EXHIBIT 4.1
VANDA PHARMACEUTICALS INC.
2004 SECURITYHOLDER AGREEMENT
THIS 2004 SECURITYHOLDER AGREEMENT (the "AGREEMENT") is entered into
as of September 28, 2004 among VANDA PHARMACEUTICALS INC., a Delaware
corporation (the "COMPANY"), and each of the other parties signatory hereto.
RECITALS
A. The Company, the Care Capital Securityholder and the EDB
Securityholder previously entered into that certain Securityholder Agreement
dated as of March 12, 2003 (the "ORIGINAL SECURITYHOLDER AGREEMENT").
B. The Securityholders are purchasing shares of the Company's
Series B Preferred Stock pursuant to that certain Series B Preferred Stock
Purchase Agreement dated as of September 28, 2004 (the "2004 PURCHASE
AGREEMENT").
C. The obligations in the 2004 Purchase Agreement are conditioned
upon the execution and delivery of this Agreement.
D. The Company and the Securityholders now desire to amend and
restate the Original Securityholder Agreement in its entirety.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements herein contained, the parties hereto agree:
SECTION 1. CERTAIN DEFINITIONS.
1.1 DEFINITIONS. For the purposes of this Agreement, the following
terms have the following meanings:
"AFFILIATE", with respect to any Person, means any other Person
directly or indirectly controlling, controlled by or under common control
with, such Person. For purposes of this definition, "control" (including
with correlative meanings, the terms "controlling", "controlled by" or
"under common control with"), as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities or by contract or otherwise.
"AFFILIATED GROUP", with respect to any Person, means such Person
and each Affiliate and Associate of such Person and each other Person with
whom such Person is acting "as a partnership, limited partnership,
syndicate, or other group for the purpose of acquiring, holding, or
disposing of" Shares (within the meaning of Section 13(d)(3) of the 1934
Act, regardless of whether the Company shall at any time be subject to the
requirements of the 1934 Act).
"ASSOCIATE" has the meaning given such term in Rule 12b-2 under the
1934 Act.
"BENEFICIAL OWNER" or "BENEFICIALLY OWN" has the meaning given such
term in Rule 13d- 3 under the 1934 Act, and, with respect to any options
or rights to acquire any Security, shall be determined without regard to
whether any such Security is "in the money."
"BOARD OF DIRECTORS" means the Board of Directors of the Company.
"BUSINESS DAY" means any day other than a Saturday, Sunday or other
day on which commercial banks are authorized or obligated to be closed in
New York City.
"CARE CAPITAL SECURITYHOLDER" means Care Capital Investments II, LP,
a Delaware limited partnership, and Care Capital Offshore Investments II,
LP, a Cayman Islands exempted limited partnership.
"CAUSE" means, with respect to any individual, (i) any willful
violation of any federal, state, foreign or other law or regulation
applicable to the business or affairs of the Company or any of its
subsidiaries or Affiliates, or the commission of any felony or other crime
involving moral turpitude, or any willful perpetration of a common law
fraud; or (ii) any other misconduct that is materially injurious to the
financial condition or business reputation of, or is otherwise materially
injurious to, the Company or any of its subsidiaries or Affiliates.
"CERTIFICATE" means the Certificate of Incorporation of the Company,
as amended from time to time.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMISSION" means the Securities and Exchange Commission, and any
successor commission or agency having similar powers.
"COMMON SHARE" means any share of Common Stock.
"COMMON STOCK" means the Common Stock, par value $.01 per share, of
the Company.
"COMPANY" means Vanda Pharmaceuticals Inc., a Delaware corporation,
and any successor thereto, whether by merger or otherwise.
"EDB SECURITYHOLDER" means BioMedical Sciences Investment Fund Pte
Ltd.
"ENCUMBRANCE" means any lien, security interest, pledge, claim,
option, right of first refusal, marital right or other encumbrance with
respect to any Share.
"IPO" means the initial Public Offering of Shares after the date
hereof.
"LAW" means any federal, state, local or foreign statute, law,
ordinance, regulation, rule, code, order, other requirement or rule of
law.
"MEDI GROUP" shall mean (i) MEDI Ventures, (ii) MedImmune, and (iii)
any successors or permitted assignees of any of the foregoing.
"MEDI VENTURES" shall mean MedImmune Ventures, Inc., a Delaware
corporation, including any successor thereto or any permitted assignee of
the interest, in whole or in part, of MEDI Ventures under this Agreement.
"MEDIMMUNE" shall mean MedImmune, Inc., a Delaware corporation,
including any of its successors or permitted assigns.
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"MEP" means the Management Equity Plan of the Company, as amended,
from time to time.
"1933 ACT" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"1934 ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder.
"OUTSTANDING," with respect to any Shares, means, as of any date of
determination, all Shares that have been issued on or prior to such date,
other than Shares repurchased or otherwise reacquired by the Company, or
any controlled Affiliate thereof, on or prior to such date.
"PARTICIPANT" has the meaning assigned in the MEP.
"PERMITTED TRANSFEREE" means: (a) any Securityholder's Affiliate
(including, without limitation, in the case of MEDI Ventures, any member
of the MEDI Group); (b) in the case of any Securityholder who is a natural
person, (i) the spouse, parents and lineal descendants (in each case,
whether natural or adopted) of such Securityholder, (ii) a Person to whom
Shares are transferred by such Securityholder by will or the laws of
descent and distribution, or (iii) a trust administered and controlled by
such Securityholder that is established for the exclusive benefit of such
Securityholder or his or her Permitted Transferees; (c) the Company or any
subsidiary thereof; (d) in the case of any Securityholder which is a
grantor trust, its grantor; or (e) any Person with respect to which the
Board of Directors shall have adopted a resolution by a vote of 66-2/3% of
its members stating that the Board of Directors has no objection if a Sale
of Shares is made to such Person.
"PERSON" means an individual, a partnership, a joint venture, a
corporation, an association, a trust, an individual retirement account or
any other entity or organization, including a government or any department
or agency thereof.
"PREFERRED SECURITYHOLDER" means each Securityholder that owns
shares of Preferred Stock.
"PREFERRED SECURITYHOLDER RESTRICTED PERSON" means any Preferred
Securityholder or any Affiliate thereof, or the general partner, managing
partner, managing member or investment manager of any thereof, or any
officer, director or private equity professional thereof.
"PREFERRED SHARE" means any share of Preferred Stock.
"PREFERRED STOCK" means any of the Company's Series A Preferred
Stock or Series B Preferred Stock.
"PUBLIC COMPANY" means a company as to which the aggregate number of
Common Shares that have been sold in Public Offerings shall equal not less
than 25% of the Common Shares then outstanding.
"PUBLIC OFFERING" means an underwritten public offering of equity
securities of the Company pursuant to an effective registration statement
under the 1933 Act.
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"REGISTRABLE SHARES" means (a) Common Shares issued pursuant to the
Care Capital Securityholder and the EDB Securityholder pursuant to the
2003 Stock Subscription Agreements; (b) Common Shares issued upon the
conversion of Preferred Shares; (c) any other Common Shares issued to a
Securityholder after the date hereof, whether or not upon conversion of
any Preferred Share, so long as the Board of Directors shall have
determined prior to such issuance that such Common Shares shall be
"Registrable Shares"; and (d) any Shares issued or issuable in respect of
Shares referred to in clauses (a), (b) or (c) above by way of a stock
dividend or a stock split or in connection with a combination or
subdivision of shares, reclassification, recapitalization, merger,
consolidation or other reorganization of the Company. As to any particular
Registrable Shares that have been issued, such securities shall cease to
be Registrable Shares when (i) a registration statement with respect to
the sale of such securities shall have become effective under the 1933 Act
and such securities shall have been disposed of under such registration
statement, (ii) they shall have been distributed to the public pursuant to
Rule 144, (iii) they shall have been otherwise transferred or disposed of,
and new certificates, in the case of certificated shares, therefor not
bearing a legend to the effect set forth in the first paragraph of the
form of legend required by Section 4.2(a) restricting further transfer
shall have been delivered by the Company, and subsequent transfer or
disposition of them shall not require their registration or qualification
under the 1933 Act or any similar state law then in force or (iv) they
shall have ceased to be outstanding.
"REGISTRATION EXPENSES" means all out-of-pocket expenses incident to
the Company's performance of or compliance with Section 5, including,
without limitation, all registration and filing fees (including filing
fees with respect to the National Association of Securities Dealers,
Inc.), all fees and expenses of complying with state securities or "blue
sky" laws (including reasonable fees and disbursements of underwriters'
counsel in connection with any "blue sky" memorandum or survey), all
printing expenses, all listing fees, all registrars' and transfer agents'
fees, all "road show" expenses of the Company and the underwriters, the
fees and disbursements of counsel for the Company and of its independent
public accountants, including the expenses of any special audits and/or
"cold comfort" letters required by or incident to such performance and
compliance, the reasonable fees and disbursements of one outside counsel
retained by the holders of Registrable Shares being registered (which
counsel shall be satisfactory to the holders of a majority of the shares
of Registrable Shares being registered), but excluding underwriting
discounts and commissions and applicable transfer taxes, if any, which
shall be borne by the sellers of the Registrable Shares being registered
in all cases.
"RESTRICTED SHARES" means all Shares other than (a) Shares that have
been registered under a registration statement pursuant to the 1933 Act,
(b) Shares with respect to which a Sale has been made in reliance on and
in accordance with Rule 144 or other applicable exemption from
registration under the 1933 Act or (c) Shares with respect to which the
holder thereof shall have delivered to the Company either (i) an opinion,
in form and substance satisfactory to the Company, of counsel, who shall
be satisfactory to the Company, or (ii) a "no action" letter from the
Commission, to the effect that subsequent transfers of such Shares may be
effected without registration under the 1933 Act.
"RESTRICTED TRANSFEREE" means any Person described in the most
recent list, if any, of Persons (which list will be entitled "LIST OF
RESTRICTED TRANSFEREES") that shall have been approved by the Board of
Directors and delivered by the Company to a Prospective Seller (as defined
for purposes of Section 4.4) not later than ten Business Days after
receipt by each Other Stockholder (as therein defined) and the Company of
an Offer Notice (as therein defined).
"RULE 144" means Rule 144 (or any successor provision) under the
1933 Act.
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"SALE" means (including with correlative meanings, the terms "SELL"
or "SOLD") any sale, assignment, transfer, distribution (whether by a
partnership to any of its partners or otherwise) or other disposition of
Shares or of a participation therein.
"SECURITYHOLDER" means each Person (other than the Company) holding
Shares that is a party to this Agreement, so long as such Person shall
beneficially own any Shares (whether or not any such Person owns any
Shares on the date hereof).
"SERIES A PREFERRED STOCK" means Series A Preferred Stock, par value
$.01 per share, of the Company.
"SERIES B PREFERRED STOCK" means Series B Preferred Stock, par value
$.01 per share, of the Company.
"SERIES B PREFERRED DIRECTOR" means the three members of the Board
of Directors designated by holders of the outstanding shares of Series B
Preferred Stock, voting together as a class and to the exclusion of all
other classes of capital stock of the Company.
"SHARE" means any share of Common Stock or Preferred Stock.
"THIRD PARTY" means, with respect to any Securityholder, any other
Person, other than the Company and its subsidiaries or any Affiliate of
such Securityholder.
SECTION 2. CERTAIN GOVERNANCE MATTERS
2.1 Board of Directors Meetings; Director Compensation. The
Company agrees to use its best efforts to ensure that each committee of the
Board of Directors shall include at least one designee of the Series B Preferred
Directors. The Company agrees that the Board of Directors shall meet at least
quarterly, unless otherwise agreed by the Board of Directors. In the event that
any non-employee director receives any compensation for serving on the Board of
Directors, all non-employee directors shall be entitled to receive compensation
therefor at the same rate and on the same terms. The Company shall reimburse the
non-employee directors for their customary and reasonable expenses incurred in
attending meetings of the Board of Directors (or meetings of committees thereof)
in accordance with the Company's policy on reimbursement of such expenses.
2.2 Insurance. The Company shall maintain a directors' and
officers' liability insurance policy upon such terms as may be determined by the
Board of Directors.
2.3 Employee Stock Options. With respect to any Shares issued or
options or rights granted to employees and consultants after the date hereof,
unless otherwise approved by the Board of Directors, the Company shall cause
each employee and consultant of the Company to enter into an agreement providing
for vesting of such Shares or options or rights in accordance with the MEP, as
in effect on the date hereof. No Shares or options or rights shall vest in the
12 months following the date of commencement of the employee's or consultant's
services in the case of new hires, or the date of issuance or grant in the case
of subsequent stock or option grants. Immediately after the Initial Closing (as
such term is defined in the Purchase Agreement), the Company shall reserve an
additional 3,337,114 Shares for issuance under the MEP.
2.4 Qualified Small Business Stock. The Company agrees to use its
Best Efforts (as defined below) to cause its capital stock to be characterized
as "qualified small business stock" as defined in Section 1202(c) of the Code
("QUALIFIED SMALL BUSINESS STOCK"), unless the Board of Directors
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determines that such a characterization is not in the best interests of the
Company. "Best efforts" shall mean only that the Company: (i) complies with any
applicable filing or reporting requirements imposed by the Code on issuers of
Qualified Small Business Stock; (ii) executes and delivers to each
Securityholder, from time to time, such forms, documents, schedules and other
instruments as may be reasonably requested thereby to cause the Securityholder's
Shares of the Company to be characterized as Qualified Small Business Stock; and
(iii) submits to the Securityholders and to the Internal Revenue Service any
reports that may be required under Section 1202(d)(l)(C) of the Code and any
related Treasury Regulations. The Company further agrees that, within 10 days
after any Securityholder has delivered to the Company a written request
therefor, the Company shall deliver to such Securityholder a written statement
informing the Securityholder whether, in the Company's good-faith judgment after
a reasonable investigation, such Securityholder's interest in the Company
constitutes "qualified small business stock" as defined in Section 1202(c) of
the Code, or would constitute "qualified small business stock," if determination
of whether stock constitutes "qualified small business stock" were made by
taking into account the modifications set forth in Section 1045(b)(4) of the
Code. The Company's obligation to furnish a written statement pursuant to this
Section 2.4 shall continue notwithstanding the fact that a class of the
Company's stock may be traded on an established securities market.
2.5 Financial Statements and Reports to Stockholders; Budget. The
Company agrees to deliver to each Preferred Securityholder:
(a) as soon as practicable after the end of each month, and in any
event within 30 days (45 days in the case of the month ending each fiscal
quarter) thereafter, consolidated balance sheets of the Company and its
subsidiaries as of the end of each such month and consolidated statements of
income and cash flow for such month and for the current fiscal year to date and
which shall show an analysis of variances from the budget and the prior month
(with the exception that no notes need be attached to such statements and
year-end audit adjustments may not have been made);
(b) as soon as practicable after the end of each fiscal quarter of
the Company, and in any event within 45 days thereafter, unaudited financial
statements of the Company on a quarterly basis prepared in accordance with
generally accepted accounting principles and fairly reflecting the fiscal
affairs of the Company for such quarterly period and analyzing variances from
the budget and the prior fiscal quarter (with the exception that no notes need
be attached to such statements and year-end audit adjustments may not have been
made);
(c) as soon as practicable after the end of each fiscal year of
the Company, and in any event within 120 days thereafter, an audited
consolidated balance sheet of the Company as of the end of such year and audited
consolidated statements of income, stockholders' equity and cash flows for such
year, which year-end financial reports shall be (i) in reasonable detail, (ii)
prepared in accordance with generally accepted accounting principles, and (iii)
accompanied by the opinion of independent public accountants of recognized
standing selected by the Company; and
(d) within 30 days prior to the end of each fiscal year, an
operating budget and plan respecting the next fiscal year that will be subject
to the approval of the Board of Directors.
2.6 Right of First Refusal, Co-Sale and Drag-Along Provisions.
Following the Initial Closing, the Company shall require all purchasers (other
than purchasers under the 2004 Purchase Agreement) from the Company of shares of
Common Stock who, following such purchase, shall hold greater than 1 % of Common
Stock (calculated on a fully-diluted basis), to agree to the terms and
conditions set forth in the attached Exhibit 2.6.
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2.7 Inspection. The Company shall permit each Preferred
Securityholder, at such Securityholder's expense, to visit and inspect the
Company's properties, to examine its books of account and records and to discuss
the Company's affairs, finances and accounts with its officers, all at such
reasonable times as may be requested by each such Securityholder; provided,
however, that the Company shall not be obligated to provide access (i) to a
competitor of the Company, any information which it reasonably considers to be a
trade secret or confidential information; or (ii) to MEDI Ventures, any trade
secret or confidential information if the Board of Directors determines in good
faith that it would be contrary the Company's best interests to share such
information with MEDI Ventures. The rights of a Preferred Securityholder under
this Section 2.7 may not be assigned as part of such Securityholder's sale of
any of the Registrable Securities except with the consent of the Company, which
consent shall not be unreasonably withheld; provided, however, that
notwithstanding the foregoing, (i) MEDI Ventures may assign these rights to any
member of the MEDI Group and (ii) any Securityholder which is a grantor trust
may transfer its rights to its grantor.
2.8 Employee Confidentiality Agreement. The Company shall require
that each employee and consultant hired or engaged by the Company following the
date hereof signs an employee confidentiality agreement, substantially in the
form attached hereto as Exhibit 2.8 (unless such agreement shall be modified by
the Company upon the approval of the Board of Directors (including a majority of
the Series B Directors)). Further, within 15 days of the Initial Closing, the
Company shall require that each of its current employees and consultants signs
such an employee confidentiality agreement, substantially in the form attached
hereto as Exhibit 2.8.
2.9 Securityholder Matters.
(a) This Agreement shall not impose any fiduciary duty on any
Securityholder or its Affiliates in any such Securityholder's capacity as a
Securityholder. To the maximum extent permitted by Law, each Securityholder
hereby waives all fiduciary duties that, absent such waiver, may be implied by
Law, and, in doing so, recognizes, acknowledges and agrees that its duties and
obligations to each other Securityholder and to the Company are only as
expressly set forth herein.
(b) Each Securityholder acknowledges that the other
Securityholders and their Affiliates may own interests in and/or manage other
businesses, including businesses that may compete with the Company or the other
Securityholders. Each Securityholder and its Affiliates, and their respective
officers, directors, Securityholders, partners, members, agents and employees,
and each member of the Board of Directors (or observer thereon) designated by
such Securityholder (collectively, a "CORPORATE OPPORTUNITIES GROUP"), shall not
be prohibited or restricted from engaging or investing in, independently or with
others, any business opportunity of any type or description, including, without
limitation, those business opportunities that might be the same or similar to
the Company's business. None of the Company, any Securityholder or such
Securityholder's Corporate Opportunities Group shall have any right in or to
such other business opportunities of any other Securityholder or such other
Securityholder's Corporate Opportunities Group or to the income or proceeds
derived therefrom. No Securityholder or its Corporate Opportunities Group shall
be obligated to present any business opportunity to the Company or any other
Securityholder or such other Securityholder's Corporate Opportunities Group,
even if the opportunity is of the character that, if presented to the Company,
could be undertaken by the Company or, if presented to any other Securityholder
or other Securityholder Corporate Opportunities Group, could be undertaken by
such Persons. Each Securityholder and its Corporate Opportunities Group shall
have the right to hold any such business opportunity for its own account or to
recommend such opportunity to Persons other than the Company, any other
Securityholder or any Person in such other Securityholder's Corporate
Opportunities Group.
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(c) Notwithstanding the foregoing, nothing in this Section 2.9
shall relieve, limit, alter or otherwise change the fiduciary duty owed to the
Company by any officer, director or stockholder who is not a Securityholder.
SECTION 3. PREEMPTIVE RIGHTS
3.1 Offer to Sell. Except in the case of Excluded Securities, the
Company shall not issue, sell or exchange, or agree to issue, sell or exchange
(i) any Common Shares, (ii) any Preferred Shares of the Company that by their
terms are convertible into or exchangeable for Common Shares, or (iii) any
option, warrant or other right to subscribe for, purchase or otherwise acquire
any equity security of the Company specified in the foregoing clause (i) or
(ii), in each such case for the purpose of financing the business of the Company
(an "EQUITY FINANCING"), unless in each case the Company shall have first
offered to sell to the Securityholders (for purposes of this Section 3, each an
"OFFEREE" and, together, the "OFFEREES") such Offeree's Section 3 Proportionate
Percentage of such securities (for purposes of this Section 3, the "OFFERED
SECURITIES"), at a price and on such other material terms and conditions as are
generally applicable to such Equity Financing and which shall have been
specified by the Company in writing and delivered to each Offeree (for purposes
of this Section 3, the "OFFER"). The Offer shall by its terms remain open and
irrevocable for a period of 20 Business Days from the date it is delivered by
the Company to the Offerees. For purposes of this Section 3, the "SECTION 3
PROPORTIONATE PERCENTAGE" means, as of any date of determination, the percentage
figure equal to the ratio between the number of Common Shares beneficially owned
by an Offeree of the Company and the aggregate number of Common Shares
outstanding (and issuable upon the exercise of all convertible securities
outstanding).
3.2 Acceptance of Offer. Each Offeree shall have the right and
option, for a period of 20 Business Days after delivery by the Company of the
Offer, to accept any or all its Offered Securities on the terms stated in the
Offer. Acceptance shall be made by delivering, within the 20 Business Day period
of the Offer, a written notice (for purposes of this Section 3, a "NOTICE OF
ACCEPTANCE") to the Company, which notice shall set forth the portion of the
Offered Securities that such Offeree elects to purchase. Such Offer, or any
portion thereof, may be irrevocably rejected at any time within such 20 Business
Day period by written notice to the Company by the Offeror.
3.3 Overallotment Securities. If any Offeree fails to properly
accept all of its Offered Securities, then such unaccepted Offered Securities
shall become the "OVERALLOTMENT SECURITIES." Each Offeree that properly accepts
all of its Offered Securities (a "FULLY-EXERCISING OFFEREE") shall have the
right, at the time it accepts and for a period of 10 days thereafter
(collectively, the "OVERALLOTMENT PERIODS"), to purchase a portion of the
Overallotment Securities on a pro rata basis according to such Fully-Exercising
Offeree's Section 3 Proportionate Percentage.
3.4 Remaining Securities. Upon expiration of the Overallotment
Periods, the Company shall have 90 days to sell all or any part of the remaining
Overallotment Securities (the "REMAINING SECURITIES") to any other Person or
Persons, upon terms and conditions in all material respects, including, without
limitation, price, which are not materially more favorable, in the aggregate, to
such other Person or Persons and not materially less favorable to the Company
than those set forth in the Offer. Upon the closing of the sale to such other
Person or Persons of all the Remaining Securities, which closing shall include
full payment to the Company, (i) the Offerees shall purchase from the Company,
and the Company shall sell to the Offerees, the Offered Securities with respect
to which Notices of Acceptance were delivered to the Company by the Offerees for
the price and at the terms specified in the Offer, and (ii) the Fully-Exercising
Offerees shall purchase from the Company, and the Company shall sell to the
Fully-Exercising Offerees, the Overallotment Securities.
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3.5 Excluded Securities. The rights of the Offerees under this
Section 3 shall not apply to the following securities (the "EXCLUDED
SECURITIES"):
(a) securities issued in connection with a Public Offering or
securities issued in a Rule 144A offering;
(b) Common Shares issued, or stock options granted, or Common
Shares issuable upon exercise of stock options granted, pursuant to the MEP;
(c) securities issued as a stock dividend or upon any stock split
or other subdivision or combination of Shares;
(d) the issuance of any Common Shares upon the exercise,
conversion or exchange of any option, warrant, convertible or exchangeable
security or other right to subscribe for, purchase or otherwise acquire any
security of the Company;
(e) securities issued (i) in connection with any acquisition of
the stock, assets or business of a Person, or (ii) in respect of the initiation
of a joint venture or strategic alliance with another Person, in each case,
which has been approved by the Board of Directors; and
(f) any securities offered or sold after an IPO.
3.4 Board of Directors Determination. The Board of Directors shall
be entitled to make any determination required or permitted to be made under
this Section 3, including any determination of compliance with the provisions
hereof by any Person, and any such determination shall be final and binding on
the Company and all stockholders.
SECTION 4. RESTRICTIONS ON TRANSFER.
4.1 General Restriction. Each Securityholder agrees that it will
not, directly or indirectly, offer, sell, assign, transfer, grant or sell a
participation in, pledge or otherwise dispose of any Shares (or solicit any
offers to buy or otherwise acquire, or take a pledge of, any Shares) in any
manner that would conflict with or violate the 1933 Act or this Agreement.
4.2 Legends.
(a) To the extent required by, or advisable to comply with, the
1933 Act or other applicable law, the Company shall affix to each certificate
evidencing outstanding Shares that is issued to any Securityholder a legend in
substantially the following form:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO REGISTRATION
OF TRANSFER OF SUCH SECURITIES WILL BE MADE ON THE BOOKS OF THE ISSUER
UNLESS SUCH TRANSFER IS MADE IN CONNECTION WITH AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF SUCH ACT OR SUCH ACT DOES NOT APPLY.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AS SET FORTH IN A SECURITYHOLDER AGREEMENT DATED
AS OF SEPTEMBER 28, 2004, A COPY OF WHICH IS ON FILE AT
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THE PRINCIPAL EXECUTIVE OFFICES OF THE ISSUER. NO REGISTRATION OF TRANSFER
OF SUCH SECURITIES WILL BE MADE ON THE BOOKS OF THE ISSUER UNLESS AND
UNTIL SUCH RESTRICTIONS SHALL HAVE BEEN COMPLIED WITH."
(b) In the event that any Shares shall cease to be Restricted
Shares, the Company shall, upon the written request of the holder thereof, issue
to such holder a new certificate evidencing such Shares without the first
paragraph of the legend required by Section 4.2(a) endorsed thereon. In the
event that any Shares shall cease to be subject to the restrictions on transfer
set forth in this Agreement, the Company shall, upon the written request of the
holder thereof, issue to such holder a new certificate evidencing such Shares
without the second paragraph of the legend required by Section 4.2(a).
4.3 Certain Restrictions on Transfer. Each Securityholder agrees
that it will not, directly or indirectly, make any Sale or create, incur or
assume any consensual Encumbrance with respect to any Shares held by such
Securityholder, other than: (a) any Sale that is made in compliance with the
procedures, and subject to the limitations, set forth in Section 4.4; (b) any
Sale that is made in compliance with the procedures, and subject to the
limitations, set forth in Section 4.5; (c) any Sale pursuant to a Public
Offering in accordance with Section 5; or (d) any Sale to a Permitted
Transferee. Notwithstanding the foregoing, except as otherwise expressly
provided herein, all Sales permitted by the foregoing clauses (a) through (d)
shall be subject to, and shall not be made other than in compliance with, the
provisions of Sections 4.1, 4.2, 4.6 and 4.7.
4.4 Right of First Refusal.
(a) If any Securityholder receives from or otherwise negotiates
with a Third Party a bona fide financed offer to purchase (for purposes of
Sections 4.4 and 4.5, an "OFFER") any of the Shares owned or held by such
Securityholder, and such Securityholder intends to pursue a sale of such Shares
to such Third Party, such Securityholder (for purposes of Sections 4.4 and 4.5,
the "PROSPECTIVE SELLER") shall provide the Company and each Securityholder that
owns Shares (for purposes of Sections 4.4 and 4.5, the "OTHER SECURITYHOLDERS")
written notice of such Offer (for purposes of Sections 4.4 and 4.5, an "OFFER
NOTICE"). The Offer Notice shall identify the Third Party making the Offer, the
number of Shares with respect to which the Prospective Seller has such an Offer
(for purposes of Sections 4.4 and 4.5, the "OFFERED SHARES"), the price per
Share at which a sale is proposed to be made (for purposes of Sections 4.4 and
4.5, the "OFFER PRICE"), the form of consideration to be paid and all the other
material terms and conditions of the Offer.
(b) The receipt of an Offer Notice by each Other Securityholder
and the Company from a Prospective Seller shall constitute an offer by such
Prospective Seller to sell to each Other Securityholder (other than the
Prospective Seller and its Affiliates) and the Company the Offered Shares at the
Offer Price in cash (in an amount equal to the cash consideration specified in
such Offer Notice or, if such consideration is not cash, an amount equal to the
fair market value of such noncash consideration as determined in good faith by
the Board of Directors). Such offer shall be irrevocable for 20 Business Days
after receipt of such Offer Notice (for purposes of Sections 4.4 and 4.5, the
"NOTICE PERIOD") by each such Other Securityholder and the Company. During the
Notice Period, each such Other Securityholder and the Company shall, subject to
the priorities set forth in the next succeeding paragraph, have the right to
accept such offer as to all or a portion of the Offered Shares by giving a
written notice of acceptance (for purposes of this Section 4.4, the "NOTICE OF
ACCEPTANCE") to the Prospective Seller prior to the expiration of the Notice
Period (for the purposes of this Section 4.4, any such Other Securityholder or
the Company so accepting such offer, an "ACCEPTING PARTY"). In the event that
within five Business Days prior to the expiration of the Notice Period, the
Prospective Seller shall not have received Notices of Acceptance for all the
Offered Shares, the Prospective Seller shall notify each such Other
Securityholder
10
of such fact and shall provide each thereof an opportunity to submit an
additional Notice of Acceptance of any such Offered Shares.
Each such Other Securityholder and the Company shall be entitled to
accept such offer from the Prospective Seller in the following order of
priority: First, the Company shall be entitled to accept such offer for any or
all of the Offered Shares; second, if the Company shall not have accepted such
offer for all the Offered Shares, each such Other Securityholder shall be
entitled to accept such offer for not more than the portion of the remaining
Offered Shares determined on a pro rata basis based on the ratio of the number
of Common Shares then beneficially owned by such Other Securityholder to the
number of Common Shares then beneficially owned by all such Other
Securityholders; and third, if one or more such Other Securityholders and the
Company have not accepted such offer for all the Offered Shares, each such Other
Securityholder shall then be entitled to accept such offer for not more than the
portion of the remaining Offered Shares determined on a pro rata basis based on
the ratio of (i) the number of Offered Shares specified in such Other
Securityholder's Notice of Acceptance in respect of which such Other
Securityholder shall not be entitled to accept the Prospective Seller's offer as
a result of the application of clause second above to (ii) the number of Offered
Shares specified in all such Other Securityholders' Notices of Acceptance in
respect of which such Other Securityholders shall not be entitled to accept the
Prospective Seller's offer as a result of the application of clause second above
(it being understood that each such Other Securityholder shall be entitled to
indicate its interest in accepting more than its pro rata share of the remaining
Offered Shares and to accept the Prospective Seller's offer with respect to such
additional Offered Shares if all the Offered Shares are not otherwise accepted
pursuant to clause first, second and third). If the Company or any such Other
Securityholder so accepts the Prospective Seller's offer, such Person will
purchase for cash from the Prospective Seller, and the Prospective Seller will
sell to such Accepting Party, such number of Offered Shares as to which such
Accepting Party shall have accepted the Prospective Seller's offer. The price
per Share to be paid by such Accepting Party shall be the Offer Price specified
in the Offer Notice. The Notice of Acceptance shall specify (i) such Accepting
Party's acceptance of the Prospective Seller's offer and (ii) the number of
Offered Shares to be purchased by such Accepting Party.
(c) The consummation of any such purchase by and sale to any
Accepting Party shall take place on such date, not later than 30 Business Days
after receipt of the Notice of Acceptance from such Accepting Party by the
Prospective Seller, as such Accepting Party and the Prospective Seller shall
select. Upon the consummation of such purchase and sale, the Prospective Seller
shall (i) deliver to the Accepting Party certificates (in the case of
certificated shares) evidencing the Offered Shares purchased and sold duly
endorsed in blank or accompanied by written instruments of transfer in form
satisfactory to such Accepting Party duly executed by the Prospective Seller, or
an instruction (in the case of uncertificated shares) to register such Offered
Shares purchased and sold in a manner satisfactory to the Accepting Party, and
(ii) shall assign all its rights under this Agreement with respect to the
Offered Shares purchased and sold pursuant to an instrument of assignment
reasonably satisfactory to such Accepting Party.
(d) In the event that (i) each such Other Securityholder and the
Company shall have received an Offer Notice from a Prospective Seller but the
Prospective Seller shall not have received from the Company and one or more
Other Securityholders Notices of Acceptance as to all the Offered Shares prior
to the expiration of the Notice Period or (ii) an Accepting Party shall have
given a Notice of Acceptance to the Prospective Seller but shall have failed to
consummate, other than as a result of the fault of the Prospective Seller, a
purchase of the Offered Shares with respect to which such Notice of Acceptance
was given within 45 days after receipt of the Notice of Acceptance by the
Prospective Seller, such Prospective Seller shall have the right to reject any
or all Notices of Acceptance theretofore received from the Other Securityholders
and the Company, and nothing in this Section 4.4 shall limit the right of the
Prospective Seller to make a sale of the Offered Shares so long as all the
Offered Shares that are sold
11
or otherwise disposed of by the Prospective Seller (which number of Offered
Shares shall be not less than the number of Offered Shares specified in such
Offer Notice) are sold for the consideration specified in such Offer Notice (A)
within 60 days after the date of receipt of such Offer Notice by each such Other
Securityholder and the Company, (B) at an amount not less than the Offer Price
included in such Offer Notice and (C) to the Third Party making the Offer (so
long as none of such Third Parties is a Restricted Transferee).
(e) In the event that each such Other Securityholder and the
Company shall have received an Offer Notice from a Prospective Seller but shall
not have given a Notice of Acceptance for all the Offered Shares to the
Prospective Seller prior to the expiration of the Notice Period following
receipt of such Offer Notice and such Prospective Seller shall not have sold the
remaining Offered Shares before the expiration of the 60 day period in
accordance with paragraph (d) above, then such Prospective Seller shall not give
another Offer Notice for a period of 90 days from the last day of such 60 day
period.
(f) Anything in this Section 4.4 or in Section 4.3 to the contrary
notwithstanding, the provisions of this Section 4.4 will not be applicable to
any Sale or Encumbrance described in clauses (b) through (e) of Section 4.3.
4.5 Right to Participate in Certain Dispositions.
(a) So long as any Securityholder (and its Affiliates) shall
beneficially own, in the aggregate, at least 10% of the Common Shares
outstanding or issuable upon the exercise or conversion of any outstanding
options or other rights to acquire Common Shares, no such Securityholder shall
in any transaction or series of related transactions, directly or indirectly,
sell or otherwise dispose of for value any Shares held by it to any Third Party
or Parties, unless the terms and conditions of such sale or other disposition
shall include an offer to include, at the option of each of the Other
Securityholders, in such sale or other disposition to the Third Party or Third
Parties, such Other Securityholder's Pro Rata Portion (as hereinafter defined)
of the Offered Shares on the terms set forth in this Section 4.5.
(b) If, so long as any Securityholder (and its Affiliates) shall
beneficially own, in the aggregate, at least 10% of the Common Shares
outstanding or issuable upon the exercise or conversion of any outstanding
options to acquire Common Share, any such Securityholder receives from a Third
Party or Parties an Offer to acquire the Offered Shares, thus becoming a
Prospective Seller in accordance with the definition of Section 4.4, and such
Prospective Seller intends to pursue a sale of such Shares to such Third Party
or Parties, the Prospective Seller shall send the Offer Notice to each of the
Other Securityholders not later than the 20th Business Day prior to the
consummation of the sale or other disposition contemplated by the Offer. The
Offer Notice shall identify the Offered Shares, the price offered for such
Offered Shares, all other material terms and conditions of the Offer and, in the
case of an Offer in which the consideration payable for Shares consists in whole
or in part of consideration other than cash, such information relating to such
other consideration as the Company may reasonably determine. During the Notice
Period, each Other Securityholder shall have the right and option to notify the
Prospective Seller of such Other Securityholder's interest in selling or
otherwise disposing of up to its Pro Rata Portion of the Offered Shares pursuant
to the Offer. Each Other Securityholder desiring to exercise such option shall,
prior to the expiration of the Notice Period, provide the Prospective Seller
with a written notice specifying the number of Shares as to which such Other
Securityholder has an interest in selling or otherwise disposing of pursuant to
the Offer (for purposes of this Section 4.5, a "NOTICE OF INTEREST"), and shall
deliver to the Prospective Seller (A) the certificate or certificates (in the
case of certificated shares) evidencing the Shares to be sold or otherwise
disposed of pursuant to such Offer by such Other Securityholder duly endorsed in
blank or accompanied by written instruments of transfer in form satisfactory to
the Prospective Seller executed by such Other Securityholder, or an instruction
(in the case of uncertificated shares) to register the transfer of the Shares or
be sold or otherwise disposed of
12
pursuant to such Offer by such Other Securityholders in a form satisfactory to
the Prospective Seller executed by such Other Securityholder, (B) an instrument
of assignment reasonably satisfactory to the Prospective Seller assigning, as of
the consummation of the sale or other disposition to the Third Party or Parties,
all such Other Securityholder's rights hereunder with respect to the Shares to
be sold or otherwise disposed of, and (C) a special irrevocable
power-of-attorney authorizing the Prospective Seller to sell or otherwise
dispose of such Shares pursuant to the terms of the Offer and to take all such
actions as shall be necessary or appropriate in order to consummate such sale or
other disposition. Delivery of such certificate or certificates evidencing the
Shares to be sold (or such instruction), the instrument of assignment and the
special irrevocable power-of-attorney authorizing the Prospective Seller to sell
or otherwise dispose of such Shares shall constitute an irrevocable election by
such Other Securityholder to authorize and permit the Prospective Seller to sell
such Shares pursuant to the Offer.
(c) Promptly after the consummation of the sale or other
disposition of the Shares of the Prospective Seller and the Other
Securityholders to the Third Party or Parties pursuant to the Offer, the
Prospective Seller shall remit to each of the Other Securityholders the total
sales price of the Shares of such Other Securityholders sold or otherwise
disposed of pursuant thereto.
(d) If at the end of the Notice Period, any Other Securityholder
shall not have given a Notice of Interest (and delivered all other required
documents) with respect to some or all of its Pro Rata Portion of the Offered
Shares, such Other Securityholder will be deemed to have waived all its rights
under this Section 4.5 with respect to the sale or other disposition pursuant to
the Offer of the portion of its Pro Rata Portion of the Offered Shares with
respect to which a Notice of Interest shall not have been given. If, at the end
of the 60 day period following the giving of the Offer Notice, the Prospective
Seller has not completed the sale of all the Offered Shares and the Shares with
respect to which Other Securityholders shall have given Notices of Interest
pursuant to this Section 4.5, the Prospective Seller shall return to such Other
Securityholders all certificates evidencing the unsold Shares that such Other
Securityholders delivered for sale or other disposition pursuant to this Section
4.5 (or any such instructions) and such Other Securityholders' related
instruments of assignment and powers-of-attorney.
(e) Except as expressly provided in this Section 4.5, the
Prospective Seller shall have no obligation to any Other Securityholder with
respect to the sale or other disposition of any Shares owned by such Other
Securityholder in connection with this Section 4.5. Anything herein to the
contrary notwithstanding and irrespective of whether any Notice of Interest
shall have been given, the Prospective Seller shall have no obligation to any
Other Securityholder to sell or otherwise dispose of any offered Shares pursuant
to this 4.5 or as a result of any decision by the Prospective Seller not to
accept or consummate any Offer or sale or other disposition with respect to the
offered Shares (it being understood that any and all such decisions shall be
made by the Prospective Seller in its sole discretion). No Other Securityholder
shall be entitled to sell or otherwise dispose of Shares directly to any Third
Party or Parties pursuant to an Offer (it being understood that all such sales
and other dispositions shall be made only on the terms and pursuant to the
procedures set forth in this Section 4.5).
(f) For purposes of this Section 4.5, "PRO RATA PORTION" means,
with respect to each Other Securityholder, a number of Shares of the same class,
series or type as the Offered Shares (subject to the next succeeding sentence)
equal to the product of (a) the total number of Offered Shares, times (b) a
fraction, the numerator of which shall be the fair market value (as determined
by the Board of Directors in good faith)of the total number of Shares owned by
such Other Securityholder, and the denominator of which shall be the fair market
value (as determined by the Board of Directors in good faith) of the total
number of Shares outstanding. Anything in this Section 4.5 to the contrary
notwithstanding, in the event any such Other Securityholder shall have an
insufficient number of Shares of the class, series or type of the Offered Shares
necessary to exercise its rights under this Section 4.5 in full, such Other
Securityholder may substitute therefor Shares of any other class, series or type
with an aggregate fair market value that,
13
when added to the fair market value of the number of Shares of the same class,
series or type as the Offered Shares owned by such Other Securityholder, shall
permit such Other Securityholder to dispose of its entire Pro Rata Portion in
the Offer pursuant to this Section 4.5.
(g) Anything in this Section 4.5 or in Section 4.3 to the contrary
notwithstanding, the provisions of this Section 4.5 will not be applicable to
any Sale of Shares described in clause (c) or (e) of Section 4.3. Nothing in
this Section 4.5 shall affect any of the obligations of any of the
Securityholders under any other provision of this Agreement.
4.6 Certain Persons to Execute Agreement.
(a) Each Securityholder agrees that it will not make any Sale or
create, incur or assume any Encumbrance with respect to any Shares held by such
Securityholder, unless, prior to the consummation of any such Sale or the
creation, incurrence or assumption of any such Encumbrance, the Person to whom
such Sale is proposed to be made or the Person in whose favor such Encumbrance
is proposed to be created, incurred or assumed (for purposes of this Section
4.6, a "PROSPECTIVE TRANSFEREE") (i) executes and delivers to the Company an
agreement, in form and substance satisfactory to the Company, whereby such
Prospective Transferee confirms that, with respect to the Shares that are the
subject of such Sale or Encumbrance, it shall be deemed to be a "Securityholder"
for the purposes of this Agreement and agrees to be bound by all the terms of
this Agreement to which the transferor Securityholder is a party and (ii) unless
such Prospective Transferee is a recognized institutional investor, delivers to
the Company an opinion of counsel, satisfactory in form and substance to the
Company, to the effect that the agreement referred to above that is delivered by
such Prospective Transferee is a legal, valid and binding obligation of such
Prospective Transferee enforceable against such Prospective Transferee in
accordance with its terms. Upon the execution and delivery by such Prospective
Transferee of the agreement referred to in clause (i) of the next preceding
sentence and, if required, the delivery of the opinion of counsel referred to in
clause (ii) of the next preceding sentence, such Prospective Transferee shall be
deemed a "Securityholder" for the purposes of this Agreement, and shall have the
rights and be subject to the obligations of a Securityholder hereunder with
respect to the Shares held by such Prospective Transferee or in respect of which
such Encumbrance shall have been created, incurred or assumed.
(b) In the event that the Company shall issue any Shares, or make
a Sale of any issued Shares, to any Person, the Company shall require such
Person to execute and deliver to the Company an agreement, in form and substance
satisfactory to the Company, whereby such Person confirms that, with respect to
the Shares that are the subject of such Sale, it shall be deemed to be a
"Securityholder" for purposes of this Agreement and agrees to be bound by all
the terms of this Agreement, such Person shall thereupon be deemed a
"Securityholder" for purposes of this Agreement, and shall have the rights and
be subject to the obligations of a Securityholder hereunder with respect to the
Shares held by such Person.
(c) Anything in this Section 4.6 or in Section 4.3 or 4.4 to the
contrary notwithstanding, the provisions of this Section 4.6 will not be
applicable to any Sale of Shares pursuant to and in accordance with Section 5.
4.7 Improper Transfer. Any attempt to sell, assign, transfer,
grant or sell a participation in, pledge or otherwise dispose of any Shares not
in compliance with this Agreement shall be null and void and neither the Company
nor any transfer agent shall give any effect in the Company's stock records to
such attempted sale, assignment, transfer, grant or sale of a participation,
pledge or other disposition.
14
SECTION 5. REGISTRATION RIGHTS.
5.1 Registration Upon Request.
(a) Upon the written request of the holder or holders of at least
25% of the Registrable Shares then outstanding requesting that the Company
effect the registration under the 1933 Act of all or part of the Registrable
Shares held by such holder or holders and specifying the intended method or
methods of disposition of such Registrable Shares, the Company will promptly
give written notice of such requested registration to all holders of Registrable
Shares and thereupon will use its best efforts to effect the registration under
the 1933 Act, as expeditiously as is reasonable, of:
(i) the Registrable Shares that the Company has been so
requested to register by such holder or holders, for disposition in
accordance with the intended method of disposition stated in such request;
and
(ii) all other Registrable Shares that the Company has been
requested to register by the holders of Registrable Shares by written
request delivered to the Company within 20 Business Days after the giving
of such written notice by the Company (which request shall specify the
intended method of disposition of such Registrable Shares), all to the
extent requisite to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Shares so to be
registered; provided, however, that:
(A) the Company shall not be required to effect any
registration pursuant to this Section 5.1, unless it shall already
be a Public Company;
(B) the Company shall not at any time be required to
effect any registration pursuant to this Section 5.1 unless the
requests from holders of Registrable Shares for such registration
cover an aggregate number of Registrable Shares with an aggregate
market value on the date of the initial request for such
registration of at least $5 million;
(C) the Company shall not be required to effect a
registration pursuant to this Section 5.1, other than with a
registration statement on Form S-3 or a similar short-form
registration statement, within a period of 12 months after the
effective date of any other registration statement relating to any
registration request under this Section 5.1 or to any registration
of which prior notice shall have been given to all holders of
outstanding Registrable Shares pursuant to Section 5.3 that was not
effected with a registration statement on Form S-3 or a similar
short-form registration statement;
(D) if the Company shall have previously effected a
registration pursuant to this Section 5.1 or shall have previously
effected a registration of which prior notice shall have been given
to all holders of outstanding Registrable Shares pursuant to Section
5.3, the Company shall not be required to effect a registration
pursuant to this Section 5.1 until a period of 6 months shall have
elapsed from the effective date of the most recent such
registration; and
(E) with respect to any registration statement filed,
or to be filed, pursuant to this Section 5.1, if the Board of
Directors determines that, in its judgment, it would (because of the
existence of plans or negotiations regarding any material
acquisition involving, or the sale or recapitalization of, the
Company or any of its subsidiaries or any material financing
activity, or the existence of material non-public
15
information about the Company, or the unavailability of any required
financial statements, or any other event or condition of similar
significance to the Company and its subsidiaries, taken as a whole)
be significantly disadvantageous (a "DISADVANTAGEOUS CONDITION") to
the Company and its Affiliates, taken as a whole, for such a
registration statement to become effective, or to be maintained
effective, the Company shall, notwithstanding any other provision of
this Section 5, be entitled, upon the giving of a written notice (a
"DELAY NOTICE") to such effect to each holder of Registrable Shares
included or to be included in such registration statement, to cause
such registration statement to be withdrawn and the effectiveness of
such registration statement terminated, or, in the event no
registration statement has yet been filed, shall be entitled not to
file any such registration statement, until, in the judgment of the
Board of Directors, such Disadvantageous Condition no longer exists
(notice of which the Company shall promptly deliver to the holders
of Registrable Shares with respect to which any such registration
statement has been filed, or was to have been filed), but in no
event for longer than 90 days after the date of the Delay Notice.
Upon receipt of any notice of the existence of a Disadvantageous
Condition, such holders of Registrable Shares selling securities
pursuant to an effective registration statement will forthwith
discontinue use of the prospectus contained in such registration
statement and, if so directed by the Company, each such holder of
Registrable Shares will deliver to the Company all copies of the
prospectus then covering such Registrable Shares current at the time
of receipt of such notice, and, in the event no registration
statement has yet been filed, all drafts of the prospectus covering
such Registrable Shares. Notwithstanding the foregoing provisions of
this subparagraph (E), no registration statement filed and
subsequently withdrawn by reason of any existing or anticipated
Disadvantageous Condition as hereinabove provided shall count as one
of the two (2) registration statements referred to in the limitation
in Section 5.1 (b), or count against the limitation in Section
5.1(a)(ii)(C) or 5.1(a)(ii)(D). The Company may not give a Delay
Notice more than once in any period of 12 consecutive months.
(b) Anything herein to the contrary notwithstanding, the Company
shall not be obligated to file more than two registration statements pursuant to
this Section 5.1 that are initiated by the Securityholders.
(c) The Company shall pay all Registration Expenses in connection
with two registrations of Registrable Shares effected by it that are initiated
by the Securityholders in each case pursuant to this 5.1.
(d) In connection with any firm commitment underwriting pursuant
to this Section 5.1, the Company will not register securities for sale for the
account of any Persons other than the Company and holders of Registrable Shares.
(e) In connection with any underwritten offering with respect to
which holders of Registrable Shares shall have requested registration pursuant
to this Section 5.1, the holders of a majority of the Registrable Shares
participating in such offering shall have the right to select the managing
underwriter with respect to such offering.
5.2 Request for Registration on Form S-3. Subject to the terms of
this Agreement, in the event that the Company receives from the holder or
holders of at least 25% of the Registrable Shares then outstanding, a written
request that the Company effect any registration on Form S-3 (or any successor
form to Form S-3 regardless of its designation) under the 1933 Act at a time
when the Company is eligible to register securities on Form S-3 (or any
successor form to Form S-3 regardless of
16
its designation) for an offering of Registrable Shares which such holder or
holders in their good faith discretion determine would have an anticipated
offering price of at least $ 1 million, the Company will promptly give written
notice of the proposed registration to the holder or holders and will as soon as
practicable use its best efforts to effect registration of the Registrable
Shares specified in such request, together with all or such portion of the
Registrable Shares of any holder or holders joining in such request as are
specified in a written request delivered to the Company within 20 days after
written notice from the Company of the proposed registration. There shall be no
limit to the number of occasions on which the Company shall be obligated to
effect registration under this Section 5.2, but the Company shall not be
obligated to effect more than one such registrations in any 12 month period. The
Company agrees to keep a registration made pursuant to the provisions of this
Section 5.2 effective until the earlier to occur of 90 days following the date
such registration becomes effective or until the holder or holders have
completed the distribution described in the registration statement relating
thereto. Notwithstanding the foregoing, the Company shall not be obligated to
effect any registration pursuant to this Section 5.2:
(a) if Form S-3 is not available for such offering by the holder
or holders;
(b) if the holder or holders, together with the holders of any
other securities of the Company entitled to inclusion in such registration,
propose to sell Registrable Shares and such other securities (if any) at an
aggregate price to the public of less than $ 1 million before deduction of
underwriting discounts and selling commissions;
(c) if within 30 days of receipt of a written request from any
holder or holders pursuant to this Section 5.2, the Company gives notice to such
holder or holders of the Company's intention to make a public offering within 90
days;
(d) if the Company shall furnish to the holder or holders a
certificate signed by the President of the Company stating that, in the good
faith judgment of the Board of Directors, it would be seriously detrimental to
the Company for any registration to be effected as requested under this Section
5.2, the Company shall have the right to defer the filing of a registration
statement with respect to such offering for a period of not more than 90 days
from delivery of the request of the holder or holders requesting such
registration; provided, however, that the Company may not utilize this right
more than once in any twelve (12)-month period; or
(e) in any particular jurisdiction in which the Company would be
required to qualify to do business or to execute a general consent to service of
process in effecting such registration, qualification or compliance.
5.3 Incidental Registration.
(a) If, at any time after the Company has completed an IPO, the
Company proposes to register (other than pursuant to Section 5.1) any of its
authorized but unissued Common Shares under the 1933 Act on a form and in a
manner that would permit registration of Registrable Shares for sale to the
public under the 1933 Act, it will each such time give prompt written notice to
all holders of Registrable Shares of its intention to do so, describing such
securities and specifying the form and manner and the other relevant facts
involved in such proposed registration (including, without limitation, whether
or not such registration will be in connection with an underwritten offering of
its Common Stock and, if so, the identity of the managing underwriter and
whether such offering will be pursuant to a "best efforts" or "firm commitment"
underwriting). Upon the written request of any such holder of Registrable Shares
delivered to the Company within 20 Business Days after such notice shall have
been given to such holder (which request shall specify the Registrable Shares
intended to be disposed of by such holder and the intended method of disposition
thereof), the Company will use its best efforts to effect the registration
17
under the 1933 Act, as expeditiously as is reasonable, of all Registrable Shares
that the Company has been so requested to register by the holders of Registrable
Shares, to the extent requisite to permit the disposition (in accordance with
the intended methods thereof as aforesaid) of the Registrable Shares so to be
registered; provided, however, that:
(i) if, at any time after giving such written notice of its
intention to register any of such securities and prior to the effective
date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register
such securities, the Company may, at its election, give written notice of
such determination to each holder of Registrable Shares that has requested
to register Registrable Shares and thereupon the Company shall be relieved
of its obligation to register any Registrable Shares in connection with
such registration (but not from its obligation to pay the Registration
Expenses in connection therewith to the extent provided in Section
5.3(b)), without prejudice, however, to the rights of any one or more
holders to request such registration be effected as a registration under
Section 5.1;
(ii) if (A) the registration so proposed by the Company
involves an underwritten offering of the securities so to be registered,
to be distributed by or through one or more underwriters of recognized
standing under underwriting terms appropriate for such a transaction, and
(B) the managing underwriter of such underwritten offering selected by the
Company shall advise the Company that, in its judgment, the number of
securities proposed to be included in such offering by the Company (for
purposes of this Section 5.3(a), "Company Securities") and the number of
shares of Registrable Shares held by all Securityholders proposed to be
included in such offering by the holder or holders thereof should be
limited, then the Company will promptly advise each such holder of
Registrable Shares thereof and the number of Shares proposed to be
included in such registration shall be included in the following order of
priority:
(i) first, the Company Securities;
(ii) second, the Registrable Shares requested to be
included in such registration that are held by the Securityholders
(or, if necessary, such Registrable Shares pro rata among the
holders thereof based upon the number of Registrable Shares owned by
each such holder); and
(iii) third, any other Registrable Shares.
(iii) the Company shall not be obligated to effect any
registration of Registrable Shares under this Section 5.3 that is
incidental to the registration of any of its securities in connection with
any merger, acquisition, exchange offer, dividend reinvestment plan or
stock option or other employee benefit plan.
(b) No registration of Registrable Shares effected under this
Section 5.3 shall relieve the Company of its obligation to effect registrations
of Registrable Shares upon the request of one or more holders pursuant to
Section 5.1.
(c) The Company will pay all Registration Expenses in connection
with each registration of Registrable Shares effected by it pursuant to this
Section 5.3.
(d) In the event that the managing underwriter advises the
Securityholders requesting the registration of Registrable Shares pursuant to
Section this 5.3 in writing that in its judgment, the
18
number of shares of Registrable Shares proposed to be included in such offering
by the holder or holders thereof should be limited, the managing underwriter
(subject to the allocation priority set forth in Section 5.3(a)) may:
i. in the case of an IPO, exclude some or all Registrable
Shares from such Registration and underwriting; and
ii. in the case of any subsequent registered public offering
of the Company's securities, limit the number of shares of
Registrable Shares to be included in such registration and
underwriting to not less than twenty-five percent (25%) of the
securities included in such registration (based on aggregate market
values).
5.4 Registration Procedures.
(a) If and whenever the Company is required to use its best
efforts to effect the registration of any Registrable Shares under the 1933 Act
as provided in Section 5.1 or 5.3, the Company will as expeditiously as is
reasonable:
(i) prepare and file with the Commission on any appropriate
form a registration statement with respect to such Registrable Shares and
use its best efforts to cause such registration statement to become
effective;
(ii) prepare and file with the Commission such amendments
(including post-effective amendments) and supplements to such registration
statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective and to comply with
the provisions of the 1933 Act with respect to the disposition of all
Registrable Shares and other securities covered by such registration
statement until the earlier of (A) such time as all such Registrable
Shares and other securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set forth
in such registration statement and (B) the expiration of 20 Business Days
from the date such registration statement first becomes effective as may
be determined by the holders of Registrable Shares covered by such
registration statement by notice to the Company prior to the date such
registration statement becomes effective;
(iii) furnish to each seller of such Registrable Shares such
number of conformed copies of such registration statement and of each such
amendment and supplement thereto (in each case including all exhibits),
such number of copies of the prospectus included in such registration
statement (including each preliminary prospectus and any summary
prospectus), in conformity with the requirements of the 1933 Act, such
documents incorporated by reference in such registration statement or
prospectus, and such other documents, as such seller may reasonably
request in order to facilitate the sale or disposition of such Registrable
Shares;
(iv) use its best efforts to register or qualify all
Registrable Shares and other securities covered by such registration
statement under such other securities or "blue sky" laws of such
jurisdictions as each seller shall reasonably request, and do any and all
other acts and things that may be necessary to enable such seller to
consummate the disposition in such jurisdictions of its Registrable Shares
covered by such registration statement, except that the Company shall not
for any such purpose be required to qualify generally to do business as a
foreign corporation in any jurisdiction wherein it is not so qualified, or
to subject itself to taxation in respect of doing business in any such
jurisdiction, or to consent to general service of process in any such
jurisdiction;
19
(v) furnish to each seller of Registrable Shares a signed
counterpart, addressed to such seller, of (A) an opinion of counsel for
the Company, dated the effective date of such registration statement (or,
if such registration includes an underwritten public offering, dated the
date of the closing under the underwriting agreement), and (B) if
available, a "cold comfort" letter signed by the independent public
accountants who have issued a report on the Company's financial statements
included in such registration statement, covering substantially the same
matters with respect to such registration statement (and the prospectus
included therein) and, in the case of such accountants' letter, with
respect to events subsequent to the date of such financial statements, as
are customarily covered in opinions of issuer's counsel and in
accountants' letters delivered to underwriters in underwritten public
offerings of securities and, in the case of the accountants' letter, such
other financial matters as such seller may reasonably request;
(vi) immediately notify each seller of Registrable Shares
covered by such registration statement at any time when a prospectus
relating thereto is required to be delivered under the 1933 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 any material fact required
to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing or if it is
necessary to amend or supplement such prospectus to comply with law, 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 Registrable Shares, such prospectus shall not include
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing and shall
otherwise comply in all material respects with law and so that such
prospectus, as amended or supplemented, will comply with law;
(vii) 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, beginning with the
first month of the first fiscal quarter after the effective date of such
registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the 1933 Act;
(viii) use its best efforts to list such securities on each
securities exchange on which Common Shares are then listed, if such
securities are not already so listed and if such listing is then permitted
under the rules of such exchange, and provide a transfer agent and
registrar for such Registrable Shares not later than the effective date of
such registration statement; and
(ix) issue to any underwriter to which any holder of
Registrable Shares may sell such Registrable Shares in connection with any
such registration (and to any direct or indirect transferee of any such
underwriter) certificates evidencing shares of Class A Common Stock
without the legends described in Section 4.2(a).
The Company may require each seller of Registrable Shares as to
which any registration being effected to furnish the Company with such
information regarding such seller and the distribution of such securities as the
Company may from time to time reasonably request in writing and as shall be
required by law or by the Commission in connection therewith.
(b) Whenever a registration requested by one or more holders
pursuant to Section 5.1 for an underwritten offering, only shares constituting
Registrable Shares that are to be distributed by the
20
underwriters and such unissued securities of the Company as the Company may
elect to include in such offering may be included in such registration. If (i)
the registration so requested by holders of Registrable Shares pursuant to
Section 5.1 involves an underwritten offering of such securities, to be
distributed (on a firm commitment basis) by or through one or more underwriters
of recognized standing under underwriting terms appropriate for such a
transaction, and (ii) the managing underwriter of such offering shall advise the
Company that, in its judgment, the number of shares of Registrable Shares held
by all Securityholders proposed to be included in such offering by the holder or
holders thereof (for purposes of Section 5.4(b), "COMPANY SECURITIES") should be
limited, then the Company will promptly advise each such holder of Registrable
Shares thereof, and the number of Shares proposed to be included in such
registration shall be included in the following order of priority:
(i) first, the Registrable Shares requested to be included
in such registration that are held by the Securityholders (or, if
necessary, such Registrable Shares pro rata among the holders thereof
based upon the number of Registrable Shares owned by each such holder);
(ii) second, the Company Securities; and
(iii) third, any other Registrable Shares.
(c) Whenever a registration requested by one or more holders
pursuant to Section 5.1 is for an underwritten offering, only shares
constituting Registrable Shares that are to be distributed by the underwriters
and such unissued securities of the Company as the Company may elect to include
in such offering may be included in such registration.
(d) If requested by the underwriters for any underwritten offering
of Registrable Shares on behalf of a holder or holders of Registrable Shares
pursuant to a registration requested under Section 5.1, the Company will enter
into an underwriting agreement with such underwriters for such offering, such
agreement to contain such representations and warranties by the Company and such
other terms and conditions as are customarily contained in underwriting
agreements with respect to secondary distributions, including, without
limitation, indemnities to the effect and to the extent provided in Section 5.6.
(e) If any registration pursuant to Section 5.1 or 5.3 shall be in
connection with an underwritten public offering, each holder of Registrable
Shares agrees by acquisition of such Registrable Shares, if so required by the
managing underwriters, not to effect any public sale or distribution (including
any sale pursuant to Rule 144) of Registrable Shares (other than as part of such
underwritten public offering) within 10 days prior to the effective date of the
registration statement with respect to such underwritten public offering or 180
days after the effective date of such registration statement.
(f) The Company agrees, if so required by the managing
underwriters in connection with an underwritten offering of Registrable Shares
pursuant to Section 5.1 or 5.3, not to effect any public sale or distribution of
any of its equity securities or securities convertible into or exchangeable or
exercisable for any of such equity securities during the 10 days prior to and
the 180 days after the effective date of any registration statement with respect
to such underwritten public offering, except as part of such underwritten
offering or except in connection with a stock option plan, stock purchase plan,
savings or similar plan, or an acquisition, merger or exchange offer.
5.5 Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement registering Registrable
Shares under the 1933 Act, the Company will give the holders of Registrable
Shares on whose behalf such Registrable Shares are to be so registered and their
underwriters, if any, and their respective counsel and accountants, the
opportunity to participate
21
in the preparation of such registration statement, each prospectus included
therein or filed with the Commission, and each amendment thereof or supplement
thereto, and will give each of them such access to its books and records and
such opportunities to discuss the business of the Company with its officers and
the independent public accountants who have issued a report on its financial
statements as shall be necessary, in the opinion of such holders and such
underwriters or their respective counsel, to conduct a reasonable investigation
within the meaning of the 1933 Act.
5.6 Indemnification.
(a) In the event of any registration of any equity securities of
the Company under the 1933 Act, the Company will indemnify and hold harmless, in
the case of any registration statement filed pursuant to Section 5.1, 5.2 or
5.3, the seller of any Registrable Shares covered by such registration
statement, its directors and officers, general and limited partners, members and
Affiliates (and directors and officers thereof and, if such seller is a
portfolio or investment fund, its investment advisors), each other Person who
participates as an underwriter in the offering or sale of such securities, each
officer and director of each such underwriter, and each other Person, if any,
who controls such seller or any such underwriter within the meaning of Section
15 of the 1933 Act or Section 20 of the 1934 Act (collectively, the "Indemnified
Persons"), against any losses, claims, damages, liabilities and expenses, joint
or several, to which such Indemnified Persons may become subject under the 1933
Act or otherwise (collectively, "Losses"), insofar as such Losses (or actions or
proceedings in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which such securities were registered under the
1933 Act, any preliminary prospectus, final prospectus or summary prospectus
included therein, or any amendment or supplement thereto, or any document
incorporated by reference therein, or (ii) any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and the Company will reimburse such
Indemnified Persons for any legal, accounting, consulting, expert or any other
expenses reasonably incurred by them in connection with investigating or
defending any such Loss; provided, however, that the Company shall not be liable
in any such case to the extent that any such Loss (or action or proceeding in
respect thereof) or expense arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in such
registration statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in conformity
with written information furnished to the Company for use in the preparation
thereof by such Indemnified Persons, as the case may be. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of such Indemnified Persons and shall survive the transfer of such
securities by such seller.
(b) The Company may require, as a condition to including any
Registrable Shares in any registration statement filed pursuant to Section 5.1,
5.2 or 5.3, that the Company shall have received an undertaking satisfactory to
it from (i) the prospective seller of such securities, to indemnify and hold
harmless (in the same manner and to the same extent as set forth in 5.6(a),
except that any such prospective seller shall not in any event be liable to the
Company pursuant thereto for an amount in excess of the net proceeds of sale of
such prospective seller's Registrable Shares so to be sold) the Company, each
such underwriter of such securities, each officer and director of each such
underwriter and each other Person, if any, who controls the Company or any such
underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act, and (ii) each such underwriter of such securities, to indemnify
and hold harmless (in the same manner and to the same extent as set forth in
5.6(a)) the Company, each officer and director of the Company, each prospective
seller, each officer and director of each prospective seller and each other
Person, if any, who controls the Company or any such prospective seller within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, with
respect to any statement in or omission from such registration statement, any
preliminary prospectus, final prospectus or summary prospectus included therein,
or any amendment or supplement thereto, if such
22
statement or omission was made in reliance upon and in conformity with written
information furnished by such prospective seller or such underwriter, as the
case may be, to the Company for use in the preparation of such registration
statement, preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Company or any such
director, officer or controlling Person and shall survive the transfer of such
securities by such seller.
(c) Promptly after receipt by an Indemnified Person of notice of
the commencement of any action or proceeding (including any governmental
investigation) involving a claim referred to in Section 5.6(a) or (b), such
Indemnified Person will, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter of the commencement of
such action; provided, however, that the failure of any Indemnified Person to
give notice as provided herein shall not relieve the indemnifying party of its
obligations under the preceding provisions of this Section 5.6, except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any such action is brought against an Indemnified Person,
unless in such Indemnified Person's reasonable judgment a conflict of interest
between such Indemnified Person and such indemnifying party may exist in respect
of such claim (in which case, the indemnifying party shall not be liable for the
fees and expenses of more than one counsel for all sellers of Registrable
Shares, or more than one counsel for the underwriters in connection with any one
action or separate but similar or related actions), the indemnifying party will
be entitled to participate in and to assume the defense thereof, jointly with
any other indemnifying party similarly notified, to the extent that it may wish
with counsel reasonably satisfactory to such Indemnified Person, and after
notice from the indemnifying party to such Indemnified Person of its election so
to assume the defense thereof, the indemnifying party will not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof.
5.7 Contribution.
(a) If the indemnification provided for in Section 5.6 is
unavailable to the Indemnified Person or indemnifying parties in respect of any
Losses referred to therein, then each such Indemnified Person and the Company
shall contribute to the amount of such Losses (a) as between the Company and the
holders of Registrable Shares covered by a registration statement, on the one
hand, and the underwriters, on the other, in such proportion as is appropriate
to reflect the relative benefits received by the Company and such holders, on
the one hand, and the underwriters, on the other, from the offering of the
Registrable Shares, or if such allocation is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits but
also the relative fault of the Company and such holders, on the one hand, and of
the underwriters, on the other, in connection with the statements or omissions
that resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations, and (b) as between the Company, on the
one hand, and each holder of Registrable Shares covered by a registration
statement, on the other, in such proportion as is appropriate to reflect the
relative fault of the Company and of each such holder in connection with such
statements or omissions, as well as any other relevant equitable considerations;
provided, however, that in no instance shall the maximum contribution of any
holder of Registrable Shares exceed the net proceeds received by such holder of
Registrable Shares in the transaction which subjects such holder of Registrable
Shares to the provisions of this Section 5.7. The relative benefits received by
the Company and such holders, on the one hand, and the underwriters, on the
other, shall be deemed to be in the same proportion as the total proceeds from
the offering (net of underwriting discounts and commissions but before deducting
expenses) received by the Company and such holders bear to the total
underwriting discounts and commissions received by the underwriters. The
relative fault of the Company and such holders, on the one hand, and of the
underwriters, on the other, shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to
23
state a material fact relates to information supplied by the Company and such
holders or by the underwriters. The relative fault of the Company, on the one
hand, and of each such holder, on the other, shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact relates to information supplied by such party, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
(b) The Company and the holders of Registrable Shares agree that
it would not be just and equitable if contribution pursuant to this Section 5.7
were determined by pro rata allocation (even if the underwriters were treated as
one entity for such purpose) or by any other method of allocation that does not
take account of the equitable considerations referred to in the next preceding
paragraph. The amount paid or payable by an Indemnified Person as a result of
the losses, claims, damages or liabilities referred to in the next preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such Indemnified
Person in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this 5.7, no underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the Registrable Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages that such underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission, and no holder of Registrable Shares
shall be required to contribute any amount in excess of the amount by which the
total price at which the Registrable Shares of such holder were offered to the
public exceeds the amount of any damages that such holder has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the 0000 Xxx) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation. Each
Securityholder's obligation to contribute pursuant to this Section 5.7 is
several in the proportion that the proceeds of the offering received by such
Securityholder bears to the total proceeds of the offering received by all the
Securityholders and not joint.
5.8 Holdback Agreement.
(a) If the Company at any time shall register Registrable Shares
under the 1933 Act (including any registration pursuant to Sections 5.1 or 5.3)
for sale to the public, the Securityholders shall not sell publicly or
privately, make any short sale of, grant any option for the purchase of, or
otherwise dispose publicly of, any Registrable Shares (other than those
Registrable Shares included in such registration pursuant to Sections 5.1 or
5.3) without the prior written consent of the Company, for a period as shall be
determined by the relevant managing underwriter, which period shall begin not
more than 10 days prior to the initial filing of the registration statement
pursuant to which such public offering shall be made and shall not last more
than 180 days after the effective date of such registration statement.
(b) The selling restrictions of this Section 5.8 shall apply (i)
only in the event of an IPO, and (ii) only to the extent that the similar
selling restrictions apply equally to all of the Company's directors, officers
and 1% stockholders.
5.9 Nominees of Beneficial Owners. In the event that any
Registrable Shares are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election, be treated as the holder of such
Registrable Shares for purposes of any request or other action by any holder or
holders of Registrable Shares pursuant to this Agreement or any determination of
any number or percentage of shares of Registrable Shares held by any holder or
holders of Registrable Shares contemplated by this Agreement. If the beneficial
owner of any Registrable Shares so elects, the Company may require assurances
reasonably satisfactory to it of such owner's beneficial ownership of such
Registrable Shares.
24
SECTION 6. MISCELLANEOUS.
6.1 Termination.
(a) This Agreement shall terminate on the later of the 10th
anniversary of the execution and delivery hereof or 5 years after an IPO;
provided, however, that, notwithstanding the foregoing, Sections 4.6 and 6.9
shall terminate upon an IPO, so long as thereafter the Company shall be a Public
Company.
(b) Subject to Section 6.1(a), at any time within 2 years prior to
the tenth anniversary of the date hereof, or the expiration of any extension of
such initial term of this Agreement, the parties hereto may, by written
agreement, extend the duration of Section 2.1 for an additional period not
exceeding 10 years from the expiration date of this Agreement as originally
fixed or as last extended, as the case may be.
6.2 Certain Representations. Each of the parties hereto represents
that this Agreement has been duly authorized, executed and delivered by it and
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms. Such representation shall survive the execution and
delivery hereof, regardless of any investigation made by any party hereto or on
such party's behalf.
6.3 Certain Remedies. Without intending to limit the remedies
available to any of the parties hereto, each of the parties hereto agrees that
damages at law will be an insufficient remedy in the event such party violates
the terms hereof and each of the parties hereto further agrees that each of the
other parties hereto may apply for and have injunctive or other equitable relief
in any court of competent jurisdiction to restrain the breach or threatened
breach of, or otherwise specifically to enforce, any of such party's agreements
set forth herein.
6.4 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any such term may be waived (either generally or
in a particular instance and either retroactively or prospectively) only with
the written consent of (i) the Company (by an affirmative vote of 66-2/3% of the
members of the Board of Directors), and (ii) Preferred Securityholders holding a
majority of the Shares held by the Preferred Securityholders. Each
Securityholder shall be bound by any amendment or waiver authorized by this
Section 6.4, whether or not such Securityholder shall have consented thereto.
6.5 Notice. Any notice required or permitted hereunder shall be
given in writing and shall be conclusively deemed effectively given upon
personal delivery, or 5 days after deposit in the United States mail, by
registered or certified mail, postage prepaid, addressed (i) if to the Company,
to the address as set forth below the Company's name on the signature page of
this Agreement, and (ii) if to a Securityholder, to the address set forth below
the Securityholder's name on the signature page of this Agreement, or at such
other address as the Company or Securityholder may designate by 3 days' advance
written notice to the other parties hereto.
6.6 Benefit; Successors and Assigns. Except as otherwise provided
herein, this Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and permitted assigns. No
Securityholder may assign any of its rights under Sections 2.1, 2.5, 2.7, 3,
4.4, 5.1, or 5.3 without the prior written consent of the Company; provided,
however, that MEDI Ventures may assign any of its rights under this Agreement to
any member of the MEDI Group without the prior written consent of the Company;
and provided, further, that without the prior written consent of the Company,
(i) any Securityholder which is a partnership may transfer such Securityholder's
rights
25
under this Agreement to such Securityholder's Affiliates, partners and/or
limited partners; (ii) any Securityholder which is a limited liability company
may transfer such Securityholder's rights under this Agreement to such
Securityholder's Affiliates and/or constituent members; and (iii) any
Securityholder which is a grantor trust may transfer its rights to its grantor
provided that, in each of (i), (ii) and (iii) the transferee of such rights
agrees to be bound by the rights and restrictions of this Agreement. This
Agreement shall not inure to the benefit of any Prospective Transferee unless
such Prospective Transferee shall have complied with the terms of Section 4.6.
Except as expressly provided in Sections 5.7 and 5.8, nothing in this Agreement
either express or implied is intended to confer on any person other than the
parties hereto and their respective successors and permitted assigns, any
rights, remedies or obligations under or by reason of this Agreement.
6.7 Aggregation of Stock. All Restricted Shares and Registrable
Shares held or acquired by affiliated Persons shall be aggregated for the
purpose of determining the availability of any rights under this Agreement.
6.8 Miscellaneous. This Agreement amends and restates in its
entirety the Original Securityholder Agreement, which agreement shall be of no
further force or effect. Further, this Agreement sets forth the entire agreement
and understanding among the parties hereto, and supersedes all prior agreements
and understandings, relating to the subject matter hereof. The parties hereto
acknowledge that each of them has been represented by counsel in connection
herewith and the transactions contemplated hereby. Accordingly, any rule of law
or any legal decision that would require interpretation of any claimed ambiguity
herein against the party that drafted it has no application and is expressly
waived. This Agreement shall be governed by, and construed in accordance with,
the law of the State of New York. The headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the meaning
hereof. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one agreement.
6.9 Investor Ownership Level. Each of the Securityholders and the
Company hereby agree that in the event that the Outstanding Securities (as
defined below) represent greater than 17.99% of the Company's outstanding
capital stock on a fully-diluted basis (the "THRESHOLD LEVEL") as a result of
any adjustment to the Conversion Price (as such term is defined in the
Certificate) or otherwise, the Company and each such Securityholder shall take
all necessary or desirable actions within its or their control to allow MEDI
Ventures to receive, in lieu of any such Outstanding Securities which would
cause such MEDI Venture's aggregate holdings to exceed the Threshold Level or in
exchange for any such Outstanding Securities which exceed the Threshold Level if
and to the extent that such Outstanding Securities are then beneficially owned
by MEDI Ventures, Non-Voting Preferred Shares as described below. As used in
this Section 6.9, "OUTSTANDING SECURITIES" shall mean the aggregate number of
shares of Common Stock held by MEDI Ventures on a fully diluted basis assuming
the exercise, exchange or conversion of (i) any and all options, warrants or
other rights requiring the Company to issue to MEDI Ventures any shares of
Common Stock and (ii) any other securities (including the Series B Preferred
Stock or any other series of Preferred Stock) of the Company held by MEDI
Ventures exercisable or exchangeable for, or convertible into, shares of Common
Stock. In such event, the Company shall authorize a new series of non-voting
Preferred Stock, the rights and preferences of which shall be substantially
identical to those of the shares held by MEDI Ventures, except that such shares
shall have no voting rights and except that such shares shall be automatically
converted into shares of Non-Voting Common Stock (as defined below) upon the
conversion of all outstanding shares of Series B Preferred Stock (the
"NON-VOTING PREFERRED SHARES"). The Non-Voting Preferred Shares shall be
convertible upon the same terms as other preferred stock into a new series of
Common Stock the rights and preferences of which shall be substantially
identical to those of the Common Stock, except that such shares shall have no
voting rights (the "NON-VOTING COMMON STOCK"). Each share of Non-Voting Common
Stock shall convert into one share of Common Stock upon an initial public
offering by the
26
Company of its Common Stock. MEDI Ventures will agree that in any instance that
applicable law provides a right of the Non-Voting Common Stock to vote as a
class or any matter, MEDI Ventures will vote its shares of Non-Voting Common
Stock in accordance with the vote of a majority in interest of the Series B
Preferred Stock, subject in all respects to the provisions of this Agreement. It
is hereby agreed and acknowledged that the rights of MEDI Ventures and the
obligations of the Company and each other Securityholder set forth herein shall
be exercisable solely at the discretion of MEDI Ventures. The Company agrees
that it shall use its best efforts to obtain the consent of any future holder of
1% or more of any of the Company's outstanding capital stock to the provisions
set forth herein.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
27
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
COMPANY:
VANDA PHARMACEUTICALS INC.
By: /s/ Xxxxxx Xxxxxxxxxxxxxx
-----------------------------------------
Name: Chief Executive Officer
Title:
Address:
VANDA PHARMACEUTICALS INC.
2004 SECURITYHOLDER AGREEMENT
COUNTERPART SIGNATURE PAGE
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
SECURITYHOLDER:
DOMAIN PARTNERS VI, L.P.
By: One Xxxxxx Square Associates VI,
L.L.C., its General Partner
By: /s/ Xxxxxxxx X. Xxxxxxxxxx
------------------------------------
Xxxxxxxx X. Xxxxxxxxxx
Managing Member
Address: c/o Domain Associates, L.L.C.
Xxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxx Xxxxxx 00000
Attn: Xxxxx X. Xxxx
Fax No.: (000)000-0000
With a copy to: Domain Associates, L.L.C.
Xxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxx Xxxxxx 00000
Attn: Xxxxxxxx X. Xxxxxxxxxx
Fax No.: (000)000-0000
VANDA PHARMACEUTICALS INC.
2004 SECURITYHOLDER AGREEMENT
COUNTERPART SIGNATURE PAGE
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
SECURITYHOLDER:
DP VI ASSOCIATES, L.P.
By: One Xxxxxx Square Associates VI, L.L.C.,
its General Partner
By: /s/ Xxxxxxxx X. Xxxxxxxxxx
------------------------------------
Xxxxxxxx X. Xxxxxxxxxx
Managing Member
Address: c/o Domain Associates, L.L.C.
Xxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxx Xxxxxx 00000
Attn: Xxxxx X. Xxxx
Fax No.: (000)000-0000
With a copy to: Domain Associates, L.L.C.
Xxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxx Xxxxxx 00000
Attn: Xxxxxxxx X. Xxxxxxxxxx
Fax No.: (000)000-0000
VANDA PHARMACEUTICALS INC.
2004 SECURITYHOLDER AGREEMENT
COUNTERPART SIGNATURE PAGE
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
SECURITYHOLDER:
PROSPECT VENTURE PARTNERS II, L.P.
By: Prospect Management Co. II, LLC, its
General Partner
By: /s/ Xxx Xxxxxxxxx
____________________________________
Xxx Xxxxxxxxx
Managing Member
Address: 000 Xxxxx Xxxxxx, Xxxxx 000
Xxxx Xxxx, XX 00000
VANDA PHARMACEUTICALS INC.
2004 SECURITYHOLDER AGREEMENT
COUNTERPART SIGNATURE PAGE
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
SECURITYHOLDER:
PROSPECT ASSOCIATES II, L.P.
By: Prospect Management Co. II, LLC, its
General Partner
By: /s/ Xxx Xxxxxxxxx
____________________________________
Xxx Xxxxxxxxx
Managing Member
Address: 000 Xxxxx Xxxxxx, Xxxxx 000
Xxxx Xxxx, XX 00000
VANDA PHARMACEUTICALS INC.
2004 SECURITYHOLDER AGREEMENT
COUNTERPART SIGNATURE PAGE
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
SECURITYHOLDER:
RHO VENTURES IV (QP), L.P.
By: Rho Management Ventures IV, L.L.C., its
General Partner
By: /s/ Xxxx Xxxxxxx
____________________________________
Name: Xxxx Xxxxxxx
Title: Managing Member
Address: 000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
VANDA PHARMACEUTICALS INC.
2004 SECURITYHOLDER AGREEMENT
COUNTERPART SIGNATURE PAGE
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
SECURITYHOLDER:
RHO VENTURES IV GMBH & CO. BETEILIGUNGS KG
By: Rho Capital Partners Verwaltungs GmbH,
its General Partner
By: /s/ Xxxx Xxxxxxx
------------------------------------
Name: Xxxx Xxxxxxx
Title: Managing Member
Address: 000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
VANDA PHARMACEUTICALS INC.
2004 SECURITYHOLDER AGREEMENT
COUNTERPART SIGNATURE PAGE
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
SECURITYHOLDER:
RHO VENTURES IV, L.P.
By: Rho Management Ventures IV, L.L.C., its
General Partner
By: /s/ Xxxx Xxxxxxx
------------------------------------
Name: Xxxx Xxxxxxx
Title: Managing Member
Address: 000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
VANDA PHARMACEUTICALS INC.
2004 SECURITYHOLDER AGREEMENT
COUNTERPART SIGNATURE PAGE
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
SECURITYHOLDER:
RHO MANAGEMENT TRUST I
By: Rho Capital Partners, Inc., as
Investment Adviser
By: /s/ Xxxx Xxxxxxx
------------------------------------
Name: Xxxx Xxxxxxx
Title:
Address: 000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
VANDA PHARMACEUTICALS INC.
2004 SECURITYHOLDER AGREEMENT
COUNTERPART SIGNATURE PAGE
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
SECURITYHOLDER:
MEDIMMUNE VENTURES, INC.
By: /s/ Xxxxxx X. Xxxxxxx
________________________________________
Name: Xxxxxx X. Xxxxxxx
Title: V.P., Corporate Development
Address: Xxx XxxXxxxxx Xxx
Xxxxxxxxxxxx, XX 00000
VANDA PHARMACEUTICALS INC.
2004 SECURITYHOLDER AGREEMENT
COUNTERPART SIGNATURE PAGE
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
SECURITYHOLDERS:
CARE CAPITAL INVESTMENTS II, LP
By: Care Capital, LLC, as general partner of
Care Capital Investments II, LP
By: /s/ Xxxxx Xxxxxx
____________________________________
Name: Xxxxx Xxxxxx
Its:
Address: 00 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Fax No.: (000)000-0000
VANDA PHARMACEUTICALS INC.
2004 SECURITYHOLDER AGREEMENT
COUNTERPART SIGNATURE PAGE
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
SECURITYHOLDERS:
CARE CAPITAL OFFSHORE INVESTMENTS II, LP
By: Care Capital, LLC, as general partner of
Care Capital Offshore Investments II, LP
By: /s/ Xxxxx Xxxxxx
------------------------------------
Name: Xxxxx Xxxxxx
Its:
Address: 00 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Fax No.: (000)000-0000
VANDA PHARMACEUTICALS INC.
2004 SECURITYHOLDER AGREEMENT
COUNTERPART SIGNATURE PAGE
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written
SECURITYHOLDER:
BIOMEDICAL SCIENCES INVESTMENT FUND PTE LTD
By: /s/ Xxx Xxxx Yeok
----------------------------------------
Name: Xxx Xxxx Yeok
Title: Director
Address: 00 Xxxxxxxx Xxx
#00-00 Xxxxxxx
Xxxxxxxxx 000000
Fax No.: 00-00000000
Attn: Xxxx Xxxx, PhD, General
Manager
VANDA PHARMACEUTICALS INC.
2004 SECURITYHOLDER AGREEMENT
COUNTERPART SIGNATURE PAGE
AMENDMENT TO
2004 SECURITYHOLDERS AGREEMENT
This AMENDMENT TO 2004 SECURITYHOLDERS AGREEMENT is dated as of April
5, 2006 (this "Amendment") by and among Vanda Pharmaceuticals Inc., a Delaware
corporation (the "Company") and each of the other parties who are signatories
thereto (the "Securityholders").
WHEREAS, the Company and the Securityholders have entered into that
certain 2004 Securityholders Agreement dated as of September 28, 2004 (the
"Agreement");
WHEREAS, the Company and the Securityholders wish to amend the
Agreement to confirm, for the avoidance of doubt, that all of the
Securityholders' rights under Section 2 and Section 4 of the Agreement shall
terminate and be of no further force or effect as of and following the closing
of the Company's contemplated initial public offering of its Common Stock on
Form S-1; and
WHEREAS, this Amendment has been approved by the Company's directors
in accordance with Section 6.4 of the Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Amendment. Section 6.1(a) of the Agreement is hereby stricken in
its entirety and replaced with the following
(a) This Agreement shall terminate and on the later of the 10th
anniversary of the execution and delivery hereof or 5 years after an IPO;
provided, however that notwithstanding the foregoing, Sections 2, 4 and 6.9
shall terminate and be of no further force or effect upon and following the
closing of the IPO.
2. Other Terms of Agreement. Except as expressly provided in this
Section 1, the Agreement shall remain in full force and effect in the form
originally executed.
3. Miscellaneous.
(a) Amendment and Waiver. Neither this Amendment nor any part
hereof may be changed, waived, or amended except by an instrument signed by the
parties required to amend the Agreement pursuant to Section 6.4 of the
Agreement.
(b) Successors and Assigns. This Amendment shall be binding upon
and inure to the benefit of, the successors and assigns of the parties hereto.
(c) Counterparts. This Amendment may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(d) Titles and Subtitles. The titles and subtitles used in this
Amendment are used for convenience only and are not to be considered in
construing or interpreting this Amendment.
(e) Severability. If one or more provisions of this Amendment are
held to be unenforceable under applicable law, such provision shall be excluded
from this Amendment and the balance of the Amendment shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
2
IN WITNESS WHEREOF, this Amendment has been executed by the parties
hereto as of the date first above written.
COMPANY:
VANDA PHARMACEUTICALS INC.
By: /s/ Xxxxxx Xxxxxxxxxxxxxx, M.D.
------------------------------------
Name: Xxxxxx Xxxxxxxxxxxxxx, M.D.
Title: Director and Chief Executive
Officer
AMENDMENT TO 2004 SECURITYHOLDERS AGREEMENT
SIGNATURE PAGE
SECURITYHOLDERS:
CARE CAPITAL INVESTMENTS II, LP
By: /s/ Xxxxx Xxxxxx
------------------------------------
Name: Xxxxx Xxxxxx
Title: Managing Member of Care Capital
II, LLC, its General Partner
CARE CAPITAL OFFSHORE
INVESTMENTS II, LP
By: /s/ Xxxxx Xxxxxx
------------------------------------
Name: Xxxxx Xxxxxx
Title: Managing Member of Care Capital
II, LLC, its General Partner
AMENDMENT TO 2004 SECURITYHOLDERS AGREEMENT
SIGNATURE PAGE
SECURITYHOLDERS:
BIOMEDICAL SCIENCES INVESTMENT
FUND PTE LTD
By: /s/ Xxx Xxxx Yeok
------------------------------------
Name: Xxx Xxxx Yeok
Title: Director
AMENDMENT TO 2004 SECURITYHOLDERS AGREEMENT
SIGNATURE PAGE
SECURITYHOLDERS:
DOMAIN PARTNERS VI, LP
By: One Xxxxxx Square Associates VI,
L.L.C., its general partner
By: /s/ Xxxx X. Xxxxxxxxx
------------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: Attorney-in-fact
DP VI ASSOCIATES, L.P.
By: One Xxxxxx Square Associates VI,
L.L.C., its general partner
By: /s/ Xxxx X. Xxxxxxxxx
------------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: Attorney-in-fact
AMENDMENT TO 2004 SECURITYHOLDERS AGREEMENT
SIGNATURE PAGE
SECURITYHOLDERS:
PROSPECT VENTURE PARTNERS II, L.P.
By: /s/ Xxxxx. X. Xxxxxxxxx
------------------------------------
Name: Xxxxx. X. Xxxxxxxxx
Title: Managing Member, Prospect
Management Co. II, LLC, its
General Partner
PROSPECT ASSOCIATES II, L.P.
By: /s/ Xxxxx. X. Xxxxxxxxx
------------------------------------
Name: Xxxxx. X. Xxxxxxxxx
Title: Managing Member, Prospect
Management Co. II, LLC, its
General Partner
AMENDMENT TO 2004 SECURITYHOLDERS AGREEMENT
SIGNATURE PAGE
SECURITYHOLDERS:
RHO VENTURES IV, L.P.
By: Rho Management Ventures IV, L.L.C.
General Partner
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Attorney in Fact
RHO VENTURES IV GMBH & CO. BETEILIGUNGS
KG
By: Rho Management Ventures IV, L.L.C.
General Partner
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Attorney in Fact
AMENDMENT TO 2004 SECURITYHOLDERS AGREEMENT
SIGNATURE PAGE
SECURITYHOLDERS:
RHO VENTURES IV (QP), L.P.
By: Rho Management Ventures IV, L.L.C.
General Partner
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Attorney in Fact
RHO MANAGEMENT TRUST I
By: Rho Management Ventures IV, L.L.C.
General Partner
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Attorney in Fact
AMENDMENT TO 2004 SECURITYHOLDERS AGREEMENT
SIGNATURE PAGE
SECURITYHOLDERS:
MEDIMMUNE VENTURES, INC.
By: /s/ Xxxxx X. Xxxxxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: President
AMENDMENT TO 2004 SECURITYHOLDERS AGREEMENT
SIGNATURE PAGE
