any
state securities law in connection with the offering covered by such
registration statement; and the Company will reimburse each such Holder,
partner, officer, director, legal counsel, underwriter or controlling person for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided however, that the indemnity agreement contained in this Section 2.9(a)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company, which consent shall not be unreasonably withheld, nor shall the Company
be liable in any such case for any such loss, claim, damage, liability or action
to the extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by such Holder, partner, officer,
director, legal counsel, underwriter or controlling person of such Holder.
(b) To the extent permitted by law, each Holder will, if
Registrable Securities held by such Holder are included in the securities as to
which such registration qualifications or compliance is being effected,
indemnify and hold harmless the Company, each of its directors, its officers,
and legal counsel and each person, if any, who controls the Company within the
meaning of the Securities Act, any underwriter and any other Holder selling
securities under such registration statement or any of such other Holder's
partners, directors or officers or any person who controls such Holder, against
any losses, claims, damages or liabilities (joint or several) to which the
Company or any such director, officer, controlling person, underwriter or other
such Holder, or partner, director, officer or controlling person of such other
Holder may become subject under the Securities Act, the Exchange Act or other
federal or state law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder under an instrument duly executed by such Holder and stated to be
specifically for use in connection with such registration; and each such Holder
will reimburse any legal or other expenses reasonably incurred by the Company or
any such director, officer, legal counsel, controlling person, underwriter or
other Holder, or partner, officer, director, legal counsel or controlling person
of such other Holder in connection with investigating or defending any such
loss, claim, damage, liability or action if it is judicially determined that
there was such a Violation; provided, however, that the indemnity agreement
contained in this Section 2.9(b) shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability or action if such settlement is
effected without the consent of the Holder, which consent shall not be
unreasonably withheld; provided further, that in no event shall any indemnity
under this Section 2.9 exceed the proceeds from the offering received by such
Holder.
(c) Promptly after receipt by an indemnified party under this
Section 2.9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 2.9, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party
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so desires, jointly with any other indemnifying party similarly noticed, to
assume the defense thereof with counsel mutually satisfactory to the parties;
provided, however, that an indemnified party shall have the right to retain its
own counsel, with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if materially prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 2.9, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 2.9.
(d) If the indemnification provided for in this Section 2.9 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any losses, claims, damages or liabilities referred to
herein, the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission; provided, that in no event shall any contribution by a
Holder hereunder exceed the proceeds from the offering received by such Holder.
(e) The obligations of the Company and Holders under this
Section 2.9 shall survive completion of any offering of Registrable Securities
in a registration statement and the termination of this agreement. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation.
2.10 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities pursuant to this Section 2 may be
assigned by a Holder to a transferee or assignee of Registrable Securities which
(a) is a subsidiary, parent, general partner, limited partner or retired partner
of a Holder, (b) is a Holder's family member or trust for the benefit of an
individual Holder, or (c) acquires at least fifty thousand (50,000) shares of
Registrable Securities (as adjusted for stock splits and combinations);
provided, however, (A) the transferor shall, within twenty (20) days after such
transfer, furnish to the Company written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned, (B) such transferee shall agree to be
subject to all restrictions set forth in this Agreement, and (C) such transferee
must not be a person or entity deemed by the Board of Directors of the Company,
in its reasonable judgment, to be a competitor of the Company.
11
2.11 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Section 2
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holders of at least sixty-six and
two-thirds percent (66-2/3%) of the Registrable Securities then outstanding. Any
amendment or waiver effected in accordance with this Section 2.11 shall be
binding upon each Holder and the Company. By acceptance of any benefits under
this Article II, Holders of Registrable Securities hereby agree to be bound by
the provisions hereunder.
2.12 LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. After the date of
this Agreement, the Company shall not, without the prior written consent of the
Holders of sixty-six and two-thirds percent (66-2/3%) of the Registrable
Securities then outstanding, enter into any agreement with any holder or
prospective holder of any securities of the Company that would grant such holder
registration rights senior to those granted to the Holders hereunder.
2.13 "MARKET STAND-OFF" AGREEMENT. Each Holder hereby agrees that such
Holder shall not sell or otherwise transfer or dispose of any Common Stock (or
other securities) of the Company held by such Holder (other than those included
in the registration) for a period specified by the representative of the
underwriters of Common Stock (or other securities) of the Company not to exceed
one hundred eighty (180) days following the effective date of a registration
statement of the Company filed under the Securities Act, provided that:
(i) such agreement shall apply only to the Company's
Initial Offering; and
(ii) all officers and directors of the Company and
holders of at least one percent (1%) of the Company's voting securities enter
into similar agreements.
Each Holder agrees to execute and deliver such other agreements as may
be reasonably requested by the Company or the underwriter which are consistent
with the foregoing or which are necessary to give further effect thereto. The
obligations described in this Section 2.13 shall not apply to a registration
relating solely to employee benefit plans on Form S-1 or Form S-8 or similar
forms that may be promulgated in the future, or a registration relating solely
to a Commission Rule 145 transaction on Form S-4 or similar forms that may be
promulgated in the future. The Company may impose stop-transfer instructions
with respect to the shares of Common Stock (or other securities) subject to the
foregoing restriction until the end of said one hundred eighty (180) day period.
2.14 RULE 144 REPORTING. With a view to making available to the
Holders the benefits of certain rules and regulations of the SEC which may
permit the sale of the Registrable Securities to the public without
registration, the Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms
are understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
the first registration filed by the Company for an offering of its securities to
the general public;
(b) File with the SEC, in a timely manner, all reports and
other documents required of the Company under the Exchange Act;
12
(c) So long as a Holder owns any Registrable Securities,
furnish to such Holder forthwith upon request: a written statement by the
Company as to its compliance with the reporting requirements of said Rule 144 of
the Securities Act, and of the Exchange Act (at any time after it has become
subject to such reporting requirements); a copy of the most recent annual or
quarterly report of the Company; and such other reports and documents as a
Holder may reasonably request in availing itself of any rule or regulation of
the SEC allowing it to sell any such securities without registration.
SECTION 3. COVENANTS OF THE COMPANY.
3.1 BASIC FINANCIAL INFORMATION AND REPORTING.
(a) Within 45 days of this Agreement, the Company will engage
independent public accountants of national standing to assist in the preparation
of the Company's books and records of account in accordance with generally
accepted accounting principles.
(b) The Company will maintain true books and records of
account in which full and correct entries will be made of all its business
transactions pursuant to a system of accounting established and administered in
accordance with generally accepted accounting principles consistently applied,
and will set aside on its books all such proper accruals and reserves as shall
be required under generally accepted accounting principles consistently applied.
(c) As soon as practicable after the end of each fiscal year
of the Company, and in any event within one hundred twenty (120) days
thereafter, the Company will furnish the Investor a consolidated balance sheet
of the Company, as at the end of such fiscal year, and a consolidated statement
of income and a consolidated statement of cash flows of the Company, for such
year, all prepared in accordance with generally accepted accounting principles
consistently applied and setting forth in each case in comparative form the
figures for the previous fiscal year, all in reasonable detail. Such financial
statements shall be accompanied by a report and opinion thereon by independent
public accountants of national standing selected by the Company's Board of
Directors.
(d) The Company will furnish the Investors, as soon as
practicable after the end of the first, second and third quarterly accounting
periods in each fiscal year of the Company, and in any event within forty-five
(45) days thereafter, a consolidated balance sheet of the Company as of the end
of each such quarterly period, and a consolidated statement of income and a
consolidated statement of cash flows of the Company for such period and for the
current fiscal year to date, prepared in accordance with generally accepted
accounting principles, with the exception that no notes need be attached to such
statements and year-end audit adjustments may not have been made.
(e) So long as the Investors (with its affiliates) shall own
not less than one hundred thousand (100,000) shares of Registrable Securities
(as adjusted for stock splits and combinations), the Company will furnish the
Investors at least thirty (30) days prior to the beginning of each fiscal year
an annual budget and operating plans for such fiscal year (and as soon as
available, any subsequent revisions thereto) through such Investors=
representative on the Company's Board of Directors or in such other manner as
the Company and the Investor shall mutually agree.
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3.2 INSPECTION RIGHTS. So long as the Investors (with its affiliates)
shall own not less than one hundred thousand (100,000) shares of Registrable
Securities (as adjusted for stock splits and combinations), such Investor shall
have the right to visit and inspect any of the properties of the Company or any
of its subsidiaries, and to discuss the affairs, finances and accounts of the
Company or any of its subsidiaries with its officers, and to review such
information as is reasonably requested all at such reasonable times and as often
as may be reasonably requested; provided, however, that the Company shall not be
obligated under this Section 3.2 with respect to a competitor of the Company or
with respect to information which the Board of Directors determines in good
faith is confidential and should not, therefore, be disclosed.
3.3 CONFIDENTIALITY OF RECORDS. Investors agree to use, and to use
their best efforts to insure that its authorized representatives use, the same
degree of care as Investors use to protect their own confidential information to
keep confidential any information furnished to it which the Company identifies
as being confidential or proprietary (so long as such information is not in the
public domain), except that Investors may disclose such proprietary or
confidential information to any partner, subsidiary or parent of Investors for
the purpose of evaluating their investment in the Company as long as such
partner, subsidiary or parent is advised of the confidentiality provisions of
this Section 3.3.
3.4 RESERVATION OF COMMON STOCK. The Company will at all times
reserve and keep available, solely for issuance and delivery upon the conversion
of the Preferred Stock, all Common Stock issuable from time to time upon such
conversion.
3.5 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT. The Company
shall require all employees and consultants to execute and deliver a Proprietary
Information and Inventions Agreement in the form attached to the Purchase
Agreement.
3.6 BOARD OF DIRECTORS.
(a) From the date hereof and until the second anniversary of
the date of this Agreement and as long as the Series A Investors (together with
their Affiliates) own at least Fifteen Percent (15%) of the outstanding capital
stock (on an as-converted basis) of the Company, the Company shall use its best
efforts to cause and maintain the election to the Board of Directors of two (2)
designees of the Series A Investors as the Series A Preferred Stock
representatives as provided for in Article III, Section 2(c) of the Company's
Restated Certificate of Incorporation.
(b) After the second anniversary of the date of this
Agreement, the Company shall use its best efforts to cause and maintain the
election to the Board of Directors of the greater of: (i) one (1) designee of
the Series A Investors or (ii) the number of designees rounded to the next
greater whole number such that the number of Series A Investor designees on the
Board of Directors shall, at any given time, be proportional to the percentage
of the outstanding capital stock (on an as-converted basis) held by the
Investor. Such designees shall be the Series A Preferred Stock representatives
provided for in Article III, Section 2(c) of the Company's Restated Certificate
of Incorporation. Notwithstanding the foregoing, this section 3.6(b) shall be
subject to the Standstill Provision in section 4.1 of this Agreement.
14
3.7 OFFICER COMPENSATION. From the date hereof and until the second
anniversary of the date of this Agreement, all salaries of officers of the
Company shall be unanimously approved by the Board of Directors of the Company.
After the second anniversary of the date of this Agreement, all salaries of
officers of the Company shall be approved by a majority of the Board of
Directors of the Company or a Compensation Committee designated by the Board of
Directors (which committee shall include at least one of Investor's Board
designees as a member).
3.8 TERMINATION OF COVENANTS. All covenants of the Company contained
in Section 3 of this Agreement shall expire and terminate as to the Investor on
the effective date of the registration statement pertaining to the Initial
Offering.
SECTION 4. INVESTOR COVENANTS
4.1 STANDSTILL PROVISION. Tripos shall not convert the Series A Note
and/or exercise its right of first refusal under Section 5 of this Agreement
such that Tripos' ownership, at any given time, of the outstanding capital stock
of the Company (on an as-converted basis) after such conversion and/or exercise
exceeds thirty percent (30%) of the outstanding capital stock of the Company (on
an as-converted basis) (the A30% Limitation"). Notwithstanding the foregoing,
the 30% Limitation shall not apply under any of the following circumstances: (i)
the issuance or proposed issuance by the Company in a single transaction, or
series of related transactions, to a single person, or group of related persons,
of shares of capital stock representing, in the aggregate, more than twenty-five
percent (25%) of the Company's outstanding capital stock (on an as-converted
basis) following such issuance or issuances; (ii) the transfer or proposed
transfer to a single person, or group of related persons, by a Company
stockholder, or group of stockholders acting in concert, in a single
transaction, or series of related transactions, of their shares of capital stock
of the Company representing, in the aggregate, more than twenty-five percent
(25%) of the Company's outstanding capital stock (on an as-converted basis);
(iii) upon the occurrence of an Event of Default as defined in the Series A
Note; (iv) failure of the Company to meet the milestones set forth in the Annual
Business Plan; (v) failure to obtain additional equity financing from third
party investors of at least One Million Dollars ($1,000,000) within twelve (12)
months of the date of Series A Purchase Agreement on terms no more favorable
than the terms granted to the holders of Series A Preferred Stock; and failure
to effect the Initial Offering within four (4) years of the date of the Series A
Purchase Agreement.
4.2 TERMINATION OF COVENANTS. The covenants of Tripos contained in
Section 4.1 of this Agreement shall expire and terminate on the effective date
of the registration statement pertaining to the Initial Offering.
SECTION 5. RIGHTS OF FIRST REFUSAL.
5.1 SUBSEQUENT OFFERINGS. Each Investor shall have a right of first
refusal to purchase its pro rata share of all Equity Securities, as defined
below, that the Company may, from time to time, propose to sell and issue after
the date of this Agreement, other than the Equity Securities excluded by Section
5.6 hereof. An Investor's pro rata share is equal to the ratio of (a) the number
of shares of the Company's Common Stock (including all shares of Common Stock
issued or issuable upon conversion of the Shares) of which such Investor is
deemed to be a holder immediately prior to the issuance of such Equity
Securities to (b) the total number of shares of the Company's outstanding Common
Stock (including all shares of Common Stock issued or issuable upon
15
conversion of the Shares or upon the exercise of any outstanding warrants or
options) immediately prior to the issuance of the Equity Securities. The term
"Equity Securities" shall mean (i) any Common Stock, Preferred Stock or other
security of the Company, (ii) any security convertible, with or without
consideration, into any Common Stock, Preferred Stock or other security
(including any option to purchase such a convertible security), (iii) any
security carrying any warrant or right to subscribe to or purchase any Common
Stock, Preferred Stock or other security or (iv) any such warrant or right.
Notwithstanding the foregoing, the Investor's right of first refusal pursuant to
this Section 5 shall be subject to the Standstill Provisions of Section 4.1 of
this Agreement.
5.2 EXERCISE OF RIGHTS. If the Company proposes to issue any Equity
Securities, it shall give each Investor written notice of its intention,
describing the Equity Securities, the price and the terms and conditions upon
which the Company proposes to issue the same. The Investor shall have fifteen
(15) days from the giving of such notice to agree to purchase its pro rata share
of the Equity Securities for the price and upon the terms and conditions
specified in the notice by giving written notice to the Company and stating
therein the quantity of Equity Securities to be purchased. Notwithstanding the
foregoing, the Company shall not be required to offer or sell such Equity
Securities to any Investor who would cause the Company to be in violation of
applicable federal securities laws by virtue of such offer or sale.
5.3 ISSUANCE OF EQUITY SECURITIES TO OTHER PERSONS. The Investor
shall have five (5) days after receipt of such notice to notify the Company of
its election to purchase all or a portion thereof of the unsubscribed shares. If
an Investor fails to exercise in full the rights of first refusal, the Company
shall have ninety (90) days thereafter to sell the Equity Securities in respect
of which the Investor's rights were not exercised, at a price and upon general
terms and conditions materially no more favorable to the purchasers thereof than
specified in the Company's notice to the Investor pursuant to Section 5.2
hereof. If the Company has not sold such Equity Securities within ninety (90)
days of the notice provided pursuant to Section 5.2, the Company shall not
thereafter issue or sell any Equity Securities, without first offering such
securities to the Investor's in the manner provided above.
5.4 TERMINATION OF RIGHTS OF FIRST REFUSAL. The rights of first
refusal established by this Section 5 shall not apply to, and shall terminate
upon the effective date of the registration statement pertaining to the
Company's Initial Public Offering.
5.5 TRANSFER OF RIGHTS OF FIRST REFUSAL. The rights of first refusal
of the Investor's rights under this Section 5 may be transferred to the same
parties, subject to the same restrictions as any transfer of registration rights
pursuant to Section 2.10.
5.6 EXCLUDED SECURITIES. The rights of first refusal established by
this Section 5 shall have no application to any of the following Equity
Securities:
(a) up to an aggregate amount of 150,000 shares of Common
Stock (and/or options, warrants or other Common Stock purchase rights issued
pursuant to such options, warrants or other rights) issued or issuable to
employees, officers or directors of, or consultants or advisors to the Company
or any subsidiary, pursuant to stock purchase or stock option plans or other
arrangements that are approved by the Board of Directors;
16
(b) stock issued pursuant to any rights or agreements
outstanding as of the date of this Agreement, options and warrants outstanding
as of the date of this Agreement; and stock issued pursuant to any such rights
or agreements granted after the date of this Agreement, provided that the rights
of first refusal established by this Section 5 applied with respect to the
initial sale or grant by the Company of such rights or agreements;
(c) shares of Common Stock issued in connection with any stock
split, stock dividend or recapitalization by the Company;
(d) shares of Common Stock issued upon conversion of the
Shares;
(e) any Equity Securities that are issued by the Company
pursuant to a registration statement filed under the Securities Act;
(f) shares of Series A Preferred Stock issued upon conversion
of the Series A Note; and
(g) shares of Equity Securities issued in connection with a
strategic alliance with a pharmaceutical or biotechnology company approved
unanimously by the board of directors of the Company.
SECTION 6. MISCELLANEOUS.
6.1 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
6.2 SURVIVAL. The representations, warranties, covenants, and
agreements made herein shall survive any investigation made by any Holder and
the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other instrument delivered by or
on behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.
6.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of Registrable Securities from time to time;
provided, however, that prior to the receipt by the Company of adequate written
notice of the transfer of any Registrable Securities specifying the full name
and address of the transferee, the Company may deem and treat the person listed
as the holder of such shares in its records as the absolute owner and holder of
such shares for all purposes, including the payment of dividends or any
redemption price.
6.4 ENTIRE AGREEMENT. This Agreement, the Exhibits and Schedules
hereto, the Series A Purchase Agreement and the other documents delivered
pursuant thereto and the Series B Purchase Agreement and the other documents
delivered thereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and no party
17
shall be liable or bound to any other in any manner by any representations,
warranties, covenants and agreements except as specifically set forth herein and
therein.
6.5 SEVERABILITY. In case any provision of the Agreement shall be
invalid, illegal, or unenforceable, the validity, legality, and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
6.6 AMENDMENT AND WAIVER.
(a) Except as otherwise expressly provided, this Agreement may
be amended or modified only upon the written consent of the Company and the
holders of at least sixty-six and two-thirds percent (66 2/3%) of the
Registrable Securities.
(b) Except as otherwise expressly provided, the obligations of
the Company and the rights of the Holders under this Agreement may be waived
only with the written consent of the holders of at least sixty-six and
two-thirds percent (66 2/3%) of the Registrable Securities.
18
6.7 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any Holder, upon any breach,
default or noncompliance of the Company under this Agreement shall impair any
such right, power, or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of any
similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent, or approval of any kind or character on
any Holder's part of any breach, default or noncompliance under the Agreement or
any waiver on such Holder's part of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, by law, or otherwise afforded to Holders, shall be cumulative and not
alternative.
6.8 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (c) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one (1) day after deposit with
a nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the party
to be notified at the address as set forth on the signature pages hereof or at
such other address as such party may designate by ten (10) days advance written
notice to the other parties hereto.
6.9 ATTORNEYS' FEES. In the event that any dispute among the parties
to this Agreement should result in litigation, the prevailing party in such
dispute shall be entitled to recover from the losing party all fees, costs and
expenses of enforcing any right of such prevailing party under or with respect
to this Agreement, including without limitation, such reasonable fees and
expenses of attorneys and accountants, which shall include, without limitation,
all fees, costs and expenses of appeals.
6.10 TITLES AND SUBTITLES. The titles of the sections and subsections
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
6.11 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.
IN WITNESS WHEREOF, the parties hereto have executed this AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT as of the date set forth in the first paragraph
hereof.
19
AMENDMENT NO. 1 TO THE AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT,
dated September 21, 1998 ("Amendment No. 1"), by and among ARENA
PHARMACEUTICALS, INC., a Delaware Corporation (the "Company") and each of the
persons set forth on the Schedule of Investors (the "Investors") attached as
Schedule "A" to the Amended and Restated Investor Rights Agreement, dated
November 26, 1997 (the "Agreement").
PREAMBLE
WHEREAS, the Company and the Investors have entered into the Agreement,
pursuant to which the Company has extended to the Investors registration rights,
information rights and certain other rights;
WHEREAS, Paragraph 6.6 of the Agreement provides that the Agreement may
be amended or modified upon the written consent of the Company and the holders
of at least sixty-six and two-thirds (66 2/3%) of the Series A Preferred Stock,
the Series B Preferred Stock, and the convertible note in the principal amount
of $755,000 in favor of Tripos, Inc.
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. The Agreement Remains in Full Force and Effect. Except as
expressly modified by this Amendment No. 1, no other changes to the Agreement
are being made and all provisions of the Agreement shall remain in full force
and effect.
2. Amendments to the Agreement. Section 5 of the Agreement is hereby
amended as follows:
A. By ADDING to Paragraph 1.1 of Section 1 the following:
""BUSINESS DAY" shall mean a day other than a Saturday, a Sunday
or a day on which banking institutions in San Diego, California
are not required to be open."
B. By DELETING the second sentence of Paragraph 5.2 and
SUBSTITUTING therefor:
"The Investor shall have ten (10) Business Days from the giving
of such notice to agree to purchase its pro rata share of the
Equity Securities, or a portion thereof, for the price and upon
the terms and conditions specified in the notice by giving
written notice to the Company and stating therein the quantity of
Equity Securities to be purchased."
C. By DELETING the first sentence of Paragraph 5.3.
20
3. Counterparts; Effective Date. This Amendment No. 1 may be
executed in counterparts and shall be effective on such date as the Company has
received the executed consent of sixty-six and two-thirds percent (66 2/3%) or
more of the Investors.
IN WITNESS WHEREOF, Investor hereby consents to, adopts and agrees to
the provisions contained in this Amendment No. 1 and the Company has caused this
Amendment No. 1 to be duly executed and delivered.
21
AMENDMENT NO. 2
TO THE AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
This AMENDMENT NO. 2 TO THE AMENDED AND RESTATED INVESTOR RIGHTS
AGREEMENT is dated December 30, 1998 ("Amendment No. 2"), by and among ARENA
PHARMACEUTICALS, INC., a Delaware corporation (the "Company") and each of the
persons set forth on the Schedule of Investors (the "Investors") attached as
Schedule "A" hereto. Amendment No.2 amends the Amended and Restated Investor
Rights Agreement, dated November 26, 1997, as amended by Amendment No. 1 dated
September 21, 1998 (the "Agreement").
PREAMBLE
WHEREAS, the Company and the Investors have entered into the Agreement,
pursuant to which the Company has extended to the Investors registration rights,
information rights and certain other rights;
WHEREAS, Paragraph 6.6 of the Agreement provides that the Agreement may
be amended or modified upon the written consent of the Company and the holders
of at least sixty-six and two-thirds (66 2/3%) of the Registrable Securities (as
defined in the Agreement).
WHEREAS, Company and the Investors wish to (i) clarify and amend certain
of their rights and (ii) add holders of the Company's Series C Preferred Stock
to become parties to the Agreement.
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. The Agreements Remains in Full Force and Effect. Except as
expressly modified by this Amendment No. 2, no other changes are being made to
the Agreement and the Agreement shall remain in full force and effect.
2. Amendment to the Agreement. The Agreement is hereby amended as
follows:
A. By ADDING a reference to the Series C Subscription
Agreements to the preamble so that the definition of
"Purchase Agreements" will include these subscription
agreements, and ADDING the words "Series C Preferred
Stock" to the definition of "Shares" in Section 1.1.
B. By DELETING the second sentence of Paragraph 5.2 and
SUBSTITUTING therefor:
22
"The Investor shall have five (5) Business Days from the giving
of such notice to agree to purchase its pro rata share of the
Equity Securities, or a portion thereof, for the price and upon
the terms and conditions specified in the notice by giving
written notice to the Company and stating therein the quantity of
Equity Securities to be purchased."
C. By DELETING "150,000 shares" in sub-paragraph 5.6(a) and
SUBSTITUTING therefor "1,500,000 shares".
D. By DELETING the words "shares of" in sub-paragraph 5.6(g)
and substituting therefore the word "any".
E. By DELETING the words "Except as otherwise provided
herein," in Sections 6.6(a) and (b).
3. Counterparts. This Amendment No. 2 may be executed in
counterparts.
IN WITNESS WHEREOF, Investor hereby consents to, adopts and agrees to
the provisions contained in this Amendment No. 2 and the Company has caused this
Amendment No. 2 to be duly executed and delivered.
23
AMENDMENT NO. 3 TO THE AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
This AMENDMENT NO. 3 TO THE AMENDED AND RESTATED INVESTOR RIGHTS
AGREEMENT is dated January 13, 1999 ("Amendment No. 3"), by and among ARENA
PHARMACEUTICALS, INC., a Delaware corporation (the "Company") and each of the
persons set forth on the Schedule of Investors (the "Investors") attached as
Schedule "A" hereto. Amendment No.3 amends the Amended and Restated Investor
Rights Agreement, dated November 26, 1997, as amended by Amendment No. 1 dated
September 21, 1998 and Amendment No. 2 dated December 30, 1998 (the
"Agreement").
PREAMBLE
WHEREAS, the Company and the Investors have entered into the Agreement,
pursuant to which the Company has extended to the Investors registration rights,
information rights and certain other rights.
WHEREAS, the Company proposes to offer and sell up to 4,871,060 shares
of its Series D Preferred Stock (the "Series D Preferred Stock," and purchasers
of the Series D Preferred Stock referred to herein as the "Series D Investors"),
and pursuant to the terms of the purchase agreement under which the Series D
Investors will purchase the Series D Preferred Stock, the Company proposes to
grant registration and certain other rights to the Series D Investors.
WHEREAS, Paragraph 6.6 of the Agreement provides that the Agreement may
be amended or modified upon the written consent of the Company and the holders
of at least sixty-six and two-thirds (66 2/3) of the Registrable Securities (as
defined in the Agreement).
WHEREAS, as a condition to their purchase of the Series D Preferred
Stock, the Series D Investors have requested that the Investors amend certain of
the registration rights previously granted to them in the Agreement.
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. The Agreements Remains in Full Force and Effect. Except as
expressly modified by this Amendment No. 3, no other changes are being made to
the Agreement and the Agreement shall remain in full force and effect.
2. Effective Date of Amendment. This Amendment No. 3 will be
effective
24
simultaneously with and not prior to the closing of the sale of the Series D
Preferred Stock to the Series D Investors.
3. Amendment to the Agreement. The Agreement is hereby amended as
follows:
A. By ADDING the following definitions to Section 1.1 of the
Agreement:
"COMBINED HOLDERS" means the Holders together with the Series D
Holders; any Holder or Series D Holder may also be referred to as a `Combined
Holder.'
"COMBINED REGISTRABLE SECURITIEs' means the Registrable
Securities together with the Series D Registrable Securities; any Registrable
Security or Series D Registrable Security may also be referred to as a `Combined
Registrable Security.'
`SERIES D HOLDER' means any person owning of record Series D
Registrable Securities that have not been sold to the public or any assignee of
record of such Series D Registrable Securities in accordance with Section 2.10
hereof.
`SERIES D INVESTORS' means the purchasers of Series D Shares.
`SERIES D PURCHASE AGREEMENT' means the purchase agreement for
the purchase and sale of the Series D Preferred Stock among the Company and the
investors party thereto.
`SERIES D REGISTRABLE SECURITIES' means (a) Common Stock of the
Company issued or issuable upon conversion of the Series D Shares; and (b) any
Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of,
such above-described securities. Notwithstanding the foregoing, Series D
Registrable Securities shall not include any securities sold by a person to the
public either pursuant to a registration statement or Rule 144 or sold in a
private transaction in which the transferor's rights under Section 2 of this
Agreement are not assigned.
`SERIES D SHARES' means the Company's Series D Preferred Stock
issued pursuant to the Series D Purchase Agreement and held by the Series D
Investors and their permitted assigns."
B. By DELETING Section 2.2(a) in its entirety and
SUBSTITUTING therefor:
"Subject to the conditions of this Section 2.2, if the Company
shall receive a written request from the Combined Holders of more
than sixty-six and two-thirds percent (66 2/3%) of the Combined
Registrable Securities then outstanding (the "Initiating
Holders") that the Company file a registration statement under
the Securities Act covering the registration of Combined
Registrable Securities having an aggregate
25
offering price to the public in excess of $2,500,000, then the
Company shall, within thirty (30) days of the receipt thereof,
give written notice of such request to all Combined Holders, and
subject to the limitations of this Section 2.2, use its best
efforts to effect, as soon as practicable, the registration under
the Securities Act of all Combined Registrable Securities that
the Combined Holders request to be registered."
C. BY SUBSTITUTING "COMBINED REGISTRABLE SECURITIES" FOR
"REGISTRABLE SECURITIES," AND "COMBINED HOLDER" FOR "HOLDER" (BUT NOT
`INITIATING HOLDER')" WHEREVER SUCH TERMS APPEAR IN SECTION 2.2(b).
D. By SUBSTITUTING "Combined Holders" for "Holders" in
Section 2.2(c)(iv).
E. By DELETING the first sentence of Section 2.3 and
SUBSTITUTING therefor:
"The Company shall notify all Holders of Registrable Securities
in writing at least thirty (30) days prior tot any filing of any registration
statement under the Securities Act for purposes of a public offering of equity
securities of the Company (including, but not limited to, registration
statements relating to secondary offerings of equity securities of the Company,
but excluding registration statements relating to employee benefit plans or with
respect to corporate reorganizations or other transactions under Rule 145 of the
Securities Act) and will afford each such Holder an opportunity to include in
such registration statement all or part of such Registration Securities held by
such Holder."
F. By DELETING the fourth sentence of Section 2.3 (a) and
SUBSTITUTING therefor:
"Notwithstanding any other provision of the Agreement, if the
underwriter determines in good faith that marketing factors
require a limitation of the number of shares to be underwritten,
the number of shares that may be included in the underwriting
shall be allocated, first, to the Company; second, to the Series
D Holders on a pro rata basis based on the total number of Series
D Registrable Securities held by the Series D Holders; third, to
the Holders on a pro rata basis based on the total number of
Registrable Securities held by the Holders; and fourth, to any
stockholder of the Company (other than a Holder or a Series D
Holder) on a pro rata basis."
G. By INSERTING at the end of the first sentence of Section
2.11:
", provided, however, that Section 2.3 of this Agreement may not
be amended without the separate written consent of holders of
sixty-six and two-thirds percent (66
26
2/3%) of the Series D Registrable Securities then outstanding."
H. By INSERTING the following as the second sentence of
Section 6.6(a):
"Notwithstanding the foregoing sentence, Section 2.3 of this
Agreement may be amended only with the separate written consent
of the holders of sixty-six and two-thirds percent (66-2/3%) of
the Series D Registrable Securities then outstanding."
I. By INSERTING the following as the second sentence of
Section 6.6(b):
"Notwithstanding the foregoing sentence, the obligations of the
Company and the rights of the Holders under Section 2.3 of this
Agreement may be waived only with the separate written consent of
the holders of sixty-six and two-thirds percent (66-2/3%) of the
Series D Registrable Securities then outstanding."
4. Counterparts and Fax Signatures. This Amendment No. 3 may be
executed in counterparts and fax signatures shall be construed as if original
signatures.
IN WITNESS WHEREOF, Investor hereby consents to, adopts and agrees to
the provisions contained in this Amendment No. 3 and the Company has caused this
Amendment No. 3 to be duly executed and delivered.
27
AMENDMENT NO. 4
TO THE AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
This AMENDMENT NO. 4 TO THE AMENDED AND RESTATED INVESTOR RIGHTS
AGREEMENT is dated _______ __, 2000 ("Amendment No. 4"), by and among ARENA
PHARMACEUTICALS, INC., a Delaware corporation (the "Company") and each of the
persons set forth on the Schedule of Investors (the "Investors") attached as
Schedule "A" hereto. Amendment No. 4 amends the Amended and Restated Investor
Rights Agreement, dated November 26, 1997, as amended by Amendment No. 1 to the
Amended and Restated Investor Rights Agreement dated September 21, 1998, and as
further amended by Amendment No. 2 to the Amended and Restated Investor Rights
Agreement, dated December 30, 1998 (the "Agreement").
PREAMBLE
WHEREAS, the Company and the Investors have entered into the Agreement,
pursuant to which the Company has extended to the Investors certain registration
rights, information rights and certain other rights;
WHEREAS, the Company and the Investors have entered into that certain
Amendment No. 2 to the Amended and Restated Investor Rights Agreement, dated
December 30, 1998, pursuant to which the Company intended to grant certain
rights to the holders of the Company's Series C Preferred Stock;
WHEREAS, Paragraph 6.6 of the Agreement provides that the Agreement may
be amended or modified upon the written consent of the Company and the holders
of at least sixty-six and two-thirds percent (66 2/3%) of the Registrable
Securities (as defined in the Agreement);
WHEREAS, the Company and the Investors wish to clarify certain of the
rights granted to the holders of the Company's Series C Preferred Stock pursuant
to Amendment No. 2 to the Amended and Restated Investor Rights Agreement, dated
December 30, 1998;
For good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
1. The Agreement Remains in Full Force and Effect. Except as
expressly modified by this Amendment No. 4, no other changes are being made to
the Agreement and the Agreement shall remain in full force and effect.
28
2. Clarification of Amendment No. 2. The Agreement is hereby
clarified, and to the extent required to effectuate such clarification, amended,
as follows:
The definition of "Investor" for purposes of Section 5 of the Agreement
has not included, and shall not include, the holders of the Company's Series C
Preferred Stock. For further clarification purposes, the holders of Series C
Preferred Stock have not and hereafter shall not be entitled to the rights as
set forth in Section 5 of the Agreement.
3. Effective Date. The clarification, and to the extent required to
effectuate such clarification, the amendment, to the Agreement set forth in
Section 2 hereof is dated effective as of December 30, 1998.
4. Counterparts. This Amendment No. 4 may be executed in
counterparts and by facsimile.
IN WITNESS WHEREOF, the undersigned hereby consents to, adopts and
agrees to the provisions contained in this Amendment No. 4 and the Company has
caused this Amendment No. 4 to be duly executed and delivered.
---------------------------
29
ARENA PHARMACEUTICALS INC.
SERIES D-E PREFERRED STOCK
INVESTOR RIGHTS AGREEMENT
This SERIES D-E INVESTOR RIGHTS AGREEMENT (which shall amend and restate
in its entirety the Series D Preferred Stock Investor Rights Agreement dated
January 29, 1999 by and between ARENA PHARMACEUTICALS, INC., a Delaware
corporation (the "Company") and the holders of the Company's Series D Preferred
Stock (the "Series D Holders") (the "Series D Investor Rights Agreement") is
entered into this 28th day of January, 2000, by and between the Company, the
Series D Holders and each of those persons, severally and not jointly, whose
names are set forth on the Schedule of Investors attached hereto as SCHEDULE A
(such persons and entities are hereinafter collectively referred to as
"Investors" and each individually as an "Investor").
RECITALS
WHEREAS, the Company proposes to sell and issue up to Two Million
(2,000,000) shares of its Series E Preferred Stock (the "Series E Preferred
Stock") pursuant to that certain Series E Purchase Agreement dated January 28,
2000 ("Series E Purchase Agreement"); and
WHEREAS, the Company has previously entered into a Series D Preferred
Stock Investor Rights Agreement dated January 29, 1999 (the "Series D Investor
Rights Agreement") with the Series D Holders, extending to the Series D Holders
registration rights, information rights and other rights, as set forth in the
Series D Investor Rights Agreement; and
WHEREAS, as a condition of entering into the Series E Purchase
Agreement, the Investors have requested that the Company extend to them
registration rights, information rights and other rights which are equal to the
rights given the Series D Holders in the Series D Investor Rights Agreement; and
WHEREAS, the Company and the Series D Holders desire hereby to amend and
restate the Series D Investor Rights Agreement in its entirety and add the
Investors;
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement, the parties mutually agree as follows:
30
SECTION 1. GENERAL
1.1 DEFINITIONS. As used in this Agreement the following terms shall
have the following respective meanings:
"BUSINESS DAY" means a day other than a Saturday, a Sunday or a
day on which banking institutions in San Diego, California are not required to
be open.
"COMBINED HOLDERS" means the Series D-E Holders together with the
Series A-B-C Holders; any Series D-E Holder or Series A-B-C Holder may also be
referred to as a "Combined Holder."
"COMBINED REGISTRABLE SECURITIES" means the Registrable
Securities together with the Series A-B-C Registrable Securities; any
Registrable Security or Series A-B-C Registrable Security may also be referred
to as a "Combined Registrable Security."
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FORM S-3" means such form under the Securities Act as in effect
on the date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
"INITIAL OFFERING" means the Company's first firm commitment
underwritten public offering of its Common Stock registered under the Securities
Act.
"PREFERRED STOCK" means the Series D-E Shares together with the
Company's Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock.
"QUALIFIED PUBLIC OFFERING" means a firmly underwritten public
offering pursuant to an effective registration statement under the Securities
Act covering the offer and sale of Common Stock for the Company in which the per
share price is (i) at least $13.96 per share, and (ii) the gross cash proceeds
to the Company are at least $20 million.
"REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of
effectiveness of such registration statement or document.
"REGISTRABLE SECURITIES" means (a) Common Stock of the Company
issued or issuable upon conversion of the Series D-E Shares; and (b) any Common
Stock of the Company issued as (or issuable upon the conversion or exercise of
any warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, the
31
securities described in clause (a). Notwithstanding the foregoing, Registrable
Securities shall not include any securities sold by a person to the public
either pursuant to a registration statement or Rule 144 or sold in a private
transaction in which the transferor's rights under Section 2 of this Agreement
are not assigned.
"REGISTRABLE SECURITIES THEN OUTSTANDING" shall be the number of
shares determined by calculating the total number of shares of the Company's
Common Stock that are Registrable Securities and either (a) are then issued and
outstanding or (b) are issuable pursuant to then exercisable or convertible
securities.
"REGISTRATION EXPENSES" shall mean all expenses incurred by the
Company in complying with Sections 2.2, 2.3 and 2.4 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, reasonable fees and disbursements not
to collectively exceed Fifteen Thousand Dollars ($15,000) of special counsel for
the Series D Holders and Investors, blue sky fees and expenses and the expense
of any special audits incident to or required by any such registration (but
excluding the compensation of regular employees of the Company which shall be
paid in any event by the Company).
"RULE 144" means Rule 144 of the Securities Act.
"SEC" or "COMMISSION" means the Securities and Exchange
Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
"SELLING EXPENSES" shall mean all underwriting discounts and
selling commissions applicable to the sale.
"SERIES A-B-C HOLDER" means any person owning of record Series
A-B-C Registrable Securities that have not been sold to the public or any
assignee of record of such Series A-B-C Registrable Securities.
"SERIES A-B-C INVESTORS" means the purchasers of Series A-B-C
Shares.
"SERIES A-B-C REGISTRABLE SECURITIES" means (a) Common Stock of
the Company issued or issuable upon conversion of the Series A-B-C Shares; and
(b) any Common Stock of the Company issued as (or issuable upon the conversion
or exercise of any warrant, right or other security which is issued as) a
dividend or other distribution with respect to, or in exchange for or in
replacement of, such above-described securities. Notwithstanding the foregoing,
Series A-B-C Registrable Securities shall not include any securities sold by a
person to the public either pursuant to a registration statement or Rule 144 or
sold in a private transaction in which the transferor's rights under Section 2
of this Agreement are not assigned.
"SERIES A-B-C SHARES" means the Company's Series A Preferred
Stock, Series B
32
Preferred Stock and Series C Preferred Stock issued to the Series A-B-C
Investors prior to the date hereof and held by the Series A-B-C Investors and
their permitted assigns.
"SERIES D-E HOLDER" means any person owning of record (a) Series
D-E Shares or (b) Registrable Securities that have not been sold to the public
or any assignee of record of such Registrable Securities in accordance with
Section 2.10 hereof.
"SERIES D-E SHARES" shall mean (a) the Company's Series E
Preferred Stock issued pursuant to the Purchase Agreement and held by the
Investors and their permitted assigns and (b) the Company's Series D Preferred
Stock issued to the Series D Holders prior to the date hereof and held by the
Series D Holders and their permitted assigns.
SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER.
2.1 RESTRICTIONS ON TRANSFER.
(a) Each Series D-E Holder agrees not to make any disposition
of all or any portion of the Shares or Registrable Securities unless and until:
(i) There is then in effect a registration statement
under the Securities Act covering such proposed disposition and such disposition
is made in accordance with such registration statement; or
(ii) (A) The transferee has agreed in writing to be
bound by the terms of this Agreement, (B) such Series D-E Holder shall have
notified the Company of the proposed disposition and shall have furnished the
Company with a detailed statement of the circumstances surrounding the proposed
disposition, and (C) if reasonably requested by the Company, such Series D-E
Holder shall have furnished the Company with an opinion of counsel, reasonably
satisfactory to the Company, that such disposition will not require registration
of such shares under the Securities Act. It is agreed that the Company will not
require opinions of counsel for transactions made pursuant to Rule 144.
(iii) Notwithstanding the provisions of paragraphs (i)
and (ii) above, no such registration statement or opinion of counsel shall be
necessary for a transfer by a Series D-E Holder which is (A) a partnership to
its partners or former partners in accordance with partnership interests, (B) a
corporation to its shareholders in accordance with their interest in the
corporation, (C) a limited liability company to its members or former members in
accordance with their interest in the limited liability company, or (D) to the
Series D-E Holder's family member or trust for the benefit of an individual
Series D-E Holder or family member of the Series D-E Holder; provided that in
each case the transferee will be subject to the terms of this Agreement to the
same extent as if he were an original Series D-E Holder hereunder.
(b) Each certificate representing Shares or Registrable
Securities shall (unless
33
otherwise permitted by the provisions of the Agreement) be stamped or otherwise
imprinted with a legend substantially similar to the following (in addition to
any legend required under applicable state securities laws or as provided
elsewhere in this Agreement):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER
THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO
THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
(c) The Company shall be obligated to reissue promptly
unlegended certificates at the request of any Series D-E Holder thereof if the
Series D-E Holder shall have obtained an opinion of counsel (which counsel may
be counsel to the Company) reasonably acceptable to the Company to the effect
that the securities proposed to be disposed of may lawfully be so disposed of
without registration, qualification or legend.
(d) Any legend endorsed on an instrument pursuant to
applicable state securities laws and the stop-transfer instructions with respect
to such securities shall be removed upon receipt by the Company of an order of
the appropriate blue sky authority authorizing such removal.
2.2 DEMAND REGISTRATION.
(a) (i) Subject to the conditions of this Section 2.2, if,
prior to June 30, 2001, the Company shall receive a written request from the
Series D-E Holders of more than sixty-six and two-thirds percent (66-2/3%) of
the Registrable Securities then outstanding (the "Initiating Series D-E
Holders") that the Company file a registration statement under the Securities
Act covering the registration of Registrable Securities having an aggregate
offering price to the public in excess of $2,500,000, then the Company shall,
within thirty (30) days of the receipt thereof, give written notice of such
request to all Series D-E Holders, and subject to the limitations of this
Section 2.2, use its best efforts to effect, as soon as practicable, the
registration under the Securities Act of all Registrable Securities that the
Series D-E Holders request to be registered.
(ii) If the Initiating Series D-E Holders intend to
distribute the Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company as a part of their request made
pursuant to this Section 2.2(a) or any request pursuant to Section 2.4 and the
Company shall include such information in the written notice referred to in
Section 2.2(a)(i) or Section 2.4(a), as applicable. In such event, the right of
any Series D-E Holder to include its Registrable Securities in such registration
shall be conditioned upon such Series D-E Holder's participation in such
underwriting and the inclusion of such Series D-E Holder's Registrable
Securities in the underwriting (unless otherwise mutually agreed by a majority
in interest of the Initiating Series D-E Holders and such Series D-E Holder) to
the extent provided herein. All Series
34
D-E Holders proposing to distribute their securities through such underwriting
shall enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by a majority in
interest of the Initiating Series D-E Holders (which underwriter or underwriters
shall be reasonably acceptable to the Company). Notwithstanding any other
provision of this Section 2.2 or Section 2.4, if the underwriter advises the
Company that marketing factors require a limitation of the number of securities
to be underwritten (including Registrable Securities) then the Company shall so
advise all Series D-E Holders of Registrable Securities which would otherwise be
underwritten pursuant hereto, and the number of shares that may be included in
the underwriting shall be allocated to the Series D-E Holders of such
Registrable Securities on a pro rata basis based on the number of Registrable
Securities held by all such Series D-E Holders (including the Initiating Series
D-E Holders). Any Registrable Securities excluded or withdrawn from such
underwriting shall be withdrawn from the registration.
(b) (i) Subject to the conditions of this Section 2.2, if, on
or after June 30, 2001, the Company shall receive a written request from the
Combined Holders of more than sixty-six and two-thirds percent (66-2/3%) of the
Combined Registrable Securities then outstanding (the "Initiating Combined
Holders") that the Company file a registration statement under the Securities
Act covering the registration of Combined Registrable Securities having an
aggregate offering price to the public in excess of $2,500,000, then the Company
shall, within thirty (30) days of the receipt thereof, give written notice of
such request to all Combined Holders, and subject to the limitations of this
Section 2.2, use its best efforts to effect, as soon as practicable, the
registration under the Securities Act of all Combined Registrable Securities
that the Combined Holders request to be registered.
(ii) If the Initiating Combined Holders intend to
distribute the Combined Registrable Securities covered by their request by means
of an underwriting, they shall so advise the Company as a part of their request
made pursuant to this Section 2.2(b) and the Company shall include such
information in the written notice referred to in Section 2.2(b)(i). In such
event, the right of any Combined Holder to include its Combined Registrable
Securities in such registration shall be conditioned upon such Combined Holder's
participation in such underwriting and the inclusion of such Combined Holder's
Combined Registrable Securities in the underwriting (unless otherwise mutually
agreed by a majority in interest of the Initiating Combined Holders and such
Combined Holder) to the extent provided herein. All Combined Holders proposing
to distribute their securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by a majority in interest of the Initiating
Combined Holders (which underwriter or underwriters shall be reasonably
acceptable to the Company). Notwithstanding any other provision of this Section
2.2(b), if the underwriter advises the Company that marketing factors require a
limitation of the number of securities to be underwritten (including Combined
Registrable Securities) then the Company shall so advise all Combined Holders of
Combined Registrable Securities which would otherwise be underwritten pursuant
hereto, and the number of shares that may be included in the underwriting shall
be allocated to the Combined Holders of such Combined Registrable Securities on
a pro rata basis based on the number of Combined Registrable Securities held by
all such Combined Holders (including the
35
Initiating Combined Holders). Any Combined Registrable Securities excluded or
withdrawn from such underwriting shall be withdrawn from the registration.
(c) The Company shall not be required to effect a registration
pursuant to this Section 2.2:
(i) prior to the earlier of January 29, 2001 or the
Company's Initial Offering; or
(ii) after the Company has effected two (2)
registrations pursuant to this Section 2.2, and such registrations have been
declared or ordered effective; or
(iii) during the period starting with the date of the
initial filing of, and ending on the date one hundred eighty (180) days
following the effective date of the registration statement pertaining to the
Initial Offering; provided that the Company makes reasonable good faith efforts
to cause such registration statement to become effective; or
(iv) if within thirty (30) days of receipt of a written
request from the Initiating Series D-E Holders pursuant to Section 2.2. (a) or
the Initiating Combined Holders pursuant to Section 2.2(b), as applicable, the
Company gives notice to the Series D-E Holders or the Combined Holders, as
applicable, of the Company's intention to make its Initial Offering within
ninety (90) days in which case the Company shall use its best efforts to make
its Initial Offering within such period.
2.3 PIGGYBACK REGISTRATIONS. The Company shall notify all Series D-E
Holders of Registrable Securities in writing at least thirty (30) days prior to
the filing of any registration statement under the Securities Act for purposes
of a public offering of equity securities of the Company (including, but not
limited to, registration statements relating to secondary equity offerings of
securities of the Company, but excluding registration statements relating to
employee benefit plans or with respect to corporate reorganizations or other
transactions under Rule 145 of the Securities Act) and will afford each such
Series D-E Holder an opportunity to include in such registration statement all
or part of such Registrable Securities held by such Series D-E Holder. Each
Series D-E Holder desiring to include in any such registration statement all or
any part of the Registrable Securities held by it shall, within fifteen (15)
days after the above-described notice from the Company, so notify the Company in
writing. Such notice shall state the intended method of disposition of the
Registrable Securities by such Series D-E Holder. If a Series D-E Holder decides
not to include all of its Registrable Securities in any registration statement
thereafter filed by the Company, such Series D-E Holder shall nevertheless
continue to have the right to include any Registrable Securities in any
subsequent registration statement or registration statements as may be filed by
the Company with respect to offerings of its securities, all upon the terms and
conditions set forth herein.
(a) UNDERWRITING. If the registration statement under which
the Company gives
36
notice under this Section 2.3 is for an underwritten offering, the Company shall
so advise the Series D-E Holders of Registrable Securities. In such event, the
right of any such Series D-E Holder to be included in a registration pursuant to
this Section 2.3 shall be conditioned upon such Series D-E Holder's
participation in such underwriting and the inclusion of such Series D-E Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Series D-E Holders proposing to distribute their Registrable Securities through
such underwriting shall enter into an underwriting agreement in customary form
with the underwriter or underwriters selected for such underwriting by the
Company. Notwithstanding any other provision of the Agreement, if the
underwriter determines in good faith that marketing factors require a limitation
of the number of shares to be underwritten, the number of shares that may be
included in the underwriting shall be allocated, first, to the Company; second,
to the Series D-E Holders on a pro rata basis based on the total number of
Registrable Securities held by the Series D-E Holders; third, to any Series
A-B-C Holder on a pro rata basis; and fourth, to any stockholder of the Company
(other than a Series D-E Holder or Series A-B-C Holder) on a pro rata basis. In
no event will shares of any other selling shareholder be included in such
registration which would reduce the number of shares which may be included by
Series D-E Holders without the written consent of holders of not less than a
majority of the Registrable Securities proposed to be sold in the offering.
(b) RIGHT TO TERMINATE REGISTRATION. The Company shall have
the right to terminate or withdraw any registration initiated by it under this
Section 2.3 prior to the effectiveness of such registration whether or not any
Series D-E Holder has elected to include securities in such registration. The
Registration Expenses of such withdrawn registration shall be borne by the
Company in accordance with Section 2.5 hereof.
2.4 FORM S-3 REGISTRATION. In case the Company shall receive from any
Series D-E Holder or Series D-E Holders of Registrable Securities a written
request or requests that the Company effect a registration on Form S-3 (or any
successor to Form S-3) or any similar short-form registration statement and any
related qualification or compliance with respect to all or a part of the
Registrable Securities owned by such Series D-E Holder or Series D-E Holders,
the Company will:
(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Series D-E Holders;
and
(b) as soon as practicable, effect such registration and all
such qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of such Series
D-E Holder's or Series D-E Holders' Registrable Securities as are specified in
such request, together with all or such portion of the Registrable Securities of
any other Series D-E Holder or Series D-E Holders joining in such request as are
specified in a written request given within fifteen (15) days after receipt of
such written notice from the Company; provided, however, that the Company shall
not be obligated to effect any such registration, qualification or compliance
pursuant to this Section 2.4:
(i) if Form S-3 (or any successor or similar form) is
not available for such
37
offering by the Series D-E Holders, or
(ii) if the Series D-E Holders, together with the
holders of any other securities of the Company entitled to inclusion in such
registration, propose to sell Registrable Securities and such other securities
(if any) at an aggregate price to the public of less than $250,000, or
(iii) if the Company has already effected four (4)
registrations on Form S-3 for the Series D-E Holders pursuant to this Section
2.4, or
(iv) if the Company has, within the twelve (12) month
period preceding the date of such request, already effected two (2)
registrations on Form S-3 for the Series D-E Holders pursuant to this Section
2.4, or
(v) in any particular jurisdiction in which the Company
would be required to qualify to do business or to execute a general consent to
service of process in effecting such registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a Form
S-3 registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after receipt of
the request or requests of the Series D-E Holders.
2.5 EXPENSES OF REGISTRATION. Except as specifically provided herein,
all Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 2.2 or any registration under
Section 2.3 or Section 2.4 herein shall be borne by the Company. All Selling
Expenses incurred in connection with any registrations hereunder, shall be borne
by the Series D-E Holders or Combined Holders, as the case may be, of the
securities so registered pro rata on the basis of the number of shares so
registered. The Company shall not, however, be required to pay for expenses of
any registration proceeding begun pursuant to Section 2.2 or 2.4, the request of
which has been subsequently withdrawn by the Initiating Series D-E Holders or
Initiating Combined Holders, as the case may be, unless (a) the withdrawal is
based upon material adverse information concerning the Company of which the
Initiating Series D-E Holders or Initiating Combined Holders were not aware at
the time of such request or (b) the Series D-E Holders or Combined Holders
holding sixty-six and two-thirds percent (66 2/3%) of Registrable Securities or
Combined Registrable Securities, as the case may be, then outstanding agree to
forfeit their right to one requested registration pursuant to Section 2.2 or
Section 2.4, as applicable, in which event such right shall be forfeited by all
Series D-E Holders or all Combined Holders, as the case may be). If the Series
D-E Holders or Combined Holders, as the case may be, are required to pay the
Registration Expenses, such expenses shall be borne by the Series D-E Holders or
Combined Holders, as the case may be, of securities (including Registrable
Securities or Combined Registrable Securities) requesting such registration in
proportion to the number of shares for which registration was requested. If the
Company is required to pay the Registration Expenses of a withdrawn offering
pursuant to clause (a) above, then the Series D-E Holders or Combined Holders,
as the case may be,
38
shall not forfeit their rights pursuant to Section 2.2 or Section 2.4 to a
demand registration.
2.6 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use all reasonable efforts to
cause such registration statement to become effective, and, upon the request of
the Series D-E Holders holding sixty-six and two-thirds percent (66 2/3%) of the
Registrable Securities registered thereunder, keep such registration statement
effective for up to ninety (90) days or, if earlier, until the Series D-E Holder
or Series D-E Holders have completed the distribution related thereto.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish to the Series D-E Holders such number of copies of
a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
(d) Use all reasonable efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Series D-E Holders, provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter(s) of such offering. Each Series
D-E Holder participating in such underwriting shall also enter into and perform
its obligations under such an agreement.
(f) Notify each Series D-E Holder who holds Registrable
Securities covered by such registration statement at any time when a prospectus
relating thereto is required to be delivered under the Securities Act of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing.
(g) Furnish, at the request of Series D-E Holders holding
sixty-six and two-thirds percent (66 2/3%) of the Registrable Securities
requested to be included in the registration, on the date that such Registrable
Securities are delivered to the underwriters for sale, if such securities are
39
being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that the registration statement with respect
to such securities becomes effective, (i) an opinion, dated as of such date, of
the counsel representing the Company for the purposes of such registration, in
form and substance as is customarily given to underwriters in an underwritten
public offering and reasonably satisfactory to Series D-E Holders holding
sixty-six and two-thirds percent (66 2/3%) of the Registrable Securities
requested to be included in the registration, addressed to the underwriters, if
any, and to the Series D-E Holders requesting registration of Registrable
Securities and (ii) a letter dated as of such date, from the independent
certified public accountants of the Company, in form and substance as is
customarily given by independent certified public accountants to underwriters in
an underwritten public offering and reasonably satisfactory to Series D-E
Holders holding sixty-six and two-thirds percent (66 2/3%) of the Registrable
Securities requested to be included in the registration, addressed to the
underwriters, if any, and if permitted by applicable accounting standards, to
the Series D-E Holders requesting registration of Registrable Securities.
2.7 TERMINATION OF REGISTRATION RIGHTS. All registration rights
granted under this Section 2 shall terminate and be of no further force and
effect six (6) years after the date of the Company's Initial Offering. In
addition, a Series D-E Holder's registration rights shall expire if (a) the
Company has completed its Initial Offering and is subject to the provisions of
the Exchange Act, and (b) all Registrable Securities held by and issuable to
such Series D-E Holder (and its affiliates, partners and former partners) may be
sold under Rule 144 during any ninety (90) day period.
2.8 DELAY OF REGISTRATION; FURNISHING INFORMATION.
(a) Other than in the event of the Company's breach of its
obligations under Section 2.3 hereof, no Series D-E Holder shall have any right
to obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 2.
(b) It shall be a condition precedent to the obligations of
the Company to take any action pursuant to Section 2.2, 2.3 or 2.4 that the
selling Series D-E Holders shall furnish to the Company such information
regarding themselves, the Registrable Securities held by them and the intended
method of disposition of such securities as shall be required to effect the
registration of their Registrable Securities.
(c) The Company shall have no obligation with respect to any
registration requested pursuant to Section 2.2 or Section 2.4 if, due to the
operation of subsection 2.2(b), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's obligation
to initiate such registration as specified in Section 2.2 or Section 2.4,
whichever is applicable.
2.9 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under Sections 2.2, 2.3 or 2.4:
40
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Series D-E Holder, the partners, officers, directors and
legal counsel of each Series D-E Holder, any underwriter (as defined in the
Securities Act) for such Series D-E Holder and each person, if any, who controls
such Series D-E Holder or underwriter within the meaning of the Securities Act
or the Exchange Act, against any losses, claims, damages, or liabilities (joint
or several) to which they may become subject under the Securities Act, the
Exchange Act or other federal or state law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations (collectively a
"Violation") by the Company: (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law in connection with the offering
covered by such registration statement; and the Company will reimburse each such
Series D-E Holder, partner, officer, director, legal counsel, underwriter or
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided however, that the indemnity agreement contained in
this Section 2.9(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Company, which consent shall not be unreasonably withheld,
nor shall the Company be liable in any such case for any such loss, claim,
damage, liability or action to the extent that it arises out of or is based upon
a Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
such Series D-E Holder, partner, officer, director, legal counsel, underwriter
or controlling person of such Series D-E Holder.
(b) To the extent permitted by law, each Series D-E Holder
will, if Registrable Securities held by such Series D-E Holder are included in
the securities as to which such registration qualifications or compliance is
being effected, indemnify and hold harmless the Company, each of its directors,
its officers, and legal counsel and each person, if any, who controls the
Company within the meaning of the Securities Act, any underwriter and any other
Series D-E Holder selling securities under such registration statement or any of
such other Series D-E Holder's partners, directors, officers and legal counsel
or any person who controls such Series D-E Holder, against any losses, claims,
damages or liabilities (joint or several) to which the Company or any such
director, officer, controlling person, underwriter or other such Series D-E
Holder, or partner, director, officer or controlling person of such other Series
D-E Holder may become subject under the Securities Act, the Exchange Act or
other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by such Series D-E Holder under an instrument duly executed by such
Series D-E Holder and stated to be specifically for use in connection with such
registration; and each such
41
Series D-E Holder will reimburse any legal or other expenses reasonably incurred
by the Company or any such director, officer, legal counsel, controlling person,
underwriter or other Series D-E Holder, or partner, officer, director, legal
counsel or controlling person of such other Series D-E Holder in connection with
investigating or defending any such loss, claim, damage, liability or action if
it is judicially determined that there was such a Violation; provided, however,
that the indemnity agreement contained in this Section 2.9(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Series D-E Holder,
which consent shall not be unreasonably withheld; provided further, that in no
event shall any indemnity under this Section 2.9 exceed the proceeds from the
offering received by such Series D-E Holder.
(c) Promptly after receipt by an indemnified party under this
Section 2.9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 2.9, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 2.9, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 2.9.
(d) If the indemnification provided for in this Section 2.9 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any losses, claims, damages or liabilities referred to
herein, the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission; provided, that in no event shall any contribution by a
Series D-E Holder hereunder exceed the proceeds from the offering received by
such Series D-E Holder.
42
(e) The obligations of the Company and Series D-E Holders
under this Section 2.9 shall survive completion of any offering of Registrable
Securities in a registration statement and the termination of this agreement. No
indemnifying party, in the defense of any such claim or litigation, shall,
except with the consent of each indemnified party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect to such claim or litigation.
2.10 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities pursuant to this Section 2 may be
assigned by a Series D-E Holder to a transferee or assignee of Registrable
Securities which (a) is a subsidiary, parent, general partner, limited partner
or retired partner of a Series D-E Holder, (b) is a Series D-E Holder's family
member or trust for the benefit of an individual Series D-E Holder or family
member of the Series D-E Holder, or (c) acquires at least fifty thousand
(50,000) shares of Registrable Securities (as adjusted for stock splits and
combinations); provided, however, (A) the transferor shall, within twenty (20)
days after such transfer, furnish to the Company written notice of the name and
address of such transferee or assignee and the securities with respect to which
such registration rights are being assigned, (B) such transferee shall agree to
be subject to all restrictions set forth in this Agreement, and (C) such
transferee must not be a person or entity deemed by the Board of Directors of
the Company, in its reasonable judgment, to be a competitor of the Company.
2.11 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Section 2
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Series D-E Holders of at least sixty-six
and two-thirds percent (66 2/3%) of the Registrable Securities then outstanding.
Any amendment or waiver effected in accordance with this Section 2.11 shall be
binding upon each Series D-E Holder and the Company. By acceptance of any
benefits under this Article II, Series D-E Holders of Registrable Securities
hereby agree to be bound by the provisions hereunder.
2.12 LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. After the date of
this Agreement, the Company shall not, without the prior written consent of the
Series D-E Holders of sixty-six and two-thirds percent (66 2/3%) of the
Registrable Securities then outstanding, enter into any agreement with any
Series D-E Holder or prospective Series D-E Holder of any securities of the
Company that would grant such Series D-E Holder registration rights on a parity
with or senior to those granted to the Series D-E Holders hereunder.
2.13 "MARKET STAND-OFF" AGREEMENT. Each Series D-E Holder hereby
agrees that such Series D-E Holder shall not sell or otherwise transfer or
dispose of any Common Stock (or other securities) of the Company held by such
Series D-E Holder (other than those included in the registration) for a period
specified by the representative of the underwriters of Common Stock (or other
securities) of the Company not to exceed one hundred eighty (180) days following
the effective
43
date of a registration statement of the Company filed under the Securities Act,
provided that:
(i) such agreement shall apply only to the Company's
Initial Offering; and
(ii) all officers and directors of the Company and
holders of at least one percent (1%) of the Company's voting securities enter
into similar agreements.
Each Series D-E Holder agrees to execute and deliver such other agreements as
may be reasonably requested by the Company or the underwriter which are
consistent with the foregoing or which are necessary to give further effect
thereto. The obligations described in this Section 2.13 shall not apply to a
registration relating solely to employee benefit plans on Form S-1 or Form S-8
or similar forms that may be promulgated in the future, or a registration
relating solely to a Commission Rule 145 transaction on Form S-4 or similar
forms that may be promulgated in the future. The Company may impose
stop-transfer instructions with respect to the shares of Common Stock (or other
securities) subject to the foregoing restriction until the end of said one
hundred eighty (180) day period.
2.14 RULE 144 REPORTING. With a view to making available to the Series
D-E Holders the benefits of certain rules and regulations of the SEC which may
permit the sale of the Registrable Securities to the public without
registration, the Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms
are understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
the first registration filed by the Company for an offering of its securities to
the general public;
(b) File with the SEC, in a timely manner, all reports and
other documents required of the Company under the Exchange Act;
(c) So long as a Series D-E Holder owns any Registrable
Securities, furnish to such Series D-E Holder forthwith upon request: a written
statement by the Company as to its compliance with the reporting requirements of
said Rule 144 of the Securities Act, and of the Exchange Act (at any time after
it has become subject to such reporting requirements); a copy of the most recent
annual or quarterly report of the Company; and such other reports and documents
as a Series D-E Holder may reasonably request in availing itself of any rule or
regulation of the SEC allowing it to sell any such securities without
registration.
SECTION 3. COVENANTS OF THE COMPANY.
3.1 BASIC FINANCIAL INFORMATION AND REPORTING.
(a) The Company will keep engaged independent public
accountants of national standing to assist in the preparation of the Company's
books and records of account in accordance
44
with generally accepted accounting principles.
(b) The Company will maintain true books and records of
account in which full and correct entries will be made of all its business
transactions pursuant to a system of accounting established and administered in
accordance with generally accepted accounting principles consistently applied,
and will set aside on its books all such proper accruals and reserves as shall
be required under generally accepted accounting principles consistently applied.
(c) As soon as practicable after the end of each fiscal year
of the Company, and in any event within one hundred twenty (120) days
thereafter, the Company will furnish the Series D-E Holder a consolidated
balance sheet of the Company, as at the end of such fiscal year, and a
consolidated statement of income and a consolidated statement of cash flows of
the Company, for such year, all prepared in accordance with generally accepted
accounting principles consistently applied and setting forth in each case in
comparative form the figures for the previous fiscal year, all in reasonable
detail. Such financial statements shall be accompanied by a report and opinion
thereon by independent public accountants of national standing selected by the
Company's Board of Directors.
(d) The Company will furnish the Series D-E Holders, as soon
as practicable after the end of the first, second and third quarterly accounting
periods in each fiscal year of the Company, and in any event within forty-five
(45) days thereafter, a consolidated balance sheet of the Company as of the end
of each such quarterly period, and a consolidated statement of income and a
consolidated statement of cash flows of the Company for such period and for the
current fiscal year to date, prepared in accordance with generally accepted
accounting principles, with the exception that no notes need be attached to such
statements and year-end audit adjustments may not have been made.
(e) The Company will furnish the Series D-E Holders, as soon
as practicable after the end of each month, a consolidated balance sheet of the
Company as of the end of each such quarterly period, and a consolidated
statement of income and a consolidated statement of cash flows of the Company
for such month, prepared in accordance with generally accepted accounting
principles, with the exception that no notes need be attached to such statements
and year-end audit adjustments may not have been made.
(f) So long as the Series D-E Holders (with their affiliates)
shall own not less than one hundred thousand (100,000) shares of Registrable
Securities (as adjusted for stock splits and combinations), the Company will
furnish the Series D-E Holders at least thirty (30) days prior to the beginning
of each fiscal year an annual budget and operating plans for such fiscal year
(and as soon as available, any subsequent revisions thereto) through such Series
D-E Holders' representative on the Company's Board of Directors or in such other
manner as the Company and the Series D-E Holders shall mutually agree.
3.2 INSPECTION RIGHTS. So long as the Series D-E Holders (with their
affiliates) shall own
45
not less than one hundred thousand (100,000) shares of Registrable Securities
(as adjusted for stock splits and combinations), a representative of the Series
D-E Holders shall have the right to visit and inspect any of the properties of
the Company or any of its subsidiaries, and to discuss the affairs, finances and
accounts of the Company or any of its subsidiaries with its officers, and to
review such information as is reasonably requested all at such reasonable times
and as often as may be reasonably requested; provided, however, that the Company
shall not be obligated under this Section 3.2 with respect to a competitor of
the Company or with respect to information which the Company's Board of
Directors determines in good faith is confidential and should not, therefore, be
disclosed.
3.3 CONFIDENTIALITY OF RECORDS. Each Series D-E Holder agrees to use,
and to use its best efforts to insure that its authorized representatives use,
the same degree of care as such Series D-E Holder uses to protect its own
confidential information and to keep confidential any information furnished to
it which the Company identifies as being confidential or proprietary (so long as
such information is not in the public domain), except that Series D-E Holders
may disclose such proprietary or confidential information to any partner,
subsidiary or parent of Series D-E Holders for the purpose of evaluating their
investment in the Company as long as such partner, subsidiary or parent is
advised of the confidentiality provisions of this Section 3.3.
3.4 RESERVATION OF COMMON STOCK. The Company will at all times
reserve and keep available, solely for issuance and delivery upon the conversion
of the Preferred Stock, all Common Stock issuable from time to time upon such
conversion.
3.5 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT. The Company
shall require all employees and consultants to execute and deliver a Proprietary
Information and Inventions Agreement in keeping with its practice prior to the
date hereof.
3.6 TERMINATION OF COVENANTS. All covenants of the Company contained
in Section 3 of this Agreement shall expire and terminate as to the Series D-E
Holder on the effective date of the registration statement pertaining to the
Initial Offering.
SECTION 4. RIGHTS OF FIRST REFUSAL.
4.1 SUBSEQUENT OFFERINGS. So long as any of the Series D Preferred
Stock is outstanding, each Series D Holder shall have a right of first refusal
to purchase its pro rata share of all Equity Securities, as defined below, that
the Company may, from time to time, propose to sell and issue after the date of
this Agreement, other than the Equity Securities excluded by Section 4.6 hereof.
So long as any of the Series E Preferred Stock is outstanding, each Investor
shall have a right of first refusal to purchase its pro rata share of all Equity
Securities, as defined below, that the Company may, from time to time, propose
to sell and issue after the date of this Agreement, other than the Equity
Securities excluded by Section 4.6 hereof. A Series D Holder's or Investor's pro
rata share is equal to the ratio of (a) the number of shares of the Company's
Common Stock (including all shares of Common Stock issued or issuable upon
conversion of the Shares of which such Series D Holder or Investor is deemed to
be a holder immediately prior to the issuance of such Equity
46
Securities) to (b) the total number of shares of the Company's outstanding
Common Stock (including all shares of Common Stock issued or issuable upon
conversion of the Preferred Stock or upon the exercise of any outstanding
warrants or options) immediately prior to the issuance of the Equity Securities.
The term "Equity Securities" shall mean (i) any Common Stock, Preferred Stock or
other security of the Company, (ii) any security convertible, with or without
consideration, into any Common Stock, Preferred Stock or other security
(including any option to purchase such a convertible security), (iii) any
security carrying any warrant or right to subscribe to or purchase any Common
Stock, Preferred Stock or other security or (iv) any such warrant or right.
4.2 EXERCISE OF RIGHTS. If the Company proposes to issue any Equity
Securities, it shall give each Series D-E Holder written notice of its
intention, describing the Equity Securities, the price and the terms and
conditions upon which the Company proposes to issue the same. The Series D-E
Holder shall have five (5) days from the giving of such notice to agree to
purchase its pro rata share of the Equity Securities for the price and upon the
terms and conditions specified in the notice by giving written notice to the
Company and stating therein the quantity of Equity Securities to be purchased.
Notwithstanding the foregoing, the Company shall not be required to offer or
sell such Equity Securities to any Series D-E Holder who would cause the Company
to be in violation of applicable federal securities laws by virtue of such offer
or sale.
4.3 ISSUANCE OF EQUITY SECURITIES TO OTHER PERSONS. A Series D-E
Holder shall have five (5) days after receipt of such notice to notify the
Company of its election to purchase all or a portion thereof of the unsubscribed
shares. If a Series D-E Holder fails to exercise in full the rights of first
refusal, the Company shall have ninety (90) days thereafter to sell the Equity
Securities in respect of which the Series D-E Holder's rights were not
exercised, at a price and upon general terms and conditions materially no more
favorable to the purchasers thereof than specified in the Company's notice to
the Series D-E Holder pursuant to Section 4.2 hereof. If the Company has not
sold such Equity Securities within ninety (90) days of the notice provided
pursuant to Section 4.2, the Company shall not thereafter issue or sell any
Equity Securities, without first offering such securities to the Series D-E
Holders in the manner provided above.
4.4 TERMINATION OF RIGHTS OF FIRST REFUSAL. The rights of first
refusal established by this Section 4 shall not apply to, and shall terminate
upon the consummation of a Qualified Public Offering.
4.5 TRANSFER OF RIGHTS OF FIRST REFUSAL. The rights of first refusal
of the Series D-E Holders under this Section 4 may be transferred to the same
parties, subject to the same restrictions as any transfer of registration rights
pursuant to Section 2.10.
4.6 EXCLUDED SECURITIES. The rights of first refusal established by
this Section 4 shall have no application to any of the following Equity
Securities:
(a) up to an aggregate amount of 487,106 shares of Common
Stock (and/or options, warrants or other Common Stock purchase rights issued
pursuant to such options, warrants
47
or other rights) issued or issuable to employees, officers or directors of, or
consultants or advisors to the Company or any subsidiary, pursuant to stock
purchase or stock option plans or other arrangements that are approved by the
Company's Board of Directors, and, upon reasonable justification by the Company,
an additional 243,553 shares available to be issued under this Section 4.6(a)
upon consent of the Series D-E Holders holding sixty-six and two-thirds percent
(66 2/3%) of the Registrable Securities then outstanding, which consent shall
not be unreasonably withheld;
(b) stock issued pursuant to any rights or agreements
outstanding as of the date of this Agreement, options and warrants outstanding
as of the date of this Agreement; and stock issued pursuant to any rights,
agreements, options or warrants granted after the date of this Agreement,
provided that the rights of first refusal established by this Section 4 applied
with respect to the initial sale or grant by the Company of such rights or
agreements;
(c) shares of Common Stock issued in connection with any stock
split, stock dividend or recapitalization by the Company;
(d) shares of Common Stock issued upon conversion of the
Preferred Stock;
(e) any Equity Securities that are issued by the Company
pursuant to a Qualified Public Offering; and
(f) shares of Equity Securities (not to exceed 5% of the
Common Stock of the Company, determined on a fully diluted, as converted basis)
issued in connection with a strategic alliance with a pharmaceutical or
biotechnology company approved unanimously by the Company's Board of Directors.
SECTION 5. MISCELLANEOUS.
5.1 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the Commonwealth of Massachusetts as applied to agreements
among Massachusetts residents entered into and to be performed entirely within
Massachusetts.
5.2 SURVIVAL. The representations, warranties, covenants, and
agreements made herein shall survive any investigation made by any Series D-E
Holder and the closing of the transactions contemplated hereby. All statements
as to factual matters contained in any certificate or other instrument delivered
by or on behalf of the Company pursuant hereto in connection with the
transactions contemplated hereby shall be deemed to be representations and
warranties by the Company hereunder solely as of the date of such certificate or
instrument.
5.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of Registrable Securities from time to time;
provided, however,
48
that prior to the receipt by the Company of adequate written notice of the
transfer of any Registrable Securities specifying the full name and address of
the transferee, the Company may deem and treat the person listed as the holder
of such shares in its records as the absolute owner and holder of such shares
for all purposes, including the payment of dividends or any redemption price.
5.4 ENTIRE AGREEMENT. This Agreement and the Schedules hereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and no party shall be liable or bound to any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
5.4 AUTHORIZATION TO ADD STOCKHOLDERS TO AGREEMENT. The President of
the Company shall have the absolute right to amend this Agreement to add
individuals or entities as Series D-E Holders, and to add such Series D-E
Holder's names to the Schedule of Series D-E Holders attached hereto as Schedule
A upon such Series D-E Holder executing a counterpart signature page of this
Agreement.
5.5 SEVERABILITY. In case any provision of the Agreement shall be
invalid, illegal, or unenforceable, the validity, legality, and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
5.6 AMENDMENT AND WAIVER.
(a) This Agreement may be amended or modified only upon the
written consent of the Company and the Series D-E Holders who hold at least
sixty-six and two-thirds percent (66 2/3%) of the Registrable Securities then
outstanding.
(b) The obligations of the Company and the rights of the
Series D-E Holders under this Agreement may be waived only with the written
consent of the Series D-E Holders who hold at least sixty-six and two-thirds
percent (66 2/3%) of the Registrable Securities then outstanding.
5.7 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any Series D-E Holder, upon any
breach, default or noncompliance of the Company under this Agreement shall
impair any such right, power, or remedy, nor shall it be construed to be a
waiver of any such breach, default or noncompliance, or any acquiescence
therein, or of any similar breach, default or noncompliance thereafter
occurring. It is further agreed that any waiver, permit, consent, or approval of
any kind or character on any Series D-E Holder's part of any breach, default or
noncompliance under the Agreement or any waiver on such Series D-E Holder's part
of any provisions or conditions of this Agreement must be in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement, by law, or otherwise afforded to Series
D-E Holders, shall be cumulative and not alternative.
5.8 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be
49
deemed effectively given: (a) upon personal delivery to the party to be
notified, (b) when sent by confirmed telex or facsimile if sent during normal
business hours of the recipient; if not, then on the next business day, (c) five
(5) days after having been sent by registered or certified mail, return receipt
requested, postage prepaid, or (d) one (1) day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written
verification of receipt. All communications shall be sent to the party to be
notified at the address as set forth on the signature pages hereof or at such
other address as such party may designate by ten (10) days advance written
notice to the other parties hereto.
5.9 ATTORNEYS' FEES. In the event that any dispute among the parties
to this Agreement should result in litigation, the prevailing party in such
dispute shall be entitled to recover from the losing party all fees, costs and
expenses of enforcing any right of such prevailing party under or with respect
to this Agreement, including without limitation, such reasonable fees and
expenses of attorneys and accountants, which shall include, without limitation,
all fees, costs and expenses of appeals.
5.10 TITLES AND SUBTITLES. The titles of the sections and subsections
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
5.11 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.
In Witness Whereof, the parties hereto have executed this SERIES D-E
PREFERRED STOCK INVESTOR RIGHTS AGREEMENT as of the date set forth in the first
paragraph hereof.
50
AMENDMENT NO. 1
TO THE
SERIES D-E INVESTOR RIGHTS AGREEMENT
This AMENDMENT NO. 1 to the Series D-E Investor Rights Agreement is
dated as of ________ __, 2000 (the "Amendment") by and between Arena
Pharmaceuticals, Inc., a Delaware corporation (the "Company") and the holders of
the Company's Series D Convertible Preferred Stock and the holders of the
Company's Series E Convertible Preferred Stock (together, the "Series D-E
Holders" and individually a "Holder").
WHEREAS, the Company previously entered into the Series D-E Investor
Rights Agreement, dated January 28, 2000 (the "Investor Rights Agreement") with
the Series D-E Holders;
WHEREAS, section 5.6(a) of the Investor Rights Agreement provides that
the Investor Rights Agreement may be amended or modified upon the written
consent of the Company and holders of 66 2/3% of the Registrable Securities (as
defined in the Investor Rights Agreement);
WHEREAS, the parties desire to amend certain of the provisions of the
Investor Rights Agreement;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. The Investor Rights Agreement Remains in Full Force and Effect.
Except as expressly modified by this Amendment, no other changes
are being made tot he Investor Rights Agreement and the Investor
Rights Agreement shall remain in full force and effect.
2. Amendment. The Investor Rights Agreement is hereby amended as
follows:
The number "487,106" found in the first line of Section 4.6(a)
shall be deleted and replaced with the number "1,500,000."
3. Effective Date and Waiver. This Amendment shall be effective as
of the date of the Investor Rights Agreement. Accordingly, the
Series D-E Holders hereby waive all rights of first refusal prior
to the date of this Amendment and associated with the issuance by
the Company of up to 1,500,000 shares of the Company's securities
in the manner described in section 4.6(a) of the Investor Rights
Agreement.
4. Counterparts. This Amendment may be executed and delivered in
counterparts and by facsimile.
51
IN WITNESS WHEREOF, the Series D-E Holders hereby consent to, adopts and
agrees to the provisions of this Amendment, and the Company has caused this
Amendment to be duly executed and delivered.
52
ARENA PHARMACEUTICALS INC.
SERIES G PREFERRED STOCK
INVESTOR RIGHTS AGREEMENT
This SERIES G INVESTOR RIGHTS AGREEMENT is entered into the Effective
Date of the Series G Purchase Agreement by and between ARENA PHARMACEUTICALS,
INC., a Delaware corporation (the "Company") and each of those persons,
severally and not jointly, whose names are set forth on the Schedule of
Investors attached hereto as EXHIBIT A to the Series G Purchase Agreement (such
persons and entities are hereinafter collectively referred to as "Investors" and
each individually as an "Investor").
RECITALS
WHEREAS, the Company proposes to sell and issue up to Four Million
(4,000,000) shares of its Series G Preferred Stock (the "Series G Preferred
Stock") pursuant to that certain Series G Purchase Agreement dated as of the
Effective Date ("Series G Purchase Agreement"); and
WHEREAS, the Company has previously entered into a Series D-E Preferred
Stock Investor Rights Agreement dated January 28, 2000 (the "Series D-E Investor
Rights Agreement"), extending to the Series D-E Holders registration rights,
information rights and other rights, as set forth in the Series D-E Investor
Rights Agreement; and, the Company has previously entered into an Amended and
Restated Investor Rights Agreement dated as of November 26, 1997, as amended
(the "Investor Rights Agreement"), extending to the Series A-B-C Holders and the
Series D Holders registration rights, information rights and other rights as set
forth in the Investor Rights Agreement;
WHEREAS, as a condition of entering into the Series G Purchase
Agreement, the Investors have requested that the Company extend to them
registration rights, information rights and other rights;
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement, the parties mutually agree as follows:
53
SECTION 1. GENERAL
1.1 DEFINITIONS. As used in this Agreement the following terms shall
have the following respective meanings:
"BUSINESS DAY" means a day other than a Saturday, a Sunday or a
day on which banking institutions in San Diego, California are not required to
be open.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FORM S-3" means such form under the Securities Act as in effect
on the date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
"INITIAL OFFERING" means the Company's first firm commitment
underwritten public offering of its Common Stock registered under the Securities
Act.
"PREFERRED STOCK" means the Series G Preferred Stock, together
with the Company's Series A Preferred Stock, Series B Preferred Stock, Series C
Series D Preferred Stock, Series E Preferred Stock, Series F Preferred Stock and
any other series of preferred stock validly issued by the Company.
"QUALIFIED PUBLIC OFFERING" means a firmly underwritten public
offering pursuant to an effective registration statement under the Securities
Act covering the offer and sale of Common Stock for the Company in which the per
share price is (i) at least $13.96 per share (as adjusted for stock splits,
stock dividends, combinations or similar events), and (ii) the gross cash
proceeds to the Company are at least $20 million.
"REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of
effectiveness of such registration statement or document.
"REGISTRABLE SECURITIES" means (a) Common Stock of the Company
issued or issuable upon conversion of the Series G Shares; and (b) any Common
Stock of the Company issued as (or issuable upon the conversion or exercise of
any warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, the
securities described in clause (a). Notwithstanding the foregoing, Registrable
Securities shall not include any securities sold by a person to the public
either pursuant to a registration statement or Rule 144 or sold in a private
transaction in which the transferor's rights under Section 2 of this Agreement
are not assigned.
54
"REGISTRABLE SECURITIES THEN OUTSTANDING" shall be the number of
shares determined by calculating the total number of shares of the Company's
Common Stock that are Registrable Securities and either (a) are then issued and
outstanding or (b) are issuable pursuant to then exercisable or convertible
securities.
"REGISTRATION EXPENSES" shall mean all expenses incurred by the
Company in complying with Sections 2.2, 2.3 and 2.4 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, reasonable fees and disbursements not
to collectively exceed Fifteen Thousand Dollars ($15,000) of special counsel for
the Series G Holders and Investors, blue sky fees and expenses and the expense
of any special audits incident to or required by any such registration (but
excluding the compensation of regular employees of the Company which shall be
paid in any event by the Company).
"RULE 144" means Rule 144 of the Securities Act.
"SEC" or "COMMISSION" means the Securities and Exchange
Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
"SELLING EXPENSES" shall mean all underwriting discounts and
selling commissions applicable to the sale.
"SERIES A-B-C HOLDER" means any person owning of record Series
A-B-C Registrable Securities that have not been sold to the public or any
assignee of record of such Series A-B-C Registrable Securities.
"SERIES D-E HOLDER" means any person owning of record (a) Series
D-E Shares or (b) Series D-E Registrable Securities that have not been sold to
the public or any assignee of record of such Registrable Securities in
accordance with Section 2.10 hereof.
"SERIES G HOLDER" means any person owning of record (a) the
Series G Shares or (b) Registrable Securities that have not been sold to the
public or any assignee of record of such Registrable Securities.
"SERIES A-B-C REGISTRABLE SECURITIES" means (a) Common Stock of
the Company issued or issuable upon conversion of the Series A-B-C Shares; and
(b) any Common Stock of the Company issued as (or issuable upon the conversion
or exercise of any warrant, right or other security which is issued as) a
dividend or other distribution with respect to, or in exchange for or in
replacement of, such above-described securities. Notwithstanding the foregoing,
Series A-B-C Registrable Securities shall not include any securities sold by a
person to the public either pursuant to a registration statement or Rule 144 or
sold in a private transaction in which the transferor's rights under Section 2
of this Agreement are not assigned.
55
"SERIES D-E REGISTRABLE SECURITIES" means (a) Common Stock of the
Company issued or issuable upon conversion of the Series D-E Shares; and (b) any
Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of,
such above-described securities. Notwithstanding the foregoing, Series D-E
Registrable Securities shall not include any securities sold by a person to the
public either pursuant to a registration statement or Rule 144 or sold in a
private transaction in which the transferor's rights under Section 2 of this
Agreement are not assigned.
"SERIES A-B-C SHARES" means the Company's Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock issued to the
Series A-B-C Investors prior to the date hereof and held by the Series A-B-C
Investors and their permitted assigns.
"SERIES D-E SHARES" shall mean (a) the Company's Series E
Preferred Stock issued pursuant to the Purchase Agreement and held by the
Investors and their permitted assigns and (b) the Company's Series D Preferred
Stock issued to the Series D Holders prior to the date hereof and held by the
Series D Holders and their permitted assigns.
"SERIES G SHARES" shall mean the Company's Series G Preferred
Stock issued pursuant to the Series G Purchase Agreement and held by the Series
G Holders and their permitted assigns.
SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER.
2.1 RESTRICTIONS ON TRANSFER.
(a) Each Series G Holder agrees not to make any disposition of
all or any portion of the Series G Shares or Registrable Securities unless and
until:
(i) There is then in effect a registration statement
under the Securities Act covering such proposed disposition and such disposition
is made in accordance with such registration statement; or
(ii) (A) The transferee has agreed in writing to be
bound by the terms of this Agreement, (B) such Series G Holder shall have
notified the Company of the proposed disposition and shall have furnished the
Company with a detailed statement of the circumstances surrounding the proposed
disposition, and (C) if reasonably requested by the Company, such Series G
Holder shall have furnished the Company with an opinion of counsel, reasonably
satisfactory to the Company, that such disposition will not require registration
of such shares under the Securities Act.
56
(iii) Notwithstanding the provisions of paragraphs (i)
and (ii) above, no such registration statement or opinion of counsel shall be
necessary for a transfer by a Series G Holder which is (A) a partnership to its
partners or former partners in accordance with partnership interests, (B) a
corporation to its shareholders in accordance with their interest in the
corporation, (C) a limited liability company to its members or former members in
accordance with their interest in the limited liability company, or (D) to the
Series G Holder's family member or trust for the benefit of an individual Series
G Holder or family member of the Series G Holder; provided that in each case the
transferee will be subject to the terms of this Agreement to the same extent as
if he were an original Series G Holder hereunder.
(b) Each certificate representing Shares or Registrable
Securities shall (unless otherwise permitted by the provisions of the Agreement)
be stamped or otherwise imprinted with a legend substantially similar to the
following (in addition to any legend required under applicable state securities
laws or as provided elsewhere in this Agreement):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER
THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO
THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
(c) The Company shall be obligated to reissue promptly
unlegended certificates at the request of any Series G Holder thereof if the
Series G Holder shall have obtained an opinion of counsel (which counsel may be
counsel to the Company) reasonably acceptable to the Company to the effect that
the securities proposed to be disposed of may lawfully be so disposed of without
registration, qualification or legend.
(d) Any legend endorsed on an instrument pursuant to
applicable state securities laws and the stop-transfer instructions with respect
to such securities shall be removed upon receipt by the Company of an order of
the appropriate blue sky authority authorizing such removal.
2.2 DEMAND REGISTRATION.
(a) (i) Subject to the conditions of this Section 2.2, if,
prior to June 30, 2001, the Company shall receive a written request from the
Series G Holders of more than sixty-six and two-thirds percent (66-2/3%) of the
Registrable Securities then outstanding (the "Initiating Series G Holders") that
the Company file a registration statement under the Securities Act covering the
registration of Registrable Securities having an aggregate offering price to the
public in excess of $2,500,000, then the Company shall, within thirty (30) days
of the receipt thereof, give written notice of such request to all Series G
Holders, and subject to the limitations of this Section 2.2, use its best
efforts to effect, as soon as practicable, the registration under the Securities
Act of all Registrable
57
Securities that the Series G Holders request to be registered.
(ii) If the Initiating Series G Holders intend to
distribute the Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company as a part of their request made
pursuant to this Section 2.2(a) or any request pursuant to Section 2.4 and the
Company shall include such information in the written notice referred to in
Section 2.2(a)(i) or Section 2.4(a), as applicable. In such event, the right of
any Series G Holder to include its Registrable Securities in such registration
shall be conditioned upon such Series G Holder's participation in such
underwriting and the inclusion of such Series G Holder's Registrable Securities
in the underwriting (unless otherwise mutually agreed by a majority in interest
of the Initiating Series G Holders and such Series G Holder) to the extent
provided herein. All Series G Holders proposing to distribute their securities
through such underwriting shall enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by a majority in interest of the Initiating Series G Holders (which
underwriter or underwriters shall be reasonably acceptable to the Company).
Notwithstanding any other provision of this Section 2.2 or Section 2.4, if the
underwriter advises the Company that marketing factors require a limitation of
the number of securities to be underwritten (including Registrable Securities)
then the Company shall so advise all Series G Holders of Registrable Securities
which would otherwise be underwritten pursuant hereto, and the number of shares
that may be included in the underwriting shall be allocated first, to the Series
D-E Holders on a pro rata basis based on the total number of Series D-E
Registrable Securities held by the Series D-E Holders; second, to any Series
A-B-C Holder on a pro rata basis based on the total number of Series A-B-C
Registrable Securities held by the Series A-B-C Holders; third, to the Series G
Holders of such Registrable Securities on a pro rata basis based on the number
of Registrable Securities held by all such Series G Holders; and fourth, to any
stockholder of the Company (other than a Series D-E Holder, Series A-B-C Holder,
or Series G Holder) on a pro rata basis. Any Registrable Securities excluded or
withdrawn from such underwriting shall be withdrawn from the registration.
(c) The Company shall not be required to effect a registration
pursuant to this Section 2.2:
(i) prior to the earlier of January 29, 2001 or the
Company's Initial Offering; or
(ii) after the Company has effected two (2)
registrations pursuant to this Section 2.2, and such registrations have been
declared or ordered effective; or
(iii) during the period starting with the date of the
initial filing of, and ending on the date one hundred eighty (180) days
following the effective date of the registration statement pertaining to the
Initial Offering; provided that the Company makes reasonable good faith efforts
to cause such registration statement to become effective; or
(iv) if within thirty (30) days of receipt of a written
request from the
58
Initiating Series G Holders pursuant to Section 2.2. the Company gives notice to
the Series G Holders of the Company's intention to make its Initial Offering
within ninety (90) days in which case the Company shall use its best efforts to
make its Initial Offering within such period.
2.3 PIGGYBACK REGISTRATIONS. The Company shall notify all Series G
Holders of Registrable Securities in writing at least thirty (30) days prior to
the filing of any registration statement under the Securities Act for purposes
of a public offering of equity securities of the Company (including, but not
limited to, registration statements relating to secondary equity offerings of
securities of the Company, but excluding a Qualified Public Offering and
registration statements relating to employee benefit plans or with respect to
corporate reorganizations or other transactions under Rule 145 of the Securities
Act) and will afford each such Series G Holder an opportunity to include in such
registration statement all or part of such Registrable Securities held by such
Series G Holder. Each Series G Holder desiring to include in any such
registration statement all or any part of the Registrable Securities held by it
shall, within fifteen (15) days after the above-described notice from the
Company, so notify the Company in writing. Such notice shall state the intended
method of disposition of the Registrable Securities by such Series G Holder. If
a Series G Holder decides not to include all of its Registrable Securities in
any registration statement thereafter filed by the Company, such Series G Holder
shall nevertheless continue to have the right to include any Registrable
Securities in any subsequent registration statement or registration statements
as may be filed by the Company with respect to offerings of its securities, all
upon the terms and conditions set forth herein.
(a) UNDERWRITING. If the registration statement under which
the Company gives notice under this Section 2.3 is for an underwritten offering,
the Company shall so advise the Series G Holders of Registrable Securities. In
such event, the right of any such Series G Holder to be included in a
registration pursuant to this Section 2.3 shall be conditioned upon such Series
G Holder's participation in such underwriting and the inclusion of such Series G
Holder's Registrable Securities in the underwriting to the extent provided
herein. All Series G Holders proposing to distribute their Registrable
Securities through such underwriting shall enter into an underwriting agreement
in customary form with the underwriter or underwriters selected for such
underwriting by the Company. Notwithstanding any other provision of the
Agreement, if the underwriter determines in good faith that marketing factors
require a limitation of the number of shares to be underwritten, the number of
shares that may be included in the underwriting shall be allocated, first, to
the Company; second, to the Series D-E Holders on a pro rata basis based on the
total number of Series D-E Registrable Securities held by the Series D-E
Holders; third, to any Series A-B-C Holder on a pro rata basis based on the
total number of Series A-B-C Registrable Securities held by the Series A-B-C
Holders; and fourth, to any Series G Holder on a pro rata basis based on the
total number of Series G Registrable Securities held by the Series G Holders;
and fifth, to any stockholder of the Company (other than a Series D-E Holder,
Series A-B-C Holder or Series G Holder) on a pro rata basis.
(b) RIGHT TO TERMINATE REGISTRATION. The Company shall have
the right to terminate or withdraw any registration initiated by it under this
Section 2.3 prior to the effectiveness
59
of such registration whether or not any Series G Holder has elected to include
securities in such registration. The Registration Expenses of such withdrawn
registration shall be borne by the Company in accordance with Section 2.5
hereof.
2.4 FORM S-3 REGISTRATION. In case the Company shall receive from any
Series G Holder or Series G Holders of Registrable Securities a written request
or requests that the Company effect a registration on Form S-3 (or any successor
to Form S-3) or any similar short-form registration statement and any related
qualification or compliance with respect to all or a part of the Registrable
Securities owned by such Series G Holder or Series G Holders, the Company will:
(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Series G Holders; and
(b) as soon as practicable, effect such registration and all
such qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of such Series G
Holder's or Series G Holders' Registrable Securities as are specified in such
request, together with all or such portion of the Registrable Securities of any
other Series G Holder or Series G Holders joining in such request as are
specified in a written request given within fifteen (15) days after receipt of
such written notice from the Company; provided, however, that the Company shall
not be obligated to effect any such registration, qualification or compliance
pursuant to this Section 2.4:
(i) if Form S-3 (or any successor or similar form) is
not available for such offering by the Series G Holders, or
(ii) if the Series G Holders, together with the holders
of any other securities of the Company entitled to inclusion in such
registration, propose to sell Registrable Securities and such other securities
(if any) at an aggregate price to the public of less than $250,000, or
(iii) if the Company has already effected four (4)
registrations on Form S-3 for the Series G Holders pursuant to this Section 2.4,
or
(iv) if the Company has, within the twelve (12) month
period preceding the date of such request, already effected two (2)
registrations on Form S-3 for the Series G Holders pursuant to this Section 2.4,
or
(v) in any particular jurisdiction in which the Company
would be required to qualify to do business or to execute a general consent to
service of process in effecting such registration, qualification or compliance.
(c) If the registration statement under which the Company
gives notice under this Section 2.4 is for an underwritten offering, the Company
shall so advise the Series G Holders of
60
Registrable Securities. In such event, the right of any such Series G Holder to
be included in a registration pursuant to this Section 2.3 shall be conditioned
upon such Series G Holder's participation in such underwriting and the inclusion
of such Series G Holder's Registrable Securities in the underwriting to the
extent provided herein. All Series G Holders proposing to distribute their
Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of the Agreement, if the underwriter determines in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the underwriting
shall be allocated, first, to the Series D-E Holders on a pro rata basis based
on the total number of Series D-E Registrable Securities held by the Series D-E
Holders; second, to any Series A-B-C Holder on a pro rata basis based on the
total number of Series A-B-C Registrable Securities held by the Series A-B-C
Holders; third, to any Series G Holder on a pro rata basis based on the total
number of Series G Registrable Securities held by the Series G Holders; and
fifth, to any stockholder of the Company (other than a Series D-E Holder, Series
A-B-C Holder or Series G Holder) on a pro rata basis.
(d) Subject to the foregoing, the Company shall file a Form
S-3 registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after receipt of
the request or requests of the Series G Holders.
2.5 EXPENSES OF REGISTRATION. Except as specifically provided herein,
all Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 2.2 or any registration under
Section 2.3 or Section 2.4 herein shall be borne by the Company. All Selling
Expenses incurred in connection with any registrations hereunder, shall be borne
by the Series G Holders, of the securities so registered pro rata on the basis
of the number of shares so registered. The Company shall not, however, be
required to pay for expenses of any registration proceeding begun pursuant to
Section 2.2 or 2.4, the request of which has been subsequently withdrawn by the
Initiating Series G Holders, as the case may be, unless (a) the withdrawal is
based upon material adverse information concerning the Company of which the
Initiating Series G Holders were not aware at the time of such request or (b)
the Series G Holders holding sixty-six and two-thirds percent (66 2/3%) of
Registrable Securities then outstanding agree to forfeit their right to one
requested registration pursuant to Section 2.2 or Section 2.4, as applicable, in
which event such right shall be forfeited by all Series G Holders. If the Series
G Holders are required to pay the Registration Expenses, such expenses shall be
borne by the Series G Holders of securities (including Registrable Securities)
requesting such registration in proportion to the number of shares for which
registration was requested. If the Company is required to pay the Registration
Expenses of a withdrawn offering pursuant to clause (a) above, then the Series G
Holders shall not forfeit their rights pursuant to Section 2.2 or Section 2.4 to
a demand registration.
2.6 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such
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Registrable Securities and use all reasonable efforts to cause such registration
statement to become effective, and, upon the request of the Series G Holders
holding sixty-six and two-thirds percent (66 2/3%) of the Registrable Securities
registered thereunder, keep such registration statement effective for up to
ninety (90) days or, if earlier, until the Series G Holder or Series G Holders
have completed the distribution related thereto.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish to the Series G Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
(d) Use all reasonable efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Series G Holders, provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter(s) of such offering. Each Series G
Holder participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Series G Holder who holds Registrable
Securities covered by such registration statement at any time when a prospectus
relating thereto is required to be delivered under the Securities Act of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing.
(g) Furnish, at the request of Series G Holders holding
sixty-six and two-thirds percent (66 2/3%) of the Registrable Securities
requested to be included in the registration, on the date that such Registrable
Securities are delivered to the underwriters for sale, if such securities are
being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that the registration statement with respect
to such securities becomes effective, (i) an opinion, dated as of such date, of
the counsel representing the Company for the purposes of such registration, in
form and substance as is customarily given to underwriters in an underwritten
public offering and reasonably satisfactory to Series G Holders holding
sixty-six and two-thirds percent (66 2/3%) of the Registrable Securities
requested to be included in the registration, addressed to the
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underwriters, if any, and to the Series G Holders requesting registration of
Registrable Securities and (ii) a letter dated as of such date, from the
independent certified public accountants of the Company, in form and substance
as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering and reasonably satisfactory to
Series G Holders holding sixty-six and two-thirds percent (66 2/3%) of the
Registrable Securities requested to be included in the registration, addressed
to the underwriters, if any, and if permitted by applicable accounting
standards, to the Series G Holders requesting registration of Registrable
Securities.
2.7 TERMINATION OF REGISTRATION RIGHTS. All registration rights
granted under this Section 2 shall terminate and be of no further force and
effect six (6) years after the date of the Company's Initial Offering. In
addition, a Series G Holder's registration rights shall expire if (a) the
Company has completed its Initial Offering and is subject to the provisions of
the Exchange Act, and (b) all Registrable Securities held by and issuable to
such Series G Holder (and its affiliates, partners and former partners) may be
sold under Rule 144 during any ninety (90) day period.
2.8 DELAY OF REGISTRATION; FURNISHING INFORMATION.
(a) Other than in the event of the Company's breach of its
obligations under Section 2.3 hereof, no Series G Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 2.
(b) It shall be a condition precedent to the obligations of
the Company to take any action pursuant to Section 2.2, 2.3 or 2.4 that the
selling Series G Holders shall furnish to the Company such information regarding
themselves, the Registrable Securities held by them and the intended method of
disposition of such securities as shall be required to effect the registration
of their Registrable Securities.
(c) The Company shall have no obligation with respect to any
registration requested pursuant to Section 2.2 or Section 2.4 if, due to the
operation of subsection 2.2(b), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's obligation
to initiate such registration as specified in Section 2.2 or Section 2.4,
whichever is applicable.
2.9 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under Sections 2.2, 2.3 or 2.4:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Series G Holder, the partners, officers, directors and
legal counsel of each Series G Holder, any underwriter (as defined in the
Securities Act) for such Series G Holder and each person, if any, who controls
such Series G Holder or underwriter within the meaning of the Securities Act or
the Exchange Act, against any losses, claims, damages, or liabilities (joint or
several) to which
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they may become subject under the Securities Act, the Exchange Act or other
federal or state law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation") by the Company:
(i) any untrue statement or alleged untrue statement of a material fact
contained in such registration statement, including any preliminary prospectus
or final prospectus contained therein or any amendments or supplements thereto,
(ii) the omission or alleged omission to state therein a material fact required
to be stated therein, or necessary to make the statements therein not
misleading, or (iii) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any state securities law or any rule or
regulation promulgated under the Securities Act, the Exchange Act or any state
securities law in connection with the offering covered by such registration
statement; and the Company will reimburse each such Series G Holder, partner,
officer, director, legal counsel, underwriter or controlling person for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided however, that the indemnity agreement contained in this Section 2.9(a)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company, which consent shall not be unreasonably withheld, nor shall the Company
be liable in any such case for any such loss, claim, damage, liability or action
to the extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by such Series G Holder, partner,
officer, director, legal counsel, underwriter or controlling person of such
Series G Holder.
(b) To the extent permitted by law, each Series G Holder will,
if Registrable Securities held by such Series G Holder are included in the
securities as to which such registration qualifications or compliance is being
effected, indemnify and hold harmless the Company, each of its directors, its
officers, and legal counsel and each person, if any, who controls the Company
within the meaning of the Securities Act, any underwriter and any other Series G
Holder selling securities under such registration statement or any of such other
Series G Holder's partners, directors, officers and legal counsel or any person
who controls such Series G Holder, against any losses, claims, damages or
liabilities (joint or several) to which the Company or any such director,
officer, controlling person, underwriter or other such Series G Holder, or
partner, director, officer or controlling person of such other Series G Holder
may become subject under the Securities Act, the Exchange Act or other federal
or state law, insofar as such losses, claims, damages or liabilities (or actions
in respect thereto) arise out of or are based upon any Violation, in each case
to the extent (and only to the extent) that such Violation occurs in reliance
upon and in conformity with written information furnished by such Series G
Holder under an instrument duly executed by such Series G Holder and stated to
be specifically for use in connection with such registration; and each such
Series G Holder will reimburse any legal or other expenses reasonably incurred
by the Company or any such director, officer, legal counsel, controlling person,
underwriter or other Series G Holder, or partner, officer, director, legal
counsel or controlling person of such other Series G Holder in connection with
investigating or defending any such loss, claim, damage, liability or action if
it is judicially determined that there was such a Violation; provided, however,
that the indemnity agreement contained in this Section 2.9(b) shall not apply to
amounts paid in settlement of any such
64
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Series G Holder, which consent shall not be unreasonably
withheld; provided further, that in no event shall any indemnity under this
Section 2.9 exceed the proceeds from the offering received by such Series G
Holder.
(c) Promptly after receipt by an indemnified party under this
Section 2.9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 2.9, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 2.9, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 2.9.
(d) If the indemnification provided for in this Section 2.9 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any losses, claims, damages or liabilities referred to
herein, the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission; provided, that in no event shall any contribution by a
Series G Holder hereunder exceed the proceeds from the offering received by such
Series G Holder.
(e) The obligations of the Company and Series G Holders under
this Section 2.9 shall survive completion of any offering of Registrable
Securities in a registration statement and the termination of this agreement. No
indemnifying party, in the defense of any such claim or litigation, shall,
except with the consent of each indemnified party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the
65
claimant or plaintiff to such indemnified party of a release from all liability
in respect to such claim or litigation.
2.10 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities pursuant to this Section 2 may be
assigned by a Series G Holder to a transferee or assignee of Registrable
Securities which (a) is a subsidiary, parent, general partner, limited partner
or retired partner of a Series G Holder, (b) is a Series G Holder's family
member or trust for the benefit of an individual Series G Holder or family
member of the Series G Holder, or (c) acquires at least fifty thousand (50,000)
shares of Registrable Securities (as adjusted for stock splits and
combinations); provided, however, (A) the transferor shall, within twenty (20)
days after such transfer, furnish to the Company written notice of the name and
address of such transferee or assignee and the securities with respect to which
such registration rights are being assigned, (B) such transferee shall agree to
be subject to all restrictions set forth in this Agreement, and (C) such
transferee must not be a person or entity deemed by the Board of Directors of
the Company, in its reasonable judgment, to be a competitor of the Company.
2.11 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Section 2
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Series G Holders of at least sixty-six
and two-thirds percent (66 2/3%) of the Registrable Securities then outstanding.
Any amendment or waiver effected in accordance with this Section 2.11 shall be
binding upon each Series G Holder and the Company. By acceptance of any benefits
under this Article II, Series G Holders of Registrable Securities hereby agree
to be bound by the provisions hereunder.
2.12 "MARKET STAND-OFF" AGREEMENT. Each Series G Holder hereby agrees
that such Series G Holder shall not sell or otherwise transfer or dispose of any
Common Stock (or other securities) of the Company held by such Series G Holder
(other than those included in the registration) for a period specified by the
representative of the underwriters of Common Stock (or other securities) of the
Company not to exceed one hundred eighty (180) days following the effective date
of a registration statement of the Company filed under the Securities Act,
provided that such agreement shall apply only to the Company's Initial Offering
and Qualified Public Offering.
Each Series G Holder agrees to execute and deliver such other agreements
as may be reasonably requested by the Company or the underwriter which are
consistent with the foregoing or which are necessary to give further effect
thereto. The obligations described in this Section 2.13 shall not apply to a
registration relating solely to employee benefit plans on Form S-1 or Form S-8
or similar forms that may be promulgated in the future, or a registration
relating solely to a Commission Rule 145 transaction on Form S-4 or similar
forms that may be promulgated in the future. The Company may impose
stop-transfer instructions with respect to the shares of Common Stock (or other
securities) subject to the foregoing restriction until the end of said one
hundred eighty (180) day period.
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2.13 RULE 144 REPORTING. With a view to making available to the Series
G Holders the benefits of certain rules and regulations of the SEC which may
permit the sale of the Registrable Securities to the public without
registration, the Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms
are understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
the first registration filed by the Company for an offering of its securities to
the general public;
(b) File with the SEC, in a timely manner, all reports and
other documents required of the Company under the Exchange Act;
(c) So long as a Series G Holder owns any Registrable
Securities, furnish to such Series G Holder forthwith upon request: a written
statement by the Company as to its compliance with the reporting requirements of
said Rule 144 of the Securities Act, and of the Exchange Act (at any time after
it has become subject to such reporting requirements); a copy of the most recent
annual or quarterly report of the Company; and such other reports and documents
as a Series G Holder may reasonably request in availing itself of any rule or
regulation of the SEC allowing it to sell any such securities without
registration.
SECTION 3. COVENANTS OF THE COMPANY.
3.1 BASIC FINANCIAL INFORMATION AND REPORTING.
(a) The Company will keep engaged independent public
accountants of national standing to assist in the preparation of the Company's
books and records of account in accordance with generally accepted accounting
principles.
(b) The Company will maintain true books and records of
account in which full and correct entries will be made of all its business
transactions pursuant to a system of accounting established and administered in
accordance with generally accepted accounting principles consistently applied,
and will set aside on its books all such proper accruals and reserves as shall
be required under generally accepted accounting principles consistently applied.
(c) As soon as practicable after the end of each fiscal year
of the Company, and in any event within one hundred twenty (120) days
thereafter, the Company will furnish the Series G Holder a consolidated balance
sheet of the Company, as at the end of such fiscal year, and a consolidated
statement of income and a consolidated statement of cash flows of the Company,
for such year, all prepared in accordance with generally accepted accounting
principles consistently applied and setting forth in each case in comparative
form the figures for the previous fiscal year, all in reasonable detail. Such
financial statements shall be accompanied by a report and opinion thereon by
independent public accountants of national standing selected by the Company's
Board of Directors.
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(d) The Company will furnish the Series G Holders, as soon as
practicable after the end of the first, second and third quarterly accounting
periods in each fiscal year of the Company, and in any event within forty-five
(45) days thereafter, a consolidated balance sheet of the Company as of the end
of each such quarterly period, and a consolidated statement of income and a
consolidated statement of cash flows of the Company for such period and for the
current fiscal year to date, prepared in accordance with generally accepted
accounting principles, with the exception that no notes need be attached to such
statements and year-end audit adjustments may not have been made.
(e) The Company will furnish the Series G Holders, as soon as
practicable after the end of each month, a consolidated balance sheet of the
Company as of the end of each such quarterly period, and a consolidated
statement of income and a consolidated statement of cash flows of the Company
for such month, prepared in accordance with generally accepted accounting
principles, with the exception that no notes need be attached to such statements
and year-end audit adjustments may not have to be made
3.2 INSPECTION RIGHTS. So long as the Series G Holders shall own not
less than one million (1,000,000) shares of Registrable Securities (as adjusted
for stock splits and combinations), a representative of the Series G Holders
shall have the right to visit and inspect any of the properties of the Company
or any of its subsidiaries, and to discuss the affairs, finances and accounts of
the Company or any of its subsidiaries with its officers, and to review such
information as is reasonably requested all at such reasonable times and as often
as may be reasonably requested; provided, however, that the Company shall not be
obligated under this Section 3.2 with respect to a competitor of the Company or
with respect to information which the Company's Board of Directors determines in
good faith is confidential and should not, therefore, be disclosed.
3.3 CONFIDENTIALITY OF RECORDS. Each Series G Holder agrees to use,
and to use its best efforts to insure that its authorized representatives use,
the same degree of care as such Series G Holder uses to protect its own
confidential information and to keep confidential any information furnished to
it which the Company identifies as being confidential or proprietary (so long as
such information is not in the public domain), except that Series G Holders may
disclose such proprietary or confidential information to any partner, subsidiary
or parent of Series G Holders for the purpose of evaluating their investment in
the Company as long as such partner, subsidiary or parent is advised of the
confidentiality provisions of this Section 3.3.
3.4 RESERVATION OF COMMON STOCK. The Company will at all times
reserve and keep available, solely for issuance and delivery upon the conversion
of the Preferred Stock, all Common Stock issuable from time to time upon such
conversion.
3.5 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT. The Company
shall require all employees and consultants to execute and deliver a Proprietary
Information and Inventions Agreement in keeping with its practice prior to the
date hereof.
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3.6 TERMINATION OF COVENANTS. All covenants of the Company contained
in Section 3 of this Agreement shall expire and terminate as to the Series G
Holder on the effective date of the registration statement pertaining to the
Initial Offering.
SECTION 4. RIGHTS OF FIRST REFUSAL.
4.1 SUBSEQUENT OFFERINGS. So long as any of the Series G Preferred
Stock is outstanding, each Series G Holder shall have a right of first refusal
to purchase its pro rata share of all Equity Securities, as defined below, that
the Company may, from time to time, propose to sell and issue after the date of
this Agreement, other than the Equity Securities excluded by Section 4.6 hereof.
A Series G Holder's pro rata share is equal to the ratio of (a) the number of
shares of the Company's Common Stock (including all shares of Common Stock
issued or issuable upon conversion of the Shares of which such Series G Holder
is deemed to be a holder immediately prior to the issuance of such Equity
Securities) to (b) the total number of shares of the Company's outstanding
Common Stock (including all shares of Common Stock issued or issuable upon
conversion of the Preferred Stock or upon the exercise of any outstanding
warrants or options) immediately prior to the issuance of the Equity Securities.
The term "Equity Securities" shall mean (i) any Common Stock, Preferred Stock or
other security of the Company, (ii) any security convertible, with or without
consideration, into any Common Stock, Preferred Stock or other security
(including any option to purchase such a convertible security), (iii) any
security carrying any warrant or right to subscribe to or purchase any Common
Stock, Preferred Stock or other security or (iv) any such warrant or right.
4.2 EXERCISE OF RIGHTS. If the Company proposes to issue any Equity
Securities, it shall give each Series G Holder written notice of its intention,
describing the Equity Securities, the price and the terms and conditions upon
which the Company proposes to issue the same. The Series G Holder shall have
five (5) days from the giving of such notice to agree to purchase its pro rata
share of the Equity Securities for the price and upon the terms and conditions
specified in the notice by giving written notice to the Company and stating
therein the quantity of Equity Securities to be purchased. Notwithstanding the
foregoing, the Company shall not be required to offer or sell such Equity
Securities to any Series G Holder who would cause the Company to be in violation
of applicable federal securities laws by virtue of such offer or sale.
4.3 ISSUANCE OF EQUITY SECURITIES TO OTHER PERSONS. If a Series G
Holder fails to exercise in full the rights of first refusal, the Company shall
have ninety (90) days thereafter to sell the Equity Securities in respect of
which the Series G Holder's rights were not exercised, at a price and upon
general terms and conditions materially no more favorable to the purchasers
thereof than specified in the Company's notice to the Series G Holder pursuant
to Section 4.2 hereof. If the Company has not sold such Equity Securities within
ninety (90) days of the notice provided pursuant to Section 4.2, the Company
shall not thereafter issue or sell any Equity Securities, without first offering
such securities to the Series G Holders in the manner provided above.
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4.4 TERMINATION OF RIGHTS OF FIRST REFUSAL. The rights of first
refusal established by this Section 4 shall not apply to, and shall terminate
upon the consummation of a Qualified Public Offering.
4.5 TRANSFER OF RIGHTS OF FIRST REFUSAL. The rights of first refusal
of the Series G Holders under this Section 4 may be transferred to the same
parties, subject to the same restrictions as any transfer of registration rights
pursuant to Section 2.10.
4.6 EXCLUDED SECURITIES. The rights of first refusal established by
this Section 4 shall have no application to any of the following Equity
Securities:
(a) up to an aggregate amount of 400,000 shares of Common
Stock (and/or options, warrants or other Common Stock purchase rights issued
pursuant to such options, warrants or other rights) issued or issuable to
employees, officers or directors of, or consultants or advisors to the Company
or any subsidiary, pursuant to stock purchase or stock option plans or other
arrangements that are approved by the Company's Board of Directors, and upon
reasonable justification by the Company, an additional 200,000 shares available
to be issued under this Section 4.6(a) upon consent of the Board of Directors of
the Company;
(b) stock issued pursuant to any rights or agreements
outstanding as of the date of this Agreement, options and warrants outstanding
as of the date of this Agreement; and stock issued pursuant to any rights,
agreements, options or warrants granted after the date of this Agreement,
provided that the rights of first refusal established by this Section 4 applied
with respect to the initial sale or grant by the Company of such rights or
agreements;
(c) shares of Common Stock issued in connection with any stock
split, stock dividend or recapitalization by the Company;
(d) shares of Common Stock issued upon conversion of the
Preferred Stock;
(e) any Equity Securities that are issued by the Company
pursuant to a Qualified Public Offering; and
(f) shares of Equity Securities (not to exceed 5% of the
Common Stock of the Company, determined on a fully diluted, as converted basis)
issued in connection with a strategic alliance with a pharmaceutical or
biotechnology company approved unanimously by the Company's Board of Directors.
SECTION 5. MISCELLANEOUS.
5.1 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
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5.2 SURVIVAL. The representations, warranties, covenants, and
agreements made herein shall survive any investigation made by any Series G
Holder and the closing of the transactions contemplated hereby. All statements
as to factual matters contained in any certificate or other instrument delivered
by or on behalf of the Company pursuant hereto in connection with the
transactions contemplated hereby shall be deemed to be representations and
warranties by the Company hereunder solely as of the date of such certificate or
instrument.
5.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of Registrable Securities from time to time;
provided, however, that prior to the receipt by the Company of adequate written
notice of the transfer of any Registrable Securities specifying the full name
and address of the transferee, the Company may deem and treat the person listed
as the holder of such shares in its records as the absolute owner and holder of
such shares for all purposes, including the payment of dividends or any
redemption price.
5.4 ENTIRE AGREEMENT. This Agreement and the Schedules hereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and no party shall be liable or bound to any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
5.4 AUTHORIZATION TO ADD STOCKHOLDERS TO AGREEMENT. The President of
the Company shall have the absolute right to amend this Agreement to add
individuals or entities as Series G Holders, and to add such Series G Holder's
names to the Schedule of Series G Holders attached hereto as Schedule A upon
such Series G Holder executing a counterpart signature page of this Agreement.
5.5 SEVERABILITY. In case any provision of the Agreement shall be
invalid, illegal, or unenforceable, the validity, legality, and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
5.6 AMENDMENT AND WAIVER.
(a) This Agreement may be amended or modified only upon the
written consent of the Company and the Series G Holders who hold at least
sixty-six and two-thirds percent (66 2/3%) of the Registrable Securities then
outstanding.
(b) The obligations of the Company and the rights of the
Series G Holders under this Agreement may be waived only with the written
consent of the Series G Holders who hold at least sixty-six and two-thirds
percent (66 2/3%) of the Registrable Securities then outstanding.
5.7 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right,
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power, or remedy accruing to any Series G Holder, upon any breach, default or
noncompliance of the Company under this Agreement shall impair any such right,
power, or remedy, nor shall it be construed to be a waiver of any such breach,
default or noncompliance, or any acquiescence therein, or of any similar breach,
default or noncompliance thereafter occurring. It is further agreed that any
waiver, permit, consent, or approval of any kind or character on any Series G
Holder's part of any breach, default or noncompliance under the Agreement or any
waiver on such Series G Holder's part of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, by law, or otherwise afforded to Series G Holders, shall be
cumulative and not alternative.
5.8 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (c) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one (1) day after deposit with
a nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the party
to be notified at the address as set forth on the signature pages hereof or at
such other address as such party may designate by ten (10) days advance written
notice to the other parties hereto.
5.9 ATTORNEYS' FEES. In the event that any dispute among the parties
to this Agreement should result in litigation, the prevailing party in such
dispute shall be entitled to recover from the losing party all fees, costs and
expenses of enforcing any right of such prevailing party under or with respect
to this Agreement, including without limitation, such reasonable fees and
expenses of attorneys and accountants, which shall include, without limitation,
all fees, costs and expenses of appeals.
5.10 TITLES AND SUBTITLES. The titles of the sections and subsections
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
5.11 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.
In Witness Whereof, the parties hereto have executed this SERIES G
PREFERRED STOCK INVESTOR RIGHTS AGREEMENT as of the Effective Date.
