Exhibit 4.2
ALGORX PHARMACEUTICALS, INC.
INVESTOR RIGHTS AGREEMENT
THIS INVESTOR RIGHTS AGREEMENT (the "Agreement") is entered into as of
this 28th day of October 2004, by and among ALGORX PHARMACEUTICALS, INC., a
Delaware corporation (the "Company") and BRIDGE PHARMA, INC. ("Bridge" or the
"Holder").
WITNESSETH
WHEREAS, the Company and Bridge have executed that certain Collaboration,
Development and License Agreement dated October 28, 2004 (the "CD&L Agreement")
pursuant to which among other things, Bridge will license to the Company certain
proprietary technology for consideration which includes a total of 1,600,000
shares of the Company's Common Stock (the "Equity Consideration").
WHEREAS, the Company and Bridge have agreed to enter into a Common Stock
Agreement to document the issuance of the Equity Consideration
WHEREAS, the obligations in the Common Stock Agreement are conditioned
upon the execution and delivery of this Agreement for the purpose of setting
forth the terms and conditions pursuant to which Bridge shall be granted
piggy-back registration rights; and
WHEREAS, in connection with the consummation of the transaction
contemplated under the Common Stock Agreement the Company and Bridge desire to
facilitate the investor rights set forth in this Agreement by agreeing to the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, and for other consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereby further agree as follows:
SECTION 1. GENERAL.
1.1 DEFINITIONS. As used in this Agreement the following terms shall have
the following respective meanings:
(a) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(b) "Holder" means Bridge or any permitted assignee of the Shares.
(c) "Initial Offering" means the Company's first firm commitment
underwritten public offering of its Common Stock registered under the Securities
Act.
(d) "Institutional Holders" means the holders of the Company's
preferred stock, or Common Stock which the preferred stock is convertible into.
(e) "Register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of
effectiveness of such registration statement or document.
(f) "Registrable Securities" means the Shares.
(g) "Registration Expenses" shall mean all Company expenses incurred
in complying with Sections 2.2 hereof, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses and the expense of any
special audits incident to or required by any such registration (but excluding
the compensation of regular employees of the Company which shall be paid in any
event by the Company).
(h) "SEC" or "Commission" means the Securities and Exchange
Commission.
(i) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(j) "Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale.
(k) "Shares" shall mean the Company's Common Stock issued pursuant
to the Common Stock Agreement dated October __, 2004 by and between the Company
and Bridge.
(l) "Special Registration Statement" shall mean (i) a registration
statement relating to any employee benefit plan or (ii) with respect to any
corporate reorganization or transaction under Rule 145 of the Securities Act,
including any registration statements related to the resale of securities issued
in such a transaction or (iii) a registration related to stock issued upon
conversion of debt securities.
SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER.
2.1 RESTRICTIONS ON TRANSFER
(a) Holder agrees not to make any disposition of all or any portion
of the Shares unless and until:
(i) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or
(ii) (A) The transferee has agreed in writing to be bound by
the terms of this Agreement, (B) such Holder shall have notified the Company of
the proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (C) if
reasonably requested by the Company, such Holder shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to
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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. After its Initial Offering, the Company will not require
the transferee to be bound by the terms of this Agreement.
(b) Each certificate representing Shares shall (unless otherwise
permitted by the provisions of the Agreement) be stamped or otherwise imprinted
with a legend substantially similar to the following (in addition to any legend
required under applicable state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR
UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED.
(c) The Company shall be obligated to reissue promptly unlegended
certificates at the request of any Holder thereof if the Holder shall have
obtained an opinion of counsel (which counsel may be counsel to the Company)
reasonably acceptable to the Company to the effect that the securities proposed
to be disposed of may lawfully be so disposed of without registration,
qualification or legend.
(d) Any legend endorsed on an instrument pursuant to applicable
state securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal.
2.2 PIGGYBACK REGISTRATIONS. The Company shall notify the Holder of Shares
in writing at least five (5) days prior to the filing of any registration
statement under the Securities Act for purposes of a public offering of
securities of the Company (including, but not limited to, registration
statements relating to secondary offerings of securities of the Company, but
excluding Special Registration Statements) and will afford such Holder an
opportunity to include in such registration statement all or part of the Shares
held by such Holder. Each Holder desiring to include in any such registration
statement all or any part of the Shares held by it shall, within fifteen (15)
days after the above-described notice from the Company, so notify the Company in
writing. Such notice shall state the intended method of disposition of the
Shares by such Holder. If a Holder decides not to include all of its Shares in
any registration statement thereafter filed by the Company, such Holder shall
nevertheless continue to have the right to include any Shares in any subsequent
registration statement or registration statements as may be filed by the Company
with respect to offerings of its securities, all upon the terns and conditions
set forth herein.
(a) UNDERWRITING. If the registration statement under which the
Company gives notice under this Section 2.2 is for an underwritten offering, the
Company shall so advise
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the Holders of Shares. In such event, the right of any such Holder to be
included in a registration pursuant to this Section 2.2 shall be conditioned
upon such Holder's participation in such underwriting and the inclusion of such
Holder's Shares in the underwriting to the extent provided herein. All Holders
proposing to distribute their Registrable Securities through such underwriting
shall enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by the Company.
Notwithstanding any other provision of this Agreement, if the underwriter
determines in good faith that marketing factors require a limitation of the
number of shares to be underwritten, the number of shares that may be included
in the underwriting shall be allocated, first, to the Company; second, to the
Institutional Holders; third, to the Holders on a pro rata basis based on the
total number of Shares held by the Holders; and fourth, to any stockholder of
the Company (other than a Holder or Institutional Holder) on a pro rata basis.
If any Holder disapproves of the terms of any such underwriting, such Holder may
elect to withdraw therefrom by written notice to the Company and the
underwriter, delivered at least ten (10) business days prior to the effective
date of the registration statement. Any Shares excluded or withdrawn from such
underwriting shall be excluded and withdrawn from the registration.
(b) RIGHT TO TERMINATE REGISTRATION. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
Section 2.2 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 in
accordance with Section 2.3 hereof.
2.3 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration pursuant to Section 2.2 shall be borne by the
Company. All Selling Expenses incurred in connection with any registrations
hereunder, shall be borne by the holders of the securities so registered pro
rata on the basis of the number of shares so registered.
2.4 TERMINATION OF REGISTRATION RIGHTS. All registration rights granted
under this Section 2 shall terminate and be of no further force and effect five
(5) years after the date of the Company's Initial Offering. In addition, a
Holder's registration rights shall expire if (a) the Company has completed its
Initial Offering and is subject to the provisions of the Exchange Act, (b) such
Holder (together with its affiliates) holds less than 1% of the Company's
outstanding Common Stock and (c) all Registrable Securities held by and issuable
to such Holder (and its affiliates) may be sold under Rule 144 (without
reference to 144(k)) during any ninety (90) day period.
2.5 INDEMNIFICATION. In the event any Shares are included in a
registration statement under Section 2.2:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless the Holder, the partners, officers and directors of the Holder,
any underwriter (as defined in the Securities Act) for such Holder and each
person, if any, who controls such Holder or underwriter within the meaning of
the Securities Act or the Exchange Act, against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any of the
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following statements, omissions or violations (collectively a "VIOLATION") by
the Company: (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein, in light of the circumstances in which they are made, not misleading,
or (iii) any violation or alleged violation by the Company of the Securities
Act, the Exchange Act, any state securities law or any rule or regulation
promulgated under the Securities Act, the Exchange Act or any state securities
law in connection with the offering covered by such registration statement; and
the Company will pay as incurred to each such Holder, partner, officer,
director, underwriter or controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided however, that the
indemnity agreement contained in this Section 2.5(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company, which consent shall
not be unreasonably withheld, nor shall the Company be liable in any such case
for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by the Holder, partner, officer, director, underwriter or
controlling person of the Holder.
(b) To the extent permitted by law, the 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 shareholder selling securities under such registration
statement or any of such other shareholder's partners, directors or officers or
any person who controls such shareholder, against any losses, claims, damages or
liabilities (joint or several) to which the Company or any such director,
officer, controlling person, underwriter or other such shareholder, or partner,
director, officer or controlling person of such other shareholder 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 the Holder under an
instrument duly executed by the Holder and stated to be specifically for use in
connection with such registration; and the Holder will pay as incurred any legal
or other expenses reasonably incurred by the Company or any such director,
officer, controlling person, underwriter or the shareholder, or partner,
officer, director or controlling person of such other Holder in connection with
investigating or defending any such loss, claim, damage, liability or action if
it is judicially determined that there was such a Violation; provided, however,
that the indemnity agreement contained in this Section 2.5(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; provided further, that in no event shall any
indemnity under this Section 2.5 exceed the net proceeds from the offering
received by such Holder.
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(c) Promptly after receipt by an indemnified party under this
Section 2.5 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 2.5, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 2.5, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 2.5.
(d) If the indemnification provided for in this Section 2.5 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any losses, claims, damages or liabilities referred to herein,
the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission; provided, that in no event shall any contribution by the
Holder exceed the net proceeds from the offering received by the Holder.
(e) The obligations of the Company and Holder under this Section 2.5
shall survive completion of any offering of Registrable Securities in a
registration statement and the termination of this Agreement. No indemnifying
party, in the defense of any such claim or litigation, shall, except with the
consent of each indemnified party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation."
2.6 "MARKET STAND-OFF" AGREEMENT. The Holder hereby agrees that it shall
not sell, transfer, make any short sale of, grant any option for the purchase
of, or enter into any hedging or similar transaction with the same economic
effect as a sale, any Common Stock (or other securities) of the Company held by
the Holder (other than those included in the registration) for a period
specified by the representative of the underwriters of the Company's Common
Stock (or
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other securities) not to exceed two hundred twenty (220) days following the
effective date of a registration statement of the Company filed under the
Securities Act, provided that such agreement shall apply only to the Company's
initial public offering.
SECTION 3. MISCELLANEOUS.
3.1 GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the laws of the State of Delaware, without giving effect to that
body of laws pertaining to conflict of laws.
3.2 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
and shall inure to the benefit of and be enforceable by each person who shall be
a holder of Registrable Securities from time to time; provided, however, that
prior to the receipt by the Company of adequate written notice of the transfer
of any Registrable Securities specifying the full name and address of the
transferee, the Company may deem and treat the person listed as the holder of
such shares in its records as the absolute owner and holder of such shares for
all purposes, including the payment of dividends or any redemption price.
3.3 ENTIRE AGREEMENT. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subject
hereof and no party shall be liable or bound to any other in any manner by any
representations, warranties, covenants and agreements except as specifically set
forth herein.
3.4 SEVERABILITY. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
3.5 AMENDMENT. The Company and Bridge may amend, modify or alter any of
the provisions of this Agreement, but only by a written instrument that
explicitly refers to this Agreement and is approved and duly executed by both
parties hereto.
3.6 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified; (ii) when sent by confirmed electronic mail or facsimile
if sent during normal business hours of the recipient, if not, then on the next
business day; (iii) for stockholders who are residents of the United States, (A)
five (5) days after having been sent by registered or certified mail, return
receipt requested, postage prepaid, or (B) one (1) day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt; or (iv) for stockholders who are foreign
residents, one (1) day after deposit with a recognized international overnight
courier, specifying next day delivery, with verification of receipt.
3.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
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3.8 FURTHER ASSURANCES. The parties agree to execute such further
documents and instruments and to take such further actions as may be reasonably
necessary to carry out the purposes and intent of this Agreement.
3.9 FACSIMILE SIGNATURES, This Agreement may be executed and delivered by
facsimile and upon such delivery the facsimile signature will be deemed to have
the same effect as if the original signature had been delivered to the other
party.
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IN WITNESS WHEREOF, the parties hereto have executed this INVESTOR RIGHTS
AGREEMENT as of the date set forth in the first paragraph hereof.
COMPANY: INVESTOR:
ALGORX PHARMACEUTICALS, INC. BRIDGE PHARMA, INC.
Signature: /s/ Xxxx Xxxxxxx Signature: /s/ Xxxxxx Xxxxx
--------------------- ------------------------------
By: Xxxx Xxxxxxx By: Xxxxxx Xxxxx
-------------------------------- -------------------------------------
Title: Pres. & COO Title: CEO Bridge Pharma, Inc.
Address: 000 Xxxxx Xxxxx Address: 000 Xxxxxxxx Xx.
Xxxxxxxx, XX 00000-0000 Xxxxxxxx, XX 00000
