Exhibit 10.15
LIGHT SCIENCES ONCOLOGY, INC.
INVESTORS RIGHTS AGREEMENT
THIS INVESTORS RIGHTS AGREEMENT (this "AGREEMENT") is made and entered into
as of October 6, 2005 (the "EFFECTIVE DATE") by and among Light Sciences
Oncology, Inc., a Washington corporation (the "COMPANY"), each of the persons
and entities on Schedule I attached hereto (the "FOUNDERS") and each of the
persons and entities on Schedule II attached hereto (the "INVESTORS"). The
Company, the Founders and the Investors who become a party to this Agreement
pursuant to Section 3.10 hereof are the "parties" hereto.
RECITALS
WHEREAS, certain Investors are parties to that certain Series A Preferred
Stock Purchase Agreement, dated as of the Effective Date, between the Company
and the persons and entities listed on Schedule I thereto (the "SERIES A
AGREEMENT"), and certain of the Company's and Investors' obligations thereunder
are conditioned upon the execution and delivery by the Company, the Founders and
the Investors of this Agreement.
WHEREAS, in order to induce the Company to enter into the Series A
Agreement and to induce the Investors to invest funds in the Company pursuant to
the Series A Agreement, the parties hereto have agreed to enter into this
Agreement.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
AGREEMENT
SECTION 1
CERTAIN DEFINITIONS
The following terms, for purposes of this Agreement, shall have their
respective meanings as set forth below in this Section 1:
1.1 "ARTICLES" shall mean, at any time, the Company's Articles of
Incorporation as filed and effective at such time under the Washington Business
Corporation Act, as amended.
1.2 "CHANGE OF CONTROL" shall mean (x) any consolidation or merger of the
Company with or into any other corporation or other entity, or any other
corporate reorganization, in which the shareholders of the Company immediately
prior to such consolidation, merger or reorganization, own less than 50% of the
Company's voting power immediately after such consolidation, merger or
reorganization; (y) any transaction or series of related transactions to which
the Company is a party in which in excess of fifty percent (50%) of the
Company's voting power is transferred to a party or parties who were not
shareholders or affiliates of shareholders
prior to such transfer (other than an equity financing exclusively for capital
raising purposes in which the Company is the surviving corporation, including a
transaction in which holders prior to such transaction own less than 50% of the
total voting power of the Company immediately after the closing of such
financing); or (z) a sale, lease, transfer or other disposition (including,
without limitation, by an exclusive license of all or substantially all of its
rights in the material intellectual property of the Company for a term of at
least all or substantially all of the effective period of the material patents
included therein) of all or substantially all of the assets of the Company.
1.3 "COMMISSION" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
1.4 "COMMON STOCK" shall mean the Company's Common Stock, par value $0.001
per share.
1.5 "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, or any similar successor federal statute, and the rules and regulations
thereunder, all as the same shall be in effect from time to time.
1.6 "HOLDER" shall mean any Investor who holds Registrable Securities and
any holder of Registrable Securities to whom the registration rights conferred
by this Agreement have been transferred in compliance with the provisions of
Section 3.10 below.
1.7 "INITIATING HOLDERS" shall mean any Holder or Holders who, in the
aggregate, hold not less than twenty-five percent (25%) of the outstanding
Registrable Securities that are issued or issuable upon conversion of the Series
A Shares.
1.8 "QUALIFIED IPO" shall mean the Company's initial firm commitment
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, covering the offer and sale of
Common Stock for the account of the Company at a price per share of at least
$15.00 (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to the Common Stock after the date
hereof) and resulting in at least $40,000,000 of gross proceeds to the Company,
and pursuant to which the Company obtains a listing for its shares on the New
York Stock Exchange or the NASDAQ National Market System.
1.9 "REGISTRABLE SECURITIES" shall mean (i) shares of Common Stock issued
or issuable pursuant to the conversion of the Series A Shares, and (ii) any
shares of Common Stock issued as a dividend or other distribution with respect
to or in exchange for or in replacement of the shares referenced in clause (i)
above; provided, however, that Registrable Securities shall not include any
shares of Common Stock which have (x) previously been registered, (y) been sold
to the public either pursuant to a registration statement or Rule 144 or (z)
been sold in a private transaction in which the transferor's rights under this
Agreement are not assigned.
1.10 The terms "REGISTER," "REGISTERED" and "REGISTRATION" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement by the Commission.
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1.11 "REGISTRATION EXPENSES" shall mean all expenses incurred in effecting
any registration pursuant to this Agreement, including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for the Company, blue sky fees and expenses,
expenses of any regular or special audits incident to or required by any such
registration and, in the case of a registration pursuant to Section 3.1 or
Section 3.4 hereof, reasonable fees and disbursements for a single counsel for
the selling Holders. Notwithstanding the foregoing, "REGISTRATION EXPENSES"
shall not include Selling Expenses and the compensation of regular employees of
the Company (which compensation to such employees shall be paid in any event by
the Company).
1.12 "RULE 144" shall mean Rule 144 as promulgated by the Commission under
the Securities Act, as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.
1.13 "RULE 145" shall mean Rule 145 as promulgated by the Commission under
the Securities Act, as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.
1.14 "SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or
any similar successor federal statute, and the rules and regulations thereunder,
all as the same shall be in effect from time to time.
1.15 "SELLING EXPENSES" shall mean any and all underwriting discounts,
selling commissions and stock transfer taxes applicable to the sale of
Registrable Securities.
1.16 "SERIES A SHARES" shall mean shares of the Company's Series A
Preferred Stock, par value $0.001 per share.
1.17 "SHARES" shall mean the Series A Shares and any shares of Common Stock
issued upon conversion thereof.
1.18 "SUBSIDIARY" shall have the meaning set forth in Section 3.2 of the
Purchase Agreement.
SECTION 2
RESTRICTIONS ON TRANSFER
2.1 Legends. Each certificate representing Registrable Securities shall
(unless otherwise permitted by the provisions of this Agreement) be stamped or
otherwise imprinted with a legend substantially similar to the following (in
addition to any legend required under applicable state securities laws or any
other agreement entered into by the original Investor holding such certificate
and the Company):
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR TRANSFERRED, ASSIGNED,
PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT
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OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE,
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT
REQUIRED.
2.2 Reissuance. 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, at such Holder's expense (which counsel may
be counsel to the Company) and 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 other compliance with any
legend.
2.3 Removal. 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.
2.4 Further Limitations on Disposition. No Holder shall make any
disposition of all or any portion of Registrable Securities unless and until the
transferee has agreed in writing for the benefit of the Company to be bound by
this Agreement, the Co-Sale Agreement (unless it has been terminated) and the
Voting Agreement (unless it has been terminated), and:
(a) 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
(b) (i) The Holder shall have notified the Company of the proposed
disposition and shall have furnished the Company with a reasonably detailed
statement of the circumstances surrounding the proposed disposition, and
(ii) if requested by the Company, the Holder shall have furnished the
Company with an opinion of counsel or other evidence 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 except in unusual circumstances.
(c) Notwithstanding the provisions of subsections (a) or (b) above, no
such registration statement or opinion of counsel or other evidence shall
be necessary for a transfer by a Holder that is a partnership to a partner
of such partnership, or to the estate of any such partner or the transfer
by gift, will or intestate succession of any partner to his or her spouse
or to the siblings, lineal descendants or ancestors of such partner or his
or her spouse, if the transferee agrees in writing to be subject to the
terms hereof to the same extent as if he or she were a Holder hereunder.
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SECTION 3
REGISTRATION RIGHTS
3.1 Requested Registration.
(a) Request for Registration. If the Company shall receive from
Initiating Holders, at any time not earlier than six (6) months after the
earlier of (i) the first date that the Company's securities trade on a
national securities exchange or list on a national automatic quotation
system, or (ii) the initial public offering of the Company's securities, a
written request that the Company effect any registration with respect to
any portion of such Initiating Holders' Registrable Securities, then the
Company will:
(i) within ten (10) days of such request, give written notice of
the proposed registration to all other Holders; and
(ii) as soon as practicable, but in any event within seventy (70)
days of such written request, file and thereafter use its best efforts
to effect such registration as soon as practicable (including, without
limitation, filing post-effective amendments, appropriate
qualifications under applicable blue sky or other state securities
laws and appropriate compliance with the Securities Act) as would
permit or facilitate the sale and distribution of all or such portion
of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any
Holder or Holders joining in such request as are specified in a
written request received by the Company within twenty (20) days after
the written notice from the Company referenced in clause (i) above is
mailed or delivered.
The Company shall not be obligated to effect, or to take any action to
effect, any such registration pursuant to this Section 3.1:
(A) In any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting
such registration, qualification or compliance, unless the Company is
already subject to service in such jurisdiction and except as may be
required by the Securities Act;
(B) After the Company has initiated two (2) such registrations
pursuant to this Section 3.1(a) (counting for these purposes registrations
which have been (1) declared or ordered effective and pursuant to which
securities have been sold or (2) withdrawn by the Holders and as to which
the Holders have not elected to bear the Registration Expenses pursuant to
Section 3.3 hereof); or
(C) If the Initiating Holders propose to dispose of shares of
Registrable Securities which may be immediately registered on Form S-3
pursuant to a request made under Section 3.4 hereof.
(D) During the period starting with the date forty five (45) days
prior to the Company's good faith estimate of the date of filing of, and
ending on a date one hundred
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twenty (120) days after the effective date of a registration subject to
Section 3.2 hereof; provided that the Company complies with Section 3.2, is
actively employing in good faith reasonable efforts to cause such
registration statement to become effective, and the Company delivers notice
of such intent to the Initiating Holders within fifteen (15) days of the
registration request; provided, further, that the Company shall not defer
its registration obligations under this Agreement for more than an
aggregate of Two Hundred Ten (210) days in any twelve (12) month period
pursuant to this Section 3.1(a)(D) and/or Section 3.1(b).
(b) Deferment. Subject to the foregoing clauses (A) through (D), the
Company shall file a registration statement covering the Registrable
Securities so requested to be registered as soon as practicable after
receipt of the request or requests of the Initiating Holders; provided,
however, that if (i) in the good faith judgment of the Board of Directors
of the Company, such registration would be seriously detrimental to the
Company, and the Board of Directors of the Company concludes, as a result,
that it is in the best interests of the Company to defer the filing of such
registration statement at such time, and (ii) the Company shall furnish to
the Initiating Holders a certificate signed by the President of the Company
stating that, in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company for such
registration statement to be filed in the near future and that it is,
therefore, in the best interests of the Company to defer the filing of such
registration statement, then the Company shall have the right to defer such
filing for the period during which such filing would be seriously
detrimental, provided that the Company may not defer the filing for a
period of more than one hundred twenty (120) days after receipt of the
request of the Initiating Holders; and, provided, further, that (A) the
Company shall not defer its obligations in this manner more than once in
any twelve (12) month period, and (B) the Company shall not defer its
registration obligations under this Agreement for more than an aggregate of
Two Hundred Ten (210) days in any twelve (12) month period pursuant to this
Section 3.1(b) and/or Section 3.1(a)(D).
The registration statement filed pursuant to the request of the Initiating
Holders may, subject to the provisions of Sections 3.1(d) and 3.12 below,
include other securities of the Company with respect to which registration
rights have been granted in accordance with this Agreement and any other
agreements entered into between the Company and the Investors, and may include
securities of the Company being sold for the account of the Company.
(c) Underwriting. The right of any Holder to participate in an
underwritten registration pursuant to Section 3.1 shall be conditioned upon
such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting (unless otherwise
mutually agreed by a majority in interest of the Initiating Holders and
such Holder with respect to such participation and inclusion) to the extent
provided herein. A Holder may elect to include in such underwriting all or
a part of the Registrable Securities such Holder holds (subject to the
other provisions of this Agreement).
(d) Procedures. If the Company shall request inclusion in any
registration pursuant to Section 3.1 of securities being sold for its own
account, or if other persons
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(other than Holders) shall request inclusion of securities held by them in
any registration pursuant to Section 3.1, the Initiating Holders shall, on
behalf of all Holders, offer to include such securities in the underwriting
and shall condition such offer on their participation in such underwriting
and acceptance of the further applicable provisions of this Section 3
(including Section 3.12 below). The Company shall (together with all
Holders and other persons proposing to distribute their securities through
such underwriting) enter into an underwriting agreement in customary form
with the representative of the underwriter or underwriters selected for
such underwriting by a majority in interest of the Initiating Holders
(subject to the approval of the Company, which approval shall not be
unreasonably withheld or delayed). Notwithstanding any other provision of
this Section 3.1, if the representative of the underwriters advises the
Initiating Holders in writing that marketing factors require a limitation
on the number of shares to be underwritten, the number of shares to be
included in the underwriting or registration shall be allocated as set
forth in Section 3.12 below. If a person who has requested inclusion in
such registration as provided above does not agree to the terms of any such
underwriting, such person shall be excluded therefrom by written notice
from the Company, the underwriter(s) or the Initiating Holders. Any
Registrable Securities or other securities excluded or withdrawn from such
underwriting shall also be withdrawn from such registration. If shares are
so withdrawn from the registration and if the number of shares to be
included in such registration was previously reduced as a result of
marketing factors pursuant to this Section 3.1(d), then the Company shall
offer to all holders who have retained rights to include securities in the
registration the right to include additional securities in the registration
in an aggregate amount equal to the number of shares so withdrawn, with
such shares to be allocated among such Holders requesting additional
inclusion in accordance with the provisions of Section 3.12 below.
3.2 Company Registration.
(a) If, at any time the Company shall determine to register any of its
securities either for its own account or the account of a security holder
or holders exercising their respective demand registration rights, other
than a registration relating solely to employee benefit plans, a
registration relating to the offer and sale of debt securities, a
registration relating to a corporate reorganization or other transaction
under Rule 145, or a registration on any registration form that does not
permit secondary sales (an "EXCLUDED REGISTRATION"), the Company will:
(i) promptly give to each Holder written notice thereof; and
(ii) use its reasonable best efforts to include in such
registration (and any related qualification under blue sky laws or
other compliance), except as set forth in Section 3.2(b) below, and in
any underwriting involved therein, all the Registrable Securities
specified in a written request or requests made by any Holder and
received by the Company within ten (10) days after the written notice
from the Company described in clause (i) above is mailed or delivered
by the Company. Such written request may specify all or a part of a
Holder's Registrable Securities.
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(b) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 3.2(a)(i). In such event, the right of any Holder to
registration pursuant to this Section 3.2 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting to the extent provided
herein. All Holders proposing to distribute their securities through such
underwriting shall (together with the Company and the other holders of
securities of the Company with registration rights to participate therein
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the representative of the
underwriter(s) selected by the Company.
Notwithstanding any other provision of this Section 3.2, if the
representative of the underwriters advises the Company in writing that marketing
factors require a limitation on the number of shares to be underwritten, the
representative may (subject to the limitations set forth below) exclude all
Registrable Securities from, or limit the number of Registrable Securities to be
included in, the registration and underwriting. If the registration is the first
firmly underwritten public offering made by the Company pursuant to an effective
registration statement on form S-1 under the Securities Act (an "INITIAL PUBLIC
OFFERING"), the Company may limit, to the extent so advised by the underwriters,
the amount of securities (including Registrable Securities) to be included in
the registration by the Company's shareholders (including the Holders), or may
exclude, to the extent so advised by the underwriters, such underwritten
securities entirely from such registration. If such registration is not a
Initial Public Offering or is the second or any subsequent Company-initiated
registered offering of the Company's securities to the general public, the
Company may limit, to the extent so advised by the underwriters, the amount of
securities to be included in the registration by the Company's shareholders
(including the Holders); provided, however, that the aggregate value of
securities (including Registrable Securities) to be included in such
registration by the Company's shareholders (including the Holders) may not be so
reduced to less than twenty-five percent (25%) of the total value of all
securities included in such registration without the consent of more than fifty
percent (50%) of the Holders. The Company shall so advise all holders of
securities requesting registration, and the number of shares of securities that
are entitled to be included in the registration and underwriting shall be
allocated first to the Company for securities being sold for its own account
(subject to the foregoing provisions of this paragraph) and thereafter as set
forth in Section 3.12.
If any person does not agree to the terms of any such underwriting, such
person shall be excluded therefrom by written notice from the Company or the
underwriter. Any Registrable Securities or other securities so excluded or
withdrawn from such underwriting shall be withdrawn from such registration. If
shares are so withdrawn from the registration or if the number of shares of
Registrable Securities to be included in such registration was previously
reduced as a result of marketing factors, the Company shall then offer to all
persons who have retained the right to include securities in the registration
the right to include additional securities in the registration in an aggregate
amount equal to the number of shares so withdrawn, with such shares to be
allocated among the persons requesting additional inclusion in accordance with
the provisions of Section 3.12 below.
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(c) Right to Terminate Registration. The Company shall have the right
to terminate or withdraw any registration initiated by it under this
Section 3.2 prior to the effectiveness of such registration whether or not
any Holder has elected to include securities in such registration. The
Registration Expenses of such withdrawn registration shall be borne by the
Company.
3.3 Expenses of Registration. All Registration Expenses incurred in
connection with (i) the first two registrations pursuant to Section 3.1 hereof
and (ii) any registration, qualification or compliance pursuant to Section 3.2
or Section 3.4 hereof shall be borne by the Company; provided, however, that if
the Holders bear the Registration Expenses for any registration proceeding begun
pursuant to Section 3.1 and subsequently withdrawn by the Holders registering
shares therein, such registration proceeding shall not be counted as a requested
registration pursuant to Section 3.1 hereof; provided further that the Company
shall not be required to pay for the expenses of any registration proceeding
begun pursuant to Section 3.1 or 3.4 if the registration request is subsequently
withdrawn at the request of the Holders of a majority of the Registrable
Securities to be registered, or with respect to registrations pursuant to
Section 3.4 because a sufficient number of Holders shall have withdrawn so that
the minimum offering conditions set forth in Section 3.4 are no longer satisfied
(in which case all participating Holders shall bear such expenses pro rata among
each other based on the number of Registrable Securities requested to be so
registered, unless the Holders of a majority of the Registrable Securities agree
to count such withdrawn registration as a requested registration pursuant to
Section 3.1 or Section 3.4, as applicable). Furthermore, in the event that a
withdrawal by the Holders is based upon material adverse information relating to
the Company that is different from the information known or available (upon
request from the Company or otherwise) to the Holders requesting registration at
the time of their request for registration under Section 3.1, such registration
shall not be treated as a counted registration for purposes of Section 3.1
hereof, even though the Holders do not bear the Registration Expenses for such
registration, and the Company shall bear all Registration Expenses of such
withdrawn registration. All Selling Expenses relating to securities registered
on behalf of the Holders shall be borne by the holders of securities included in
such registration pro rata among each other on the basis of the number of
Registrable Securities so registered.
3.4 Registration on Form S-3.
(a) After the initial public offering of the Company's securities, the
Company shall use its best efforts to qualify for registration on Form S-3
or any comparable or successor form or forms. After the Company has
qualified for the use of Form S-3, in addition to the rights contained in
the foregoing provisions of this Section 3 and subject to the conditions
set forth in this Section 3, the Holders of Registrable Securities shall
have the right to request registrations on Form S-3 (such requests shall be
in writing and shall state the number of shares of Registrable Securities
to be disposed of and the intended methods of disposition of such shares by
such Holders); provided, however, that the Company shall not be obligated
to effect any such registration (i) 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) on Form S-3 at an aggregate price to the public of less
than $2,000,000, (ii) in the event that the Company shall furnish the
certification described in paragraph 3.1(b)(ii) (but
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subject to the limitations set forth therein), or (iii) if, in the
preceding twelve-month period, the Company has effected two (2) such
registrations under this Section 3.4 in such period.
(b) If a request complying with the requirements of Section 3.4(a)
hereof is delivered to the Company, the provisions of Sections 3.1(a)(i),
(ii), (A) and (D) and Section 3.1(b) above shall apply to such
registration. If the registration is for an underwritten offering, the
provisions of Sections 3.1(c) and 3.1(d) hereof shall also apply to such
registration.
3.5 Registration Procedures. In the case of each registration effected by
the Company pursuant to Section 3, the Company will keep each Holder advised in
writing as to the initiation of each registration and as to the completion
thereof. At its expense, the Company will use its best efforts to:
(a) Keep such registration effective for a period of ninety (90) days,
or until the Holder or Holders have completed the distribution described in
the registration statement relating thereto, whichever first occurs;
provided, however, that (i) such 90-day period shall be extended for a
period of time equal to the period the Holder refrains from selling any
securities included in such registration (A) at the request of the Company
or an underwriter of Common Stock (or other securities) of the Company, or
(B) due to any defect in any prospectus or the failure by the Company to
provide sufficient copies of any prospectus required to be delivered; and
(ii) in the case of any registration of Registrable Securities on Form S-3
which are intended to be offered on a continuous or delayed basis, such
90-day period shall be extended, if necessary, to keep the registration
statement effective until all such Registrable Securities are sold,
provided that Rule 145, or any successor rule under the Securities Act,
permits an offering on a continuous or delayed basis, and provided,
further, that applicable rules under the Securities Act governing the
obligation to file a post-effective amendment permit, in lieu of filing a
post-effective amendment that (x) includes any prospectus required by
Section 10(a)(3) of the Securities Act or (y) reflects facts or events
representing a material or fundamental change in the information set forth
in the registration statement, the incorporation by reference of
information otherwise required to be included in (x) and (y) above (from
periodic reports filed pursuant to Section 13 or 15(d) of the Exchange
Act);
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply
with the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement for the period set
forth in subsection (a) above;
(c) Furnish such number of prospectuses, including preliminary
prospectuses and other documents incident thereto, in conformity with the
Securities Act, including any amendment of or supplement to the prospectus,
as a Holder from time to time may reasonably request;
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(d) Use its reasonable best 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) Notify each seller of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or incomplete in
the light of the circumstances then existing, and at the request of any
such seller, prepare and furnish to such seller a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such
shares, such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or incomplete in
the light of the circumstances then existing;
(f) Cause all such Registrable Securities registered pursuant to such
registration statement to be listed on each securities exchange on which
similar securities issued by the Company are then listed;
(g) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant to such registration statement and a CUSIP
number for all such Registrable Securities, in each case not later than the
effective date of such registration;
(h) 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, (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, 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;
(i) Make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to
such registration statement, and any attorney, accountant, or another agent
retained by any such seller or underwriter (collectively, the
"INSPECTORS"), all financial and other records, pertinent corporate
documents, and properties of the Company (collectively, the "RECORDS") as
shall be reasonably necessary to enable them to exercise their due
diligence responsibility, and cause the Company's officers, directors, and
employees to supply all information
11
reasonably requested by any such Inspector in connection with such
registration statement. Records which the Company determines, in good
faith, to be confidential shall not be disclosed by the Inspectors unless
(i) the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in the registration statement or (ii) the release
of such Records is ordered pursuant to a subpoena or other order from a
court of competent jurisdiction. The seller of Registrable Securities
agrees that it will, upon learning that disclosure of such Records is
sought in a court of competent jurisdiction, give notice to the Company and
allow the Company, at the Company's expense, to undertake appropriate
action to prevent disclosure of the Records deemed confidential;
(j) Otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering
the period of at least 12 months, but not more than 18 months, beginning
with the first month after the effective date of the registration
statement,, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder; and
(k) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to Section 3.1 above, the Company
will enter into an underwriting agreement in form reasonably necessary to
effect the offer and sale of Common Stock, provided that such underwriting
agreement contains customary underwriting provisions and, if the
underwriter so requests, the underwriting agreement also contains customary
contribution provisions and provided further that each Holder participating
in such underwriting shall also enter into and perform its obligations
under such an agreement.
3.6 Indemnification. In the event any Registrable Securities are included
in a registration statement under Sections 3.1, 3.2 or 3.4 above:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, the partners, shareholders, members, officers
and directors of each Holder, legal counsel, accountant, 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 Section 15 of
the Securities 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, any exhibits attached thereto 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 and relating
to action or
12
inaction required by the Company in connection with the offering covered by
such registration statement; and the Company will reimburse each such
Holder, partner, shareholder, member, officer or director, legal counsel,
accountant, 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 3.6(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 or
delayed, 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 or any partner,
shareholder, member, officer, director, legal counsel, accountant,
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, qualification or compliance is being effected, indemnify
and hold harmless the Company, each of its directors, its officers 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,
shareholders, members, directors or officers or any person who controls
such Holder, against any losses, claims, damages or liabilities (joint or
several) to which any of the foregoing persons 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 any person
intended to be indemnified pursuant to this subsection 3.6(b), in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity agreement
contained in this Section 3.6(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 such Holder, which consent
shall not be unreasonably withheld or delayed; and provided, further, that
in no event shall any indemnity under this Section 3.6(b) exceed the net
proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this Section
3.6 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 3.6, 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
13
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 3.6, 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 3.6.
(d) If the indemnification provided for in this Section 3.6 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, however, that in no event shall any contribution by
a Holder hereunder exceed the gross proceeds from the offering received by
such Holder; and provided further that no person or entity guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) will be entitled to contribution from any person or entity
who was not guilty of such fraudulent misrepresentation.
(e) The obligations of the Company and Holders under this Section 3.6
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. Each indemnified party shall furnish such information
regarding itself or the claim in question as an indemnifying party may
reasonably request in writing and as shall be reasonably required in
connection with defense of such claim and litigation resulting therefrom.
(f) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in
conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control with respect to any
14
Holder party to such agreement (it being agreed that no such Holder shall
be required to enter into an agreement containing such conflicting
provisions without its consent).
3.7 Information by Holder. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Sections 3.1, 3.2 or
3.4 above with respect to Registrable Securities of any selling Holder that such
Holder shall furnish to the Company such information regarding such Holder and
the distribution proposed by such Holder as the Company may reasonably request
in writing and as shall be reasonably required in connection with any
registration, qualification or compliance referred to in this Section 3.
3.8 Limitations on Subsequent Registration Rights. From and after the date
of this Agreement, the Company shall not, without the prior written consent of a
majority in interest of the Holders, enter into any agreement with any holder or
prospective holder of any securities of the Company giving such holder or
prospective holder any (i) registration rights unless the terms thereof are
junior to and less favorable than the registration rights granted to the Holders
hereunder or (ii) piggyback registration rights (i.e., rights similar to those
set forth in Section 3.2(a) above) which would reduce the number of shares
includable by the holders in any registration pursuant to Section 3.2 above;
provided, however, that notwithstanding the foregoing or any other provision of
this Agreement to the contrary, any purchaser of Series A Shares from the
Company under the Series A Agreement shall be permitted to join this Agreement
as an Investor party hereto with only the consent of the Company.
3.9 Rule 144 Reporting. With a view to making available to the Holders the
benefits of certain rules and regulations of the Commission which may permit the
sale of the Registrable Securities to the public without registration, the
Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144, at all times from and after ninety (90)
days following the effective date of the first registration filed by the
Company under the Securities Act for an offering of its securities to the
general public;
(b) File with the Commission, in a timely manner, all reports and
other documents required of the Company under the Exchange Act at any time
after it has become subject to such reporting requirements; and
(c) So long as a Holder owns any Registrable Securities, furnish to
such Holder forthwith upon request: (i) a written statement by the Company
as to its compliance with the reporting requirements of Rule 144 (at any
time from and after ninety (90) days following the effective date of its
initial public offering), and of the Exchange Act (at any time after it has
become subject to such reporting requirements), or that it qualifies as a
registrant whose securities may be resold pursuant to Form S-3 (at any time
when it so qualifies); (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company; and (iii) such other reports and documents as a Holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing it to sell any such securities without registration.
15
3.10 Assignment of Registration Rights. The rights to cause the Company to
register Registrable Securities pursuant to this Section 3 may be assigned by a
Holder only to a transferee or assignee of Registrable Securities which acquires
at least 100,000 shares of Registrable Securities (in each case as adjusted for
stock splits, stock dividends, combinations and other recapitalizations);
provided, however, that (i) the transferor shall, within a reasonable time 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, (ii) such transferee shall agree to be
subject to all restrictions and obligations set forth in this Agreement, and
(iii) such transfer or assignment of Registrable Securities shall be effected in
accordance with the terms of Section 2.4 hereof, the ROFR Agreement, the Voting
Agreement, and applicable securities laws; and provided, further, that any
Holder may transfer Registrable Securities either (a) to any "AFFILIATE(S)" (as
defined below) of such Holder (which, in the case of a Holder which is a limited
partnership, shall also include without limitation current and former limited
partners, general partners, members and principals of such Holder or any general
partner of such Holder) or (b) to such Holder's spouse, children or
grandchildren, or to a trust for the exclusive benefit of such Holder, such
Holder's spouse, children or grandchildren, without regard to the foregoing
numerical limitations so long as such Holder and all such assignees agree (as
evidenced in a writing to be delivered to the Company prior to any such
assignment) that such Holder (or its designee) will act as the single
attorney-in-fact for all such assignees for the purpose of exercising any
rights, receiving any notices or taking any other action under this Section 3.
For the purposes of determining the number of shares of Registrable Securities
held by a transferee or assignee, the holdings of transferees and assignees of a
partnership who are partners or retired partners of such partnership (including
spouses and ancestors, lineal descendants and siblings of such partners or
spouses who acquire Registrable Securities by gift, will or intestate
succession) shall be aggregated together and with the partnership; provided,
however, that all assignees and transferees who would not qualify individually
for assignment of registration rights shall have a single attorney-in-fact for
the purpose of exercising any rights, receiving any notices or taking any other
action under this Section 3. For purposes of this Section 3.10, the term
"affiliate" means, as to the entity in question, any person or entity that
directly or indirectly controls, is controlled by or is under common control
with the entity in question, and the term "control" means possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of an entity whether through ownership of voting securities, by
contract, or otherwise.
3.11 "Market Stand Off" Agreement. In connection with the initial public
offering of the Company's Common Stock, each Holder and each Founder hereby
agrees that such Holder or Founder shall not sell or otherwise transfer or
dispose of any of the Company's securities held by such Holder or Founder (other
than those included in the registration at issue, if any) for a period specified
by the representative of the underwriters of Common Stock of the Company not to
exceed (i) one hundred eighty (180) days following the effective date of the
registration statement for such initial public offering or (ii) such longer
period requested by the underwriters as is necessary to comply with regulatory
restrictions on the publication of research reports (including, but not limited
to, NASD Rule 2711); provided that all officers and directors of the Company and
all other persons or entities owning at least one percent (1%) of the Company's
securities (on as as-converted basis) enter into substantially equivalent
agreements. The Company agrees to cause all officers, directors and holders of
one percent (1%) or more to be bound by the provisions of this Section 3.11 or
substantially equivalent restrictions. Each Holder
16
and Founder 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 Company
agrees that it shall not release any Holder or Founder (or any person referred
to in the preceding sentence) from the obligations imposed pursuant to this
Section 3.11 unless all Holders are so released on a proportionate basis
relative to their ownership of Registrable securities. The obligations described
in this Section 3.11 shall not apply to a registration relating solely to
employee benefit plans on Form S-8 or similar forms that may be promulgated in
the future, or a registration relating solely to a 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
period.
3.12 Allocation of Registration Opportunities. In any circumstance in which
all of the Registrable Securities and other shares of Common Stock (including
shares of Common Stock issued or issuable upon conversion of shares of any
currently unissued series of Preferred Stock of the Company) with registration
rights (the "OTHER SHARES") requested to be included in a registration on behalf
of the Holders or other selling shareholders cannot be so included as a result
of limitations on the aggregate number of shares of Registrable Securities and
Other Shares that may be so included, the number of shares of Registrable
Securities and Other Shares that may be so included shall be allocated among the
Holders and other selling shareholders requesting inclusion of shares first to
the Holders pro rata on the basis of the number of shares of Registrable
Securities held by such Holders (assuming conversion) and then, if any
availability remains, to the other selling shareholders pro rata on the basis of
the number of Other Shares held by such other selling shareholders (assuming
conversion); provided, however, that such allocation shall not operate to reduce
the aggregate number of Registrable Securities and Other Shares to be included
in such registration. If any Holder or other selling shareholder does not
request inclusion of the maximum number of shares of Registrable Securities and
Other Shares allocated to such Holder or shareholder pursuant to the
above-described procedure, the remaining portion of the allocation of such
Holder or shareholder shall be reallocated among those requesting Holders and
other selling shareholders whose allocations did not satisfy their requests in
the priority identified above pro rata on the basis of the number of shares of
Registrable Securities and Other Shares, as applicable, that are held by such
Holders and other selling shareholders, as applicable, in each case assuming
conversion, and this procedure shall be repeated until all of the shares of
Registrable Securities and Other Shares which may be included in the
registration on behalf of the Holders and other selling shareholders shall have
been so allocated. The Company shall not limit the number of Registrable
Securities to be included in a registration pursuant to this Agreement in order
to include shares held by shareholders with no registration rights or to include
any shares of stock issued to employees, officers, directors or consultants
pursuant to the Company's stock option plan or any other employee benefit plan
(or, with respect to registrations under Sections 3.1 or 3.4 hereof, in order to
include in such registration securities registered for the Company's own
account).
3.13 Delay of Registration. No Holder shall have any right to take any
action to restrain, enjoin or otherwise delay any registration as the result of
any controversy that might arise with respect to the interpretation or
implementation of this Section 3.
17
3.14 Termination Rights. This Agreement shall terminate upon the earlier of
(a) the fifth anniversary of the consummation of the Company's Qualified IPO, or
(b) the closing of a Change of Control. In addition, a particular Holder's
registration rights shall expire if both (i) the Company's securities trade on a
national securities exchange or list on a national automatic quotation system,
and (ii) all Registrable Securities held by such Holder (and its affiliates) may
be sold pursuant to Rule 144 during any ninety (90) day period.
SECTION 4
COVENANTS
4.1 Affirmative Covenants. The Company covenants and agrees that it will
(unless waived in whole or in part by the holders of at least a majority of the
then outstanding Shares) perform and observe the following covenants and
provisions, and will cause each Subsidiary, if and when such Subsidiary exists,
to perform and observe such of the following covenants and provisions as are
applicable to such Subsidiary:
(a) The Company and each Subsidiary will pay and discharge all lawful
taxes, assessments and governmental charges or levies imposed upon it or
upon its income or property before the date on which penalties attach
thereto, and all lawful claims which, if unpaid, would become a lien or
charge on any properties of the Company or any Subsidiary; provided,
however, that neither the Company nor any Subsidiary will be required to
pay any tax, assessment, charge, levy or claim which is being contested in
good faith and by appropriate proceedings if the Company or the Subsidiary
will have set aside on its books reserves, if any, to the extent required
by generally accepted accounting principles ("GAAP") with respect thereto.
All transfer, excise or other taxes payable to any jurisdiction (in the
United States and outside of the United States) or by reason of the sale or
issuance of the Shares (except for such taxes payable by reason of any
subsequent transfer of the Shares) shall be paid or provided for by the
Company.
(b) The Company shall maintain, or shall cause to be maintained valid
policies of workers' compensation insurance and insurance with responsible
and reputable insurance companies or associations in such amounts, types
and covering such risks as are acceptable to the Board of Directors of the
Company and are customarily carried by companies engaged in similar
businesses and owning similar properties in the same general areas in which
the Company or such Subsidiary operates, including, without limitation,
directors and officers liability insurance and insurance against loss,
damage, fire, theft, public liability, products liability, clinical trial
liability and other risks.
(c) The Company and each Subsidiary shall preserve and maintain its
corporate existence, rights, franchises and privileges in the jurisdiction
of its incorporation, and shall qualify and remain qualified, and cause
each Subsidiary to qualify and remain qualified, as a foreign corporation
in each jurisdiction in which such qualification is necessary or desirable
in view of its business and operations or the ownership or lease of its
properties, except where the failure to so preserve, maintain and qualify,
individually or in the aggregate, would not have a Company Material Adverse
Effect (as defined in the Series A Agreement). The Company shall, and shall
cause each
18
Subsidiary to, secure, preserve and maintain all Intellectual Property
Assets (as defined in the Series A Agreement) owned or possessed by it,
except where the failure to so secure, preserve and maintain such
Intellectual Property Assets would not have a Company Material Adverse
Effect.
(d) The Company shall, at any time during normal business hours and
upon reasonable prior notice to the Company, permit any Holder of at least
600,000 (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like) Shares (a "MAJOR HOLDER"), or its
designated representative, to (i) visit and inspect the premises and any of
the properties of the Company and any Subsidiary, including its records and
books of account (and make copies thereof and take extracts therefrom), and
(ii) discuss the affairs, finances and accounts of the Company and any
Subsidiary with its officers, directors, employees and accountants, all at
the expense of such Major Holder; provided, that the Company shall not be
obligated under this Section 4.1(d) with respect to information whose
disclosure would adversely affect attorney-client privilege with respect to
such information; provided, further, that the Company shall not be
obligated under this Section 4.1(d) with respect to any information which
the Board of Directors determines in good faith is confidential and should
not be disclosed unless the applicable Major Holder executes a
confidentiality agreement in form and substance reasonably acceptable to
the Company. Subject to the foregoing restrictions, the disclosure of
information to a Major Holder's representative shall be permitted so long
as the Major Holder informs such representatives that the information is
confidential and subject to an ongoing obligation to keep such information
confidential.
(e) The Company will use reasonable efforts to provide to each Major
Holder written notice of any litigation or government proceeding or
investigation pending or threatened against the Company or any Subsidiary,
or against any of their respective officers, directors, persons in charge
of a principal business function, or other individuals designated by the
Board of Directors of the Company as a key employee, or principal
shareholder of the Company or any Subsidiary, in each case with potential
liability in excess of $1,000,000, promptly after receiving written notice
of the foregoing. In addition, the Company shall promptly notify the
Investors if at any time the Company does not have sufficient operating
capital to operate the Company in a manner similar to its then current
operations for a period of at least sixty (60) days.
(f) The Company will require each person now or hereafter employed by
or providing consulting services to the Company or any Subsidiary with
access to confidential and proprietary information of the Company to enter
into a non-disclosure and proprietary rights assignment agreement
substantially in the form approved by the Board of Directors (or, with
respect to consultants, such other form or forms containing proprietary
information and confidentiality obligations consistent with industry
practices).
(g) The Company and each Subsidiary shall keep adequate records and
books of account in which complete entries will be made in accordance with
GAAP with respect to all financial transactions of the Company and any
Subsidiary, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, returns of merchandise,
19
obsolescence, amortization, taxes, bad debts and other purposes in
connection with its business shall be made.
(h) At least 30 days prior to the commencement of each fiscal year,
the Company will prepare and submit to, and obtain in respect thereof the
approval from the Board of Directors, the operating budgets, operating
expenses, profit and loss projections, cash flow projections and a capital
expenditure budget (the "ANNUAL BUDGET") for the succeeding fiscal year.
Promptly after it is approved by the Board, a copy of the Annual Budget
shall be provided to each Major Holder.
(i) The Company will, upon any increase in the number of shares of
Common Stock issuable upon conversion of outstanding Series A Shares,
reserve additional shares of Common Stock for issuance upon such
conversion, so that the number of shares of Common Stock so reserved will
not at any time be less than the number of such shares issuable upon such
conversion.
(j) The Company will take such actions as are necessary to ensure that
all Patents (as defined in the Series A Agreement) owned by the Company are
kept in force and maintained in compliance with formal legal requirements
(including payment of required filing, examination and maintenance fees and
filing of required proofs of working or use), unless otherwise determined
by the Board of Directors in advance of the failure to take any such
actions with respect to any particular Patent.
(k) The Company hereby agrees to provide prompt notice to Major Holder
following any "determination date" (as defined in Treasury Regulation
Section 1.897-2(c)(1)) on which the Company becomes a United States real
property holding corporation. In addition, upon a written request by a
Major Holder, the Company shall provide such Major Holder with a written
statement informing the Major Holder whether the Major Holder's interest in
the Company constitutes a United States real property interest. The
Company's determination shall comply with the requirements of Treasury
Regulation Section 1.897-2(h)(1) or any successor regulation, and the
Company shall provide timely notice to the Internal Revenue Service, in
accordance with and to the extent required by Treasury Regulation Section
1.897-2(h)(2) or any successor regulation, that such statement has been
made. The Company's written statement to a Major Holder shall be delivered
to the Major Holder within 10 days of the Major Holder's written request
therefor.
4.2 Financial Statements and Other Information. The Company will (unless
waived in whole or in part by the holders of at least a majority of the then
outstanding Shares) deliver to each Major Holder, individually or collectively
with its affiliates, copies of the following:
(a) As soon as practicable, but in any event within 120 days after the
end of each fiscal year of the Company (beginning with the 2006 fiscal
year), (i) audited balance sheets of the Company as at the end of such
year, together with audited statements of income and retained earnings and
statements of cash flows of the Company for such year, together with notes
related thereto, each prepared in accordance with GAAP, consistently
applied, and setting out in each case in comparative form the figures for
the previous
20
fiscal year, all in reasonable detail and certified by certified
independent public accountants of established national reputation selected
by the Board of Directors of the Company or the audit committee thereof,
and (ii) a report of the principal financial officer of the Company
containing a management discussion and analysis of the Company's
consolidated financial condition at the end of such year and the results of
operations for such year, including, but not limited to, a description of
significant events with respect to the Company and its Subsidiaries, if
any, during the preceding year and any planned or anticipated significant
activities or events during the next fiscal quarter; and
(b) As soon as practicable, but in any event within 45 days after the
end of each of the first three fiscal quarters of the Company in each year,
an unaudited balance sheet at the end of such quarter, and unaudited
statements of profit and loss, of changes in financial condition and of
cash flow for such period and for the current fiscal year to date, and
comparisons to the Annual Budget (as defined below) and to corresponding
periods for prior fiscal years, in each case prepared in accordance with
GAAP, consistently applied (other than for accompanying notes and subject
to changes resulting from year-end audit adjustments).
The foregoing financial statements shall be prepared on a consolidated basis if
the Company then has any Subsidiaries.
4.3 Negative Covenants of the Company. The Company agrees that it will not
take the following actions without the prior affirmative vote or prior written
consent of the holders of at least a majority of the then outstanding Shares:
(a) Effect or permit any Change of Control.
(b) Increase or decrease the maximum number of directors authorized on
the Company's Board of Directors without the unanimous consent of all
directors then serving on the Board of Directors.
(c) Amend or repeal any provision of, or add any provision to, the
Bylaws in a manner that adversely affects the Series A Preferred Stock or
otherwise adversely alters or changes the rights, preferences or privileges
of the Series A Preferred Stock or the holders thereof.
(d) Amend or repeal any provision of, or add any provision to, the
Articles, or file any certificate of designation thereunder.
(e) Take any action that alters the rights, preferences or privileges
of the Series A Preferred Stock or any other preferred stock of the
Company.
(f) Create, authorize, designate or issue any other class or series of
capital stock with preferences, rights, privileges or powers superior to or
on a parity with those of the Series A Preferred Stock.
21
(g) Apply any of its assets to the redemption, retirement, purchase or
acquisition, directly or indirectly, through Subsidiaries or otherwise, of
any shares of its capital stock (except (i) repurchases of unvested shares
at the original purchase price upon termination of employment of employees
or consultants holding restricted stock, (ii) repurchases of shares
pursuant to the express terms of any option plan approved by the Board of
Directors, or (iii) repurchases pursuant to the Company's exercise of a
right of first refusal contained in agreements approved by the Board of
Directors).
(h) Commence voluntary or involuntary liquidation, dissolution or
winding up proceedings.
(i) Increase or decrease the number of authorized shares of Common
Stock or Preferred Stock.
(j) Effect any recapitalization or reclassification of shares of
outstanding capital stock.
(k) Pay or declare any dividend or distribution on any shares of its
capital stock (except stock dividends payable solely in shares of Common
Stock).
(l) Enter into any contract, agreement or understanding relating to
the employment, separation or termination of any officer, employee or
consultant of the Company calling for the payment of any sums or other
benefits in connection with (or for periods after) the termination or
separation of such officer's, employee's or consultant's relationship with
the Company, in each case unless either (i) approved by a majority of the
non-employee directors then serving on the Board of Directors, (ii)
pursuant to an employment or separation policy approved by the Board of
Directors and which applies to employees generally, or (iii) the total of
all sums and other benefits payable pursuant to such contract, agreement or
understanding does not exceed $20,000.
(m) Amend any contract, agreement or understanding relating to the
employment, separation or termination of any officer, employee or
consultant of the Company in any material respect, in each case unless
approved by a majority of the disinterested directors then serving on the
Board of Directors, either (i) approved by a majority of the non-employee
directors then serving on the Board of Directors, (ii) pursuant to an
employment or separation policy approved by the Board of Directors and
which applies to employees generally, or (iii) after such amendment the
total of all sums and other benefits payable pursuant to such contract,
agreement or understanding do not exceed $20,000.
(n) Effect an initial public offering that is not a Qualified IPO.
(o) Enter into any material contract, agreement or understanding with
an affiliate of the Company (other than a wholly-owned subsidiary of the
Company) or with an officer, director or shareholder of the Company (or any
of their affiliates) unless (i) it relates to the employment, separation or
termination of any officer, employee or consultant of the Company and is
permitted (or approved) pursuant to the other terms of this Section 4.3, or
(ii) is approved by the disinterested directors on the Board of
22
Directors after disclosure to them of the potential conflict of interest
and of the terms of such contract, agreement or understanding.
(p) Incur or suffer to exist in excess of $4,000,000 of indebtedness
for borrowed monies in the aggregate, at any given time, that is secured by
any of the assets of the Company.
(q) Make any commitment or binding obligation to take any action that
would be prohibited under this Section 4.3.
(r) Allow any Subsidiary to take any action (or make a commitment or
binding obligation to take any action) that would be prohibited under this
Section 4.3 if taken by the Company.
4.4 Foreign Registrations. If the Company elects to register or achieve a
public listing of the Common Stock outside the United States before its initial
public offering in the United States, the Holders of a majority of the
Registrable Securities may require the parties to appropriately adjust the terms
of this Agreement in good faith to provide the Holders with rights to register,
list and sell the Registrable Securities in such jurisdiction that are at least
as favorable as those contemplated in this Agreement. Without limiting the
generality of the foregoing, the restrictions under Section 3.11 as to when the
Holders may sell or otherwise transfer or dispose of any Registrable Securities
will, if appropriate, be shortened or eliminated taking into account the rules,
regulations and standard procedures of the jurisdiction and the applicable stock
exchange, and shall be subject to the written approval of Investors holding a
majority of the Registrable Securities (the "INVESTOR MAJORITY"). Any written
agreement of the Investor Majority and the Company as contemplated above shall
be binding on all Holders. Without limiting the generality of the foregoing, the
parties hereto acknowledge that in connection with any such written agreement
the Investor Majority may (but shall not be required to) condition their
approval upon the Company agreeing to take such steps, if any, as are necessary
or desirable to ensure that the Registrable Securities are freely tradable on
the foreign exchange after the applicable restricted period, if any, expires.
4.5 Reincorporation Transaction. If at any time, in anticipation of a
registered initial public offering of Common Stock, an Investor Majority deems
it in the best interests of the Company and its shareholders to reincorporate
the Company as a Delaware corporation (including by means of a merger,
conversion, consolidation or other reorganization of the Company into or with a
Delaware corporation), each party hereto will take such steps to effect such
reincorporation, merger, conversion, consolidation or other reorganization as
may be requested by the Investor Majority, including transferring or tendering
such party's shares in the Company in exchange or consideration for shares of
capital stock of the Delaware corporation, provided that no party will be
required to take any steps which would have a material adverse effect on the
rights or economic interests of such party which are materially different from
the effects of such steps on other parties.
4.6 Termination. All obligations of the Company under Sections 4.1, 4.2,
4.3, 4.4 and 4.5 shall terminate upon the earlier of the consummation of a
Qualified IPO or a Change of Control.
23
SECTION 5
MISCELLANEOUS
5.1 Governing Law; Jurisdiction; Venue; No Jury Trial. This Agreement shall
be governed by and construed in accordance with the laws of the State of
Washington and the laws of the United States applicable therein (in each case
without giving effect to any choice or conflict of laws provision or rule that
would cause the application of the laws of any other jurisdiction) and shall be
treated in all respects as a Washington contract. Any action, suit or proceeding
arising out of or relating to this Agreement shall be brought in the state
courts of the State of Washington located in King County, or, if it has or can
acquire jurisdiction, any Federal court located in such State and County, and
EACH OF THE PARTIES HERETO, AFTER CONSULTING WITH OR HAVING HAD THE OPPORTUNITY
TO CONSULT WITH COUNSEL, HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY AND
IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS AND WAIVES
TRIAL BY JURY, IN EACH CASE IN CONNECTION WITH ANY ACTION, SUIT OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT. Each of the parties hereto hereby
irrevocably and unconditionally waives any objection to the laying of venue of
any action, suit or proceeding arising out of or relating to this Agreement or
the transactions contemplated hereby in the courts of the State of Washington or
the United States of America, in each case located in King County, and hereby
further irrevocably and unconditionally waives and agrees not to plead or claim
in any such court that any such matter brought in any such court has been
brought in an inconvenient forum.
5.2 Successors and Assigns. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
5.3 Entire Agreement; Amendment. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subjects hereof. Neither this Agreement nor any term hereof may be amended,
discharged or terminated, except by a written instrument signed by the Company
and the holders of at least fifty percent (50%) of the Registrable Securities;
provided, that no such amendment shall increase the number of Shares required to
qualify as a "Major Holder" without the consent of each Major Holder that holds
fewer Shares than the proposed higher threshold. Any such amendment, discharge
or termination shall be binding on all the Holders, but in no event shall the
obligation of any Holder hereunder be materially increased, except upon the
written consent of such Holder.
5.4 Notices. All notices, requests, consents, and other communications
under this Agreement shall be in writing and shall be deemed delivered (a) three
business days after being sent by registered or certified mail, return receipt
requested, postage prepaid, (b) one business day after being sent via a
reputable nationwide overnight courier service guaranteeing next business day
delivery or (c) upon delivery when sent by facsimile (with confirmation of
receipt), in each case to the intended recipient at the address indicated for
such party on the signature page or Schedules hereto, as applicable, or at such
other address as such party may designate by ten (10) days' advance written
notice to the other parties.
24
5.5 Delays or Omissions; Waiver. No delay or omission to exercise any
right, power or remedy accruing to any Holder upon any breach or default of the
Company under this Agreement shall impair any such right, power or remedy of
such Holder, nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any Holder or the Company of any breach or default under this
Agreement or any waiver on the part of the Company or any Holder of any
provisions or conditions of this Agreement must be made in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
Holder or the Company, shall be cumulative and not alternative.
5.6 Rights; Separability. Unless otherwise expressly provided herein, a
Holder's rights hereunder are several rights, not rights jointly held with any
of the other Holders. In case any provision of the Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
5.7 Information Confidential. Notwithstanding anything to the contrary in
this Agreement (i) no Holder by reason of this Agreement shall have access to
any classified information of the Company, (ii) no Holder by reason of this
Agreement shall have access to any trade secrets of the Company unless such
Holder executes a confidentiality agreement in form and substance reasonably
acceptable to the Company, and (iii) notwithstanding the preceding clause (ii)
the Company shall not be required to provide confidential or proprietary
information (or access thereto) pursuant to this Agreement to any Holder whom
the Company's Board of Directors reasonably determines to be a competitor of the
Company (it being agreed that a financial investor, including Xxxxxxx & Xxxxxxx
Development Corporation ("JJDC"), shall not be deemed a competitor if it has an
investment in a competitor representing not more than 50% of such competitor's
outstanding voting securities, regardless of whether such investor has one or
more seats on such competitor's board of directors). Notwithstanding anything to
the contrary herein, JJDC covenants and agrees that it will not provide any
confidential or proprietary information to any affiliate of JJDC. Each Holder
acknowledges that the information received by it pursuant hereto may be
confidential and for such Holder's use only, and such Holder will not use such
confidential information in violation of the Exchange Act or reproduce, disclose
or disseminate such information to any other person (other than its employees,
directors, affiliates, or agents having a need to know the contents of such
information, and its attorneys), except in connection with the exercise of
rights under this Agreement, unless the Company has made such information
available to the public generally or such Holder is required to disclose such
information by a governmental body. The Holders' obligations under this Section
5.7 shall survive the termination of this Agreement.
5.8 Titles and Subtitles. The titles of the paragraphs and subparagraphs of
this Agreement are for convenience of reference only and are not to be
considered in construing or interpreting this Agreement.
25
5.9 Aggregation of Stock. All shares of Registrable Securities held or
acquired by Holders and its transferees, if any, shall be aggregated together
for the purpose of determining the availability of any rights under the
Agreement.
5.10 Counterparts. This Agreement may be executed in any number
counterparts, including by facsimile copy, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
26
IN WITNESS WHEREOF, the parties hereto have executed this Investors Rights
Agreement effective as of the Effective Date.
THE COMPANY: LIGHT SCIENCES ONCOLOGY, INC.
By: /s/ Xxxx Xxxxxxx
------------------------------------
Its: President and Chief Executive
Officer
Address:
-------------------------------
Fax No:
--------------------------------
FOUNDERS:
LIGHT SCIENCES CORPORATION
By: /s/ Xxxxxx Xxxxxxx
------------------------------------
Its: CEO
INVESTORS:
ESSEX WOODLANDS HEALTH VENTURES FUND VI,
L.P.
By: Essex Woodlands Health Ventures VI,
L.P.
Its: General Partner
By: Essex Woodlands Health Ventures VI,
L.L.C.
Its: General Partner
By: /s/ Xxxx Xxxxxxx
------------------------------------
Xx. Xxxx Xxxxxxx, Managing Director
SCHEDULE I
FOUNDERS
Founder Name and Address Shares of Common Stock Held
------------------------ ---------------------------
Light Sciences Corporation 7,743,040
---------
TOTAL 7,743,040
=========
SCHEDULE II
INVESTORS
Investor Name and Address Series A Shares Held
------------------------- --------------------
ESSEX WOODLANDS HEALTH VENTURE FUND VI, L.P. 3,200,000
XXXXX XXXXXX 1,424,989
XXXXX STREET V, L.P. 1,000,000
CHINA DEVELOPMENT INDUSTRIAL BANK, INC. 400,000
XXXXXX XXXXXXXXX 200,000
XXXX-XXXXX XXX 20,000
XXXXXXX & XXXXXXX DEVELOPMENT CORPORATION 800,000
---------
TOTAL 7,044,989
=========
LIGHT SCIENCES ONCOLOGY, INC.
AMENDMENT TO INVESTORS RIGHTS AGREEMENT
AND TERMINATION AGREEMENT
THIS AMENDMENT TO INVESTORS RIGHTS AGREEMENT AND TERMINATION AGREEMENT
(this "AMENDMENT") dated as of September 11, 2006, is executed by and among
Light Sciences Oncology, Inc., a Washington corporation (the "COMPANY"), the
undersigned persons and entities who are also listed on Schedule A to the Rights
Agreement (defined below) (the "INVESTORS"), Light Sciences, LLC, a Washington
limited liability company, and Xxxxx Xxxx.
WHEREAS, the Company and certain of the Investors have previously entered
into that certain Investors Rights Agreement dated as of October 6, 2005, as
amended, by and among the Company and the other parties identified therein (the
"RIGHTS AGREEMENT");
WHEREAS, the Company and the Investors desire to amend the Agreement to
modify the definition of "Qualified IPO" in Section 1.8 of the Rights Agreement;
and
WHEREAS, the undersigned hereby acknowledge and agree that certain rights
and agreements (as identified herein) shall terminate upon the closing of a
"Qualified IPO" (as amended by this Amendment).
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is acknowledged, the parties hereto agree as follows:
1. Section 1.8 of the Agreement is hereby amended
and restated in its entirety to read as follows:
""QUALIFIED IPO" shall mean the Company's initial firm commitment
underwritten public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, covering the offer
and sale of Common Stock for the account of the Company resulting in at
least $40,000,000 of proceeds (calculated before underwriting discounts,
commissions and expenses) to the Company, and pursuant to which the
Company obtains a listing for its shares on the New York Stock Exchange or
NASDAQ."
2. The undersigned acknowledge and agree that the amendment to the term
"Qualified IPO" in the Rights Agreement in Section 1 above shall also be
applicable to the term "Qualified IPO" as used in (a) that certain Second
Amended and Restated Voting Agreement (the "VOTING Agreement") dated as of
December 12, 2005 by and among the Company and the other parties identified
therein; (b) that certain Series A Preferred Stock Purchase Agreement (the
"PURCHASE AGREEMENT") dated as of October 6, 2005, as amended, by and among the
Company and the other parties identified therein; and (c) that certain Right of
First Refusal and Co-Sale Agreement dated as of October 6, 2005 by and among the
Company and the other parties identified therein (the "ROFR", and together with
the Rights Agreement, the Voting Agreement and the Purchase Agreement, the
"AGREEMENTS").
3. The undersigned hereby acknowledge and agree that upon the consummation
of a "Qualified IPO" (as defined in Section 1 above), Section 4 of the Rights
Agreement, and each of the Voting Agreement and the ROFR, shall terminate and
have no further force and effect.
4. This Amendment shall be governed in all respects by the laws of the
State of Washington without regard to principles of conflict of laws.
5. This Amendment may be executed in any number of counterparts, including
by facsimile copy, each of which shall be deemed to be an original, and all of
which shall constitute one and the same document.
6. In all respects not inconsistent with the terms and provisions of this
Amendment, the Agreements are hereby ratified, adopted, approved and confirmed.
7. If any term, provision, covenant or restriction of this Amendment is
held by a court of competent jurisdiction or other authority to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Amendment, and of the Agreements, shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.
* * *
2
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first set forth above.
COMPANY: LIGHT SCIENCES ONCOLOGY, INC.,
a Washington corporation
By: /s/ Xxxxxx X. Xxxxxxxx
----------------------------------
Its: Vice President
INVESTORS: ESSEX WOODLANDS HEALTH VENTURES
FUND, VI, L.P.
By: Essex Woodlands Health Ventures VI, L.P.
Its: General Partner
By: Essex Woodlands Health Ventures VI, L.L.C.
Its: General Partner
By: /s/ Xxxx Xxxxxxx
----------------------------------
Xx. Xxxx Xxxxxxx, Managing Director
XXXXX STREET V, L.P.
By: Xxxxx Street Partners, LLC
Its: General Partner
By: /s/ Xxxxx X. Xxxxxx
----------------------------------
Xxxxx X. Xxxxxx, Ph.D., Partner
XXXXXXX & XXXXXXX DEVELOPMENT
CORPORATION
By:
----------------------------------
Xxxxx Xxxxx, Vice President
[SIGNATURE PAGE TO AMENDMENT TO INVESTORS RIGHTS AGREEMENT
AND TERMINATION AGREEMENT]
INVESTORS: CDIB CAPITAL INVESTMENT AMERICA, LTD.
By:
----------------------------------
Hsing-Xxxx Xx, Director
/s/ Xxxxxx Xxxxxxxxx
----------------------------------------
Xxxxxx Xxxxxxxxx
/s/ Xxxx-Xxxxx Xxx
----------------------------------------
Xxxx-Xxxxx Xxx
/s/ Xxxxx X. Xxxxxx
----------------------------------------
Xxxxx X. Xxxxxx
/s/ Xxxxxxx Xxx
----------------------------------------
Xxxxxxx Xxx
Scandinavian Life Science Venture
Two KB
By: /s/ Xxxxxx Xxxx Xxxxxxxx
---------------------------------
Its: Senior Partner
---------------------------------
Medicon Valley Capital Two KB
By: /s/ Xxxxxx Xxxx Xxxxxxxx
---------------------------------
Its: Senior Partner
---------------------------------
Medicon Valley Capital II K/S
By: /s/ Xxxxxx Xxxx Xxxxxxxx
---------------------------------
Its: Senior Partner
---------------------------------
[SIGNATURE PAGE TO AMENDMENT TO INVESTORS RIGHTS AGREEMENT
AND TERMINATION AGREEMENT]
INVESTORS:
Novo A/S
By: /s/ Ulrik Spork
-----------------------------------
Ulrik Spork
Senior Partner
NSV Partners Institutional, LP
By: New Science Ventures LLC
Its: General Partner
By: /s/ Xxxxxx X. X. Xxxxx
-----------------------------------
Its: Partner
-----------------------------------
NSV PARTNERS IX (LSO), LP
By: New Science Ventures LLC
Its: General Partner
By: /s/ Xxxxxx X. X. Xxxxx
-----------------------------------
Its: Partner
-----------------------------------
OTHER PARTIES:
LIGHT SCIENCES, llc
By: /s/ Xxxxx Xxxx
-----------------------------------
Its: President and Chief Executive Officer
-------------------------------------
/s/ Xxxxx Xxxx
----------------------------------------
Xxxxx Xxxx
[SIGNATURE PAGE TO AMENDMENT TO INVESTORS RIGHTS AGREEMENT
AND TERMINATION AGREEMENT]
LSC HOLDER:
/s/ Xxxxx X. Xxxxxx
----------------------------------------
Xxxxx X. Xxxxxx
[SIGNATURE PAGE TO AMENDMENT TO INVESTORS RIGHTS AGREEMENT
AND TERMINATION AGREEMENT]
