DGI BIOTECHNOLOGIES, INC.
AMENDED AND RESTATED STOCKHOLDERS'
AGREEMENT
JUNE 15, 2001
TABLE OF CONTENTS
PAGE
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SECTION 1. Definitions 1
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SECTION 2. Certain Covenants of the Corporation. 4
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2.1 Meetings of the Board of Directors 4
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2.2 Reservation of Shares of Class A Common Stock and Series B Preferred
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Stock, Etc. 5
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2.3 Preemptive Rights. 5
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2.4 Access to Records 6
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2.5 Financial Reports 6
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2.6 Budget and Operating Forecast 7
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2.7 System of Accounting 8
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2.8 Restriction on Transfer Rights; Confidentiality 8
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2.9 Duration of Section. 8
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SECTION 3. Transfer of Securities. 9
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3.1 Restriction on Transfer. 9
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3.2 Restrictive Legend 9
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3.3 Notice of Transfer 10
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3.4 Required Registration 11
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3.5 Piggyback Registration. 12
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3.6 Registrations on Form S-2 and S-3 13
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3.7 Preparation and Filing 13
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3.8 Expenses 15
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3.9 Rule 144 Reporting 16
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3.10 Indemnification. 16
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3.11 "Market Stand-Off" Agreement 18
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3.12 Removal of Legends, Etc. 19
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3.13 Tag-Along Rights 19
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3.14 Drag-Along Rights. 20
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SECTION 4. Securities Act Registration Statements 21
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SECTION 5. Election of Directors. 21
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5.1 Voting for Directors 21
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5.2 Cooperation of the Corporation 22
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5.3 Notices 22
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5.4 Board of Directors' Committees 22
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5.5 Removal 22
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5.6 Duration of Section 23
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SECTION 6. Remedies 23
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SECTION 7. Successors and Assigns 23
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SECTION 8. Duration of Agreement 24
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SECTION 9. Entire Agreement 24
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SECTION 10. Each Party the Drafter; Construction 24
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SECTION 11. Notices 24
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SECTION 12. Amendments and Waivers 25
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SECTION 13. Counterparts 26
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SECTION 14. Headings 26
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SECTION 15. Nouns and Pronouns 26
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SECTION 16. Severability 26
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SECTION 17. Governing Law 26
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SECTION 18. Titles and Subtitles 26
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SECTION 19. Restrictions on Public Disclosure 26
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AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT dated as of June 15, 2001 (the
"Agreement"), is entered into by and among DGI BIOTECHNOLOGIES, INC., a Delaware
corporation (the "Corporation"), NEW BRUNSWICK SCIENTIFIC CO., INC., a New
Jersey corporation (hereinafter referred to as the "Existing Investor"), each of
the holders of the Corporation's Class A Common Stock listed on Schedule I
attached hereto (the "Founders"), BankInvest Biomedical Venture Fund III ps, a
Danish venture fund with limited liability ("BankInvest"), and each of the
investors who sign counterpart signature pages to this Agreement, and whose
names are included on Schedule II hereto, from time to time as contemplated in
Section 1.03 of the Series B Convertible Preferred Stock Purchase Agreement, of
even date herewith (together with BankInvest, the "New Investors," and together
with the Existing Investor, the "Investors"). In connection with the foregoing
sentence, the parties hereto agree and acknowledge that the Corporation shall
amend Schedule II from time to time to include one or more New Investors without
the additional consent of any of the parties hereto.
WHEREAS, the Corporation, the Existing Investor and the Founders are
parties to a Stockholders' Agreement dated May 5, 2000 (the "Original
Stockholders' Agreement");
WHEREAS, the Corporation and the New Investors are entering into a Series B
Convertible Preferred Stock Purchase Agreement, of even date herewith (the
"Series B Purchase Agreement");
WHEREAS, the Original Stockholders' Agreement may not be amended without the
written consent of the Corporation and the Existing Investor; and
WHEREAS, in order to induce the Corporation to enter into the Series B Purchase
Agreement and to induce the New Investors to invest funds in the Corporation
pursuant to the Series B Purchase Agreement, the Existing Investor and the
Founders hereby agree to waive their rights under and terminate the Original
Stockholders Agreement, and the Corporation, the Founders and the Investors
hereby agree that this Agreement shall govern the rights of the parties with
regard to the subject matter contained herein.
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and undertakings of the Corporation, the Investors, and the Founders
hereunder, the parties hereto do hereby agree as follows:
SECTION 1. Definitions
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. As used herein, the following terms shall have the following respective
meanings:
Affiliate of any Person shall mean any Person directly or indirectly
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controlling, controlled by or under common control with such Person.
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Board shall mean the Board of Directors of the Corporation.
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Budget shall have the meaning set forth in Section 2.7 hereof.
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Certificate shall mean the Amended and Restated Certificate of Incorporation of
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the Corporation.
Class A Common Stock shall mean the Class A Common Stock, par value $.001, of
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the Corporation.
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Class B Common Stock shall mean the Class B Nonvoting Common Stock, par value
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$.001, of the Corporation.
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Commission shall mean the U.S. Securities and Exchange Commission.
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Common Stock shall mean either Class A Common Stock or Class B Common Stock of
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the Corporation.
Equity Percentage shall mean, as to an Investor, that percentage figure which
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expresses the ratio that (a) the number of shares of issued and outstanding
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Common Stock then owned by such Investor bears to (b) the aggregate number of
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shares of issued and outstanding Common Stock then owned by all stockholders on
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a fully diluted basis. For purposes solely of the computation set forth in
clauses (a) and (b) above, all issued and outstanding securities held by an
Investor that are convertible into or exercisable or exchangeable for shares of
Common Stock (including any issued and issuable shares of Preferred Stock) or
for any such convertible, exercisable or exchangeable securities, shall be
treated as having been so converted, exercised or exchanged at the rate or price
at which such securities are convertible, exercisable or exchangeable for shares
of Common Stock in effect at the time in question (which, for purposes of
Section 2.3 of this Agreement, shall be at the time of delivery by the
Corporation of the notice of the Offer contemplated by Section 2.3(b)), whether
or not such securities are at such time immediately convertible, exercisable or
exchangeable.
Exchange Act shall mean the Securities Exchange Act of 1934, as amended.
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Excluded Forms shall have the meaning given such term in Section 3.5 hereof.
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Excluded Securities shall mean, collectively:
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(i) the Reserved Shares;
(ii) Common Stock issued or issuable to officers, directors or employees of or
consultants or independent contractors to the Corporation, pursuant to any
written agreement, plan or arrangement to purchase, or rights to subscribe for,
such Common Stock, including Class B Common Stock issued pursuant to any options
granted under the Corporation's Stock Option Plan, and which, as a condition
precedent to the issuance of such shares, provides for the vesting of such
shares and subjects such shares to restrictions on transfers and rights of first
offer in favor of the Corporation; provided, however, that the maximum number of
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shares of Class B Common Stock heretofore or hereafter issuable pursuant to the
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Corporation's Stock Option Plan and all such agreements, plans and arrangements
shall not exceed 994,020 shares (subject to adjustment as required to comply
with any anti-dilution rights set forth in any such agreement, plan or
arrangement);
(iii) Common Stock issued as a stock dividend payable in shares of Common
Stock, or capital stock of any class issuable upon any subdivision,
recombination, split-up or reverse stock split of all the outstanding shares of
such class of capital stock of the Corporation;
(iv) any securities issued pursuant to the acquisition by the Corporation of
any other corporation, partnership, joint venture, trust or other entity by any
merger, stock acquisition, reorganization, purchase of substantially all assets
or otherwise in which the Corporation, or its stockholders of record immediately
prior to the effective date of such transaction, directly or indirectly, own at
least a majority of the voting power of the acquired entity or the resulting
entity after such transaction;
(v) shares of Preferred Stock or Common Stock issued upon exercise of
outstanding warrants issued to Morgan & Finnegan, L.L.P., Privateq Advisors AG,
Summercloud Bay, Inc., and shares of Common Stock issued upon exercise of
outstanding warrants issued to Richard Kouri, Robert Wurtzberger, Dr. Sidney
Udenfriend, Dr. Sidney Spector, and John Prendergast; and
(vi) shares of Preferred Stock or Common Stock issued upon exercise or
conversion of warrants, options or other rights to purchase securities issued to
persons or entities with whom the Company has business relationships, provided
that such issuances are for other than primarily equity financing purposes and
are approved by the Board.
Notice of Acceptance shall have the meaning set forth in Section 2.3(c)
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hereof.
Offer shall have the meaning set forth in Section 2.3(b) hereof.
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Offered Securities shall mean, except for Excluded Securities, (i) any shares of
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Common Stock, Preferred Stock or any other equity security of the Corporation,
(ii) any debt security or capitalized lease with any equity feature with respect
to the Corporation, or (iii) any option, warrant or other right to subscribe
for, purchase or otherwise acquire any such equity security, debt security or
capitalized lease.
Other Shares shall have the meaning set forth in Section 3.5(e) hereof.
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Person means and includes an individual corporation, partnership, association,
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limited liability company, trust, estate or other entity.
Preferred Directors shall have the meaning set forth in Section 5.1 hereof.
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Preferred Stock shall mean shares of Series A Preferred Stock and Series B
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Preferred Stock.
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Preferred Stockholders shall mean, collectively, all holders of shares of
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Preferred Stock of the Corporation.
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Qualified Public Offering shall have the meaning given it in Section 2.10.
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Refused Securities shall have the meaning set forth in Section 2.3(e) hereof.
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Reserved Shares shall mean the shares of Class A Common Stock reserved by the
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Corporation for issuance upon the conversion of the Preferred Stock.
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Restricted Securities shall mean any of the Preferred Stock held by the
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Investors or any of their permitted transferees, and any of the Class A Common
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Stock issued or issuable upon the conversion of such Preferred Stock, all shares
of Class A Common Stock issued or issuable in respect thereof by way of stock
splits, stock dividends, stock combinations, recapitalizations or like
occurrences, and any other shares of Class A Common Stock or other securities of
the Corporation which may be issued hereafter to the Investors or their
permitted transferees which are convertible into or exercisable for shares of
Class A Common Stock (including, without limitation, other classes or series of
preferred stock, warrants, options or other rights to purchase Class A Common
Stock or convertible debentures or other convertible debt securities) and the
Class A Common Stock issued or issuable upon such conversion or exercise of such
other securities, which have not been sold (a) in connection with an effective
registration statement filed pursuant to the Securities Act, or (b) pursuant to
Rule 144 or Rule 144A promulgated by the Commission under the Securities Act.
Securities Act shall mean the Securities Act of 1933, as amended.
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Series A Preferred Stock shall mean any series, or all collectively, of Series A
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Preferred Stock, Series A-1 Preferred Stock or Series A-2 Preferred Stock of
the Corporation.
Series B Preferred Stock shall mean Series B Preferred Stock of the Corporation.
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Stockholders shall mean all holders of capital stock of the Corporation.
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Target Month shall have the meaning set forth in Section 2.6(a) hereof.
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Transfer shall include any disposition of any Restricted Securities or of any
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interest therein which would constitute a sale thereof within the meaning of the
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Securities Act.
SECTION 2. Certain Covenants of the Corporation.
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2.1 Meetings of the Board of Directors
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. The Corporation shall call, and use its best efforts to have, regular
meetings of the Board not less often than quarterly. The Corporation shall pay
all reasonable and appropriately documented travel expenses and other
out-of-pocket expenses incurred by directors who are not employed by the
Corporation in connection with attendance at meetings to transact the business
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of the Corporation or attendance at meetings of the Board or any committee
thereof.
2.2 Reservation of Shares of Class A Common Stock and Series B Preferred
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Stock, Etc.
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The Corporation shall at all times have authorized and reserved out of its
authorized but unissued shares of Class A Common Stock, a sufficient number of
shares of Class A Common Stock to provide for the conversion of the Series A
Preferred Stock and Series B Preferred Stock and a sufficient number of shares
of Series B Preferred Stock to provide for the purchase of Series B Preferred
Stock by the New Investors. Neither the issuance of the Series B Preferred
Stock nor the shares of Class A Common Stock issuable upon the conversion of the
Series A Preferred Stock or Series B Preferred Stock shall be subject to a
preemptive right of any other Stockholder, except for rights of the Existing
Investor under the Original Stockholders' Agreement, all of which are hereby
waived.
2.3 Preemptive Rights.
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(a) The Corporation shall not issue, sell or exchange, agree to issue, sell
or exchange, or reserve or set aside for issuance, sale or exchange, any Offered
Securities unless in each case the Corporation shall have first offered to
sell to each Investor an amount of such Offered Securities equal to that amount
of Offered Securities which such Investor would be entitled to purchase based on
such Investor's Equity Percentage, on the terms set forth herein. Each Investor
may delegate its rights and obligations with respect to such Offer to one or
more Affiliates, which Affiliates shall thereafter also be deemed to be the
"Investor" for the purpose of applying this Section 2.3 to such Offer.
(b) The Corporation shall deliver to each Investor written notice of the
offer to sell the Offered Securities, specifying the price and terms and
conditions of the offer (the "Offer"). The Offer by its terms shall remain open
and irrevocable for a period of twenty (20 days from the date of its delivery to
such Investor (the "20-Day Period").
(c) Each Investor shall evidence its intention to accept the Offer, in whole
or in part, by delivering a written notice signed by an Investor setting forth
the number of shares of the Offered Securities that such Investor elects to
purchase (the "Notice of Acceptance"). The Notice of Acceptance must be
delivered to the Corporation prior to the end of the 20-Day Period.
(d) If an Investor tenders its Notice of Acceptance prior to the end of the
20-Day Period indicating its intention to purchase the Offered Securities, the
Corporation shall schedule a closing of the sale of such Offered Securities.
Upon the closing of the sale of the Offered Securities to be purchased by an
Investor, such Investor shall (i) purchase from the Corporation that portion of
the Offered Securities for which it tendered a Notice of Acceptance upon the
terms specified in the Offer, and (ii) execute and deliver an agreement further
restricting transfer of such Offered Securities substantially as set forth in
Section 3.1, 3.2 and 3.3 of this Agreement. In addition, with respect to the
Offered Securities being purchased by an Affiliate of an Investor, the
Corporation shall provide the Affiliate with the rights and benefits set forth
in this Agreement, and such Affiliate shall become a party hereto. The
obligation of an Investor to purchase such Offered Securities is further
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conditioned upon the preparation by the Corporation of a purchase agreement
embodying the terms of the Offer, which shall be reasonably satisfactory in form
and substance to such Investor and the Investor's counsel.
(e) The Corporation shall have one hundred eighty (180) days from the
expiration of the 20-Day Period, to sell the Offered Securities refused by any
of the Investors (the "Refused Securities") to any other person or persons, but
only upon terms and conditions which are in all material respects (including,
without limitation, price and interest rate) no more favorable to such other
person or persons, and no less favorable to the Corporation, than those set
forth in the Offer.
(f) In each case, any Offered Securities not purchased either by the
Investors or by any other person in accordance with this Section 2.3 may not be
sold or otherwise disposed of until they are again offered to the Investors
under the procedures specified in this Section 2.3.
(g) An Investor may, by prior written consent, waive its rights under this
Section 2.3. Such a waiver shall be deemed a limited waiver and shall only
apply to the extent specifically set forth in the written consent of such
Investor.
(h) Notwithstanding the foregoing, the Corporation may issue shares of
Series B Preferred Stock to New Investors in one or more Subsequent Closings as
contemplated in Section 1.03 of the Series B Purchase Agreement without being
subject to the preemptive rights set forth in this Section 2.3.
2.4 Access to Records
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. The Corporation shall afford to each Investor and such Investor's employees,
counsel and other authorized representatives, on reasonable notice, free and
full access, at all reasonable times and for reasonable periods of time during
normal business hours, to all of the books, records and properties of the
Corporation and to all officers and employees of the Corporation.
2.5 Financial Reports
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. Until such time that the Corporation has a class of its equity securities
registered under the Exchange Act and is required to file reports thereunder
pursuant to Sections 13 or 15(d) of the Exchange Act, except with respect to the
obligation set forth in Section 2.5(e)(i) hereunder which shall survive such
time, the Corporation shall furnish each Investor with the financial information
described below:
(a) Within 20 days after the last day of each month (the "Target Month") (or
such other calendar period as is approved by the Board), financial
statements, including a balance sheet as of the last date of such Target Month,
a statement of income (or monthly operating expenses) for such month, together
with a cumulative statement of income from the first day of the current year to
the last day of such month, which statements shall be prepared from the books
and records of the Corporation, a cash flow analysis, together with cumulative
cash flow analyses from the first day of the current year to the last day of
such month, and a comparison between the actual monthly operating expenses and
the projected figures for such month and the comparable figures for the prior
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year, subject to the provisions of Section 2.7 hereof.
(b) Within 40 days after the end of such quarterly accounting period,
unaudited financial statements for such quarterly accounting period, certified
by the Chief Financial Officer or the Treasurer of the Corporation (or an
equivalent position), as presenting fairly the financial condition and results
of operations of the Corporation and as having been prepared on a basis
consistent with the accounting principles reflected in the Corporation's annual
audited financial statements, accompanied by a report, signed by the Chief
Financial Officer or the Treasurer of the Corporation (or an equivalent
position), summarizing the operating and financial highlights of the Corporation
for such quarterly accounting period, which report shall include (a) a
comparison between the actual quarterly operating and financial results, the
Budget (as defined in Section 2.6 hereof) and the results of the similar
quarterly accounting period for the prior fiscal year of the Corporation,
together with an explanation of material variances from the Budget and such
similar quarterly accounting period, as the case may be, and (b) a narrative
analysis of operations and trends in the business of the Corporation during such
quarterly accounting period.
(c) Within 85 days after the end of each fiscal year of the Corporation,
audited financial statements of the Corporation, which shall include an income
statement and a statement of cash flow for such fiscal year and a balance sheet
as of the last day thereof, each prepared in accordance with generally accepted
accounting principles consistently applied, and accompanied by the report of
such independent certified public accountants as shall have been approved by the
Board.
(d) If for any period the Corporation shall have any subsidiary or
subsidiaries whose accounts are consolidated with those of the Corporation, then
the financial statements delivered for such period pursuant to paragraphs (a),
(b) and (c) of this Section 2.5 shall be the consolidated and consolidating
financial statements of the Corporation for all such consolidated subsidiaries.
(e) Promptly upon becoming available:
(i) copies of all financial statements, reports, press releases, notices,
proxy statements and other documents sent by the Corporation to its Stockholders
or released to the public and copies of all regular and periodic reports,
if any, filed by the Corporation with the Commission or any securities exchange
or self-regulatory organization; and
(ii) any other financial or other information available to management of the
Corporation that the Investor shall have reasonably requested in writing on a
timely basis.
2.6 Budget and Operating Forecast
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. The Corporation shall prepare and submit to the Board and each Investor an
operating plan with monthly and quarterly breakdowns (the "Budget") for each
fiscal year by November 15th of the prior fiscal year of the Corporation. The
Budget shall be deemed accepted as the Budget for such fiscal year only when it
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has been approved by the Board. The Budget shall be reviewed by the Corporation
periodically and all changes therein, and all material deviations therefrom,
shall be reviewed by the Board on at least a quarterly basis.
2.7 System of Accounting
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. The Corporation shall maintain, and cause each of its subsidiaries, when and
if any shall exist, to maintain, its books of accounts, related records and
system of accounting in accordance with good business practices and generally
accepted accounting principles, and shall cause the matters contained therein to
be appropriately and accurately reflected in the financial reports (which shall
be prepared in accordance with generally accepted accounting principles)
furnished pursuant to this Agreement.
2.8 Restriction on Transfer Rights; Confidentiality
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. The rights granted to the Investors pursuant to Sections 2.4 through 2.6
hereof shall not be transferred or assigned by an Investor to, and shall not
inure to the benefit of, any successor, transferee or assignee of such Investor,
which is engaged in any business directly competitive with the Corporation.
Each Investor agrees to use, and to use its best efforts to insure that its
authorized representatives use, the same degree of care as the Investor uses to
protect its own confidential information to keep confidential any information
furnished to it (so long as such information is not in the public domain),
except that an Investor may disclose such proprietary or confidential
information to an Affiliate for the purpose of evaluating its investment in the
Corporation as long as such Affiliate is advised of the confidentiality
provisions of this Section 2.8.
2.9 Duration of Section.
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(a) Sections 2.4, 2.5 (other than 2.5(e)), 2.6, and 2.8 and the rights and
obligations of the parties thereunder shall automatically terminate on the first
to occur of: (a) the consummation of a firm commitment underwritten public
offering of Class A Common Stock registered under the Securities Act pursuant to
which (i) Class A Common Stock is offered to the public at a price of at least
$5.00 per share of Common Stock (subject to adjustment for stock splits, stock
dividends, stock combinations, recapitalizations and like occurrences) and (ii)
the offering size is at least $10 million (a "Qualified Public Offering"), or
(b)(X) with respect to the Existing Investor, that date on which ninety (90%) of
the Series A Preferred Stock held by the Existing Investor on the date hereof is
no longer outstanding, and (Y) with respect to the New Investors, that date on
which ninety (90%) of the Series B Preferred Stock issued to the New Investors,
is no longer outstanding. Prior to any such termination, the rights and
obligations of an Investor under such sections set forth above shall terminate
upon the date on which such Investor no longer owns any Preferred Stock.
(b) Section 2.3 and the rights and obligations of the parties thereunder
shall automatically terminate on the first to occur of: (a) the consummation of
a Qualified Public Offering, or (b) (X) with respect to the Existing Investor,
that date on which fifty (50%) of the Series A Preferred Stock held by the
Existing Investor, is no longer outstanding, and (Y) with respect to the New
Investors, that date on which fifty (50%) of the Series B Preferred Stock issued
to the New Investors, is no longer outstanding. Prior to any such termination,
the rights and obligations of an Investor under such Section 2.3 shall terminate
upon the date on which such Investor no longer owns any Preferred Stock.
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SECTION 3. Transfer of Securities.
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3.1 Restriction on Transfer.
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(a) The Restricted Securities shall not be transferable, except upon the
conditions specified in this Section 3, which conditions are intended solely to
ensure compliance with the provisions of this Agreement and the Securities Act
in respect of the Transfer thereof.
(b) No Founder shall Transfer any of his shares of Common Stock without the
express written consent of a majority of the holders of Preferred Stock and the
other Founders, other than: (i) to a Founder's spouse, (ii) to a Founder's
issue, (iii) to a trust for the benefit of a Founder's spouse or issue, (iv) if
the Founder is a trust or estate, to the beneficiary of such trust or estate,
(v) in the event of a Founder's death, in accordance with such Founder's last
will and testament, provided the Transfer is to a Person described in (i), (ii)
or (iii) above, or (vi) a transfer ordered in the event of a Founder's
incompetency, as determined by a court of competent jurisdiction.
3.2 Restrictive Legend
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. Each certificate evidencing any Restricted Securities and each certificate
evidencing any such securities issued to subsequent transferees of any
Restricted Securities and any shares of Common Stock shall (unless otherwise
permitted by the provisions of Section 3.3 or 3.10 hereof) be stamped or
otherwise imprinted with a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAW. THE SECURITIES MAY NOT BE PLEDGED, HYPOTHECATED, SOLD
OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE SECURITIES
LAW OR AN EXEMPTION THEREFROM UNDER SUCH ACT OR LAW. ADDITIONALLY, THE TRANSFER
OF THESE SECURITIES IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE AMENDED AND
RESTATED STOCKHOLDERS' AGREEMENT DATED JUNE 15, 2001, AMONG DGI BIOTECHNOLOGIES,
INC. AND CERTAIN OTHER SIGNATORIES THERETO, AND NO TRANSFER OF SUCH SECURITIES
SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED. COPIES
OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE
HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF DGI BIOTECHNOLOGIES,
INC.
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3.3 Notice of Transfer
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. By acceptance of any Restricted Securities, the holder thereof agrees to give
prior written notice to the Corporation of such holder's intention to effect any
Transfer and to comply in all other respects with the provisions of this Section
3.3. Each such notice shall describe the manner and circumstances of the
proposed Transfer and shall be accompanied by: (a) the written opinion of
counsel for the holder of such Restricted Securities, or, at such holder's
option, a representation letter of such holder, addressed to the Corporation
(which opinion and counsel, or representation letter, as the case may be, shall
be reasonably acceptable to the Corporation, such acceptance not to be
unreasonably withheld, conditioned or delayed), as to whether, in the case of a
written opinion, in the opinion of such counsel, such proposed Transfer involves
a transaction requiring registration of such Restricted Securities under the
Securities Act and applicable state securities laws or an exemption thereunder
is available, or, in the case of a representation letter, such letter sets forth
a factual basis for concluding that such proposed transfer involves a
transaction requiring registration of such Restricted Securities under the
Securities Act and applicable State Securities laws or that an exemption
thereunder is available, or (b) if such registration is required and if the
provisions of Section 3.4 hereof are applicable, a written request addressed to
the Corporation by the holder of such Restricted Securities, describing in
detail the proposed method of disposition and requesting the Corporation to
effect the registration of such Restricted Securities pursuant to the terms and
provisions of Section 3.4 hereof; provided, however, that in the case of a
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Transfer by a holder to an Affiliate, no such opinion of counsel or
representation letter of the holder shall be necessary, provided that the
transferee agrees in writing to be subject to Sections 3.1, 3.2, 3.3 and 3.12
hereof to the same extent as if such transferee were originally a signatory to
this Agreement. If in such opinion of counsel or as reasonably concluded from
the facts set forth in the representation letter of the holder (which opinion
and counsel, or representation letter, as the case may be, shall be reasonably
acceptable to the Corporation), the proposed Transfer may be effected without
registration under the Securities Act and any applicable state securities laws
or "blue sky" laws, then the holder of Restricted Securities shall thereupon be
entitled to effect such Transfer in accordance with the terms of the notice
delivered by it to the Corporation. Each certificate or other instrument
evidencing the securities issued upon such Transfer (and each certificate or
other instrument evidencing any such securities not Transferred) shall bear the
legend set forth in Section 3.2 hereof unless: (a) in such opinion of such
counsel or as can be concluded from the representation letter of such holder
(which opinion and counsel or representation letter shall be reasonably
acceptable to the Corporation) the registration of future Transfers is not
required by the applicable provisions of the Securities Act and state securities
laws, or (b) the Corporation shall have waived the requirement of such legend;
provided, however, that such legend shall not be required on any certificate or
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other instrument evidencing the securities issued upon such Transfer in the
event such Transfer shall be made in compliance with the requirements of Rule
144 (as amended from time to time or any similar or successor rule) promulgated
under the Securities Act. The holder of Restricted Securities shall not effect
any Transfer until such opinion of counsel or representation letter of such
holder has been given to and accepted by the Corporation (unless waived by the
Corporation) or until registration of the Restricted Securities involved in the
above-mentioned request has become effective under the Securities Act. In the
event that an opinion of counsel is required by the registrar or transfer agent
of the Corporation to effect a transfer of Restricted Securities in the future,
the Corporation shall seek and obtain such opinion from its counsel, and the
holder of such Restricted Securities shall provide such reasonable assistance as
10
is requested by the Corporation (other than the furnishing of an opinion of
counsel) to satisfy the requirements of the registrar or transfer agent to
effectuate such transfer.
3.4 Required Registration
----------------------
. At any time after 180 days following completion of a Qualified Public
Offering by the Corporation, if the Corporation shall be requested by one or
more holders of at least 50% of the outstanding shares of the Series A Preferred
Stock (a "Series A Demand") or by one or more holders of at least 50% of the
outstanding shares of the Series B Preferred Stock (a "Series B Demand") (in
either case based on the underlying Class A Common Stock for which the shares of
Preferred Stock are convertible or exercisable) to effect the registration under
the Securities Act of Restricted Securities having a proposed aggregate offering
price equal to or greater than $5,000,000, then the Corporation shall promptly
give written notice of such proposed registration to all holders of Restricted
Securities, and thereupon the Corporation shall promptly use its best efforts to
effect the registration under the Securities Act of the Restricted Securities
that the Corporation has been requested to register for disposition as described
in the request of such holders of Restricted Securities (the "Initiating
Holders") and in any response received from any of the holders of Restricted
Securities within 30 days after the giving of the written notice by the
Corporation; provided, however, that the Corporation shall not be obligated to
-------- -------
effect any registration under the Securities Act except in accordance with the
following provisions and Section 3.7 and provided, further, that the Corporation
-------- -------
shall not be obligated to effect more than one registration under this Section
3.4 pursuant to a Series A Demand and one registration under this Section 3.4
pursuant to a Series B Demand:
(a) Subject to Section 3.6, the Corporation shall not be obligated to file
and cause to become effective more than one (1) registration statement on behalf
of the holders of each of the Series A Preferred Stock and Series B
Preferred Stock pursuant to this Section 3.4.
(b) Notwithstanding the foregoing, the Corporation may include in each such
registration requested pursuant to this Section 3.4 any authorized but unissued
shares of Class A Common Stock (or authorized treasury shares) for sale by the
Corporation or any issued and outstanding shares of Class A Common Stock for
sale by the Founders or by others; provided, however, that, if the number of
-------- -------
shares of Class A Common Stock so included pursuant to this clause (b) exceeds
the number of Restricted Securities requested by the holders of Restricted
Securities requesting such registration, then such registration shall be deemed
to be a registration in accordance with and pursuant to Section 3.5; and
provided further, however, that the inclusion of such previously authorized but
---------- -------
unissued shares by the Corporation or issued and outstanding shares of Class A
Common Stock by others in such registration does not adversely affect, in the
sole opinion of the holders of Restricted Securities requesting such
registration, the ability of the holders of Restricted Securities requesting
such registration to market the entire number of Restricted Securities requested
by them.
(c) Notwithstanding the foregoing, if at the time of any request to register
securities pursuant to this Section 3.4 the Corporation is engaged in or has
plans to engage in a registered public offering or is engaged in any other
activity which, in the good faith determination of the Board would be materially
adversely affected by the requested registration, then the Corporation may at
its option direct that such request be delayed for a period not to exceed 180
11
days from the date of such request, such right to be exercised by the
Corporation not more than once in any consecutive twelve (12) month period.
3.5 Piggyback Registration.
-----------------------
(a) Each time that the Corporation proposes for any reason to register any
of its securities under the Securities Act, other than pursuant to (i) a
registration statement on Form S-4 or Form S-8 or similar or successor forms
(collectively, "Excluded Forms") or (ii) in connection with the Corporation's
initial public offering, the Corporation shall promptly give written notice of
such proposed registration to all holders of Restricted Securities, which shall
offer such holders the right to request inclusion of any Restricted Securities
in the proposed registration.
(b) Each holder of Restricted Securities shall have 30 days from the receipt
of such notice to deliver to the Corporation a written request specifying the
number of Restricted Securities such holder intends to sell and the holder's
intended method of disposition.
(c) In the event that the proposed registration by the Corporation is, in
whole or in part, an underwritten public offering of securities of the
Corporation, any request under Section 3.5(b) may specify that the Restricted
Securities be included in the underwriting (i) on the same terms and conditions
as the shares of Class A Common Stock, if any, otherwise being sold through
underwriters under such registration, or (ii) on terms and conditions comparable
to those normally applicable to offerings of common stock in reasonably similar
circumstances in the event that no shares of Class A Common Stock are being sold
through underwriters under such registration.
(d) Upon receipt of a written request pursuant to Section 3.5(b), the
Corporation shall promptly use its best efforts to cause all such Restricted
Securities to be registered under the Securities Act, to the extent required to
permit sale or disposition as set forth in the written request.
(e) Notwithstanding the foregoing, if the managing underwriter of any such
proposed registration determines and advises in writing that the inclusion of
all Restricted Securities proposed to be included in the underwritten public
offering, together with any other issued and outstanding shares of Class A
Common Stock proposed to be included therein by holders other than the holders
of Restricted Securities (such other holders hereinafter collectively referred
to as the "Other Holders"), would interfere with the successful marketing of the
Corporation's securities, then the total number of such securities proposed to
be included in such underwritten public offering shall be reduced, (i) first by
the shares requested to be included in such registration by Other Holders, and
(ii) second, if necessary, by the Restricted Securities proposed to be included
in such registration by the holders thereof, on a pro rata basis, based upon the
--- ----
number of Restricted Securities sought to be registered by each such holder.
The shares of Class A Common Stock that are excluded from the underwritten
public offering pursuant to the preceding sentence shall be withheld from the
market by the holders thereof for a period, not to exceed 180 days from the
closing of such underwritten public offering, that the managing underwriter
12
reasonably determines as necessary in order to effect such underwritten public
offering.
(f) The rights of the holders of Restricted Securities under this Section
3.5 shall terminate once the Corporation has effected two (2) registrations
under this Section 3.5.
3.6 Registrations on Form S-2 and S-3
--------------------------------------
. In addition to the rights provided in Sections 3.4 and 3.5, at such time as
the Corporation shall have qualified for the use of Form S-2 or Form S-3 (or any
successor form promulgated under the Securities Act), the Initiating Holders
shall have the right to request in writing up to two (2) registrations on Form
S-2 or Form S-3. Each such request by the Initiating Holders shall: (a) specify
the number of Restricted Securities which the Initiating Holders intend to sell
or dispose of, (b) state the intended method by which the Initiating Holders
intend to sell or dispose of such Restricted Securities, and (c) request
registration of Restricted Securities having a proposed aggregate offering price
of at least $5,000,000 (unless such request covers all remaining Restricted
Securities held by the Investors in which event this restriction shall not
apply). Upon receipt of a request pursuant to this Section 3.6, the Corporation
shall use its best efforts to effect such registration or registrations on Form
S-2 or Form S-3. Notwithstanding the foregoing, the Corporation may delay
filing a registration statement on Form S-2 or Form S-3 and may withhold efforts
to cause the registration statement to become or remain effective, if the Board
determines in good faith that such registration might (i) interfere with or
affect the negotiation or completion of any transaction that is being
contemplated by the Corporation at the time the right to delay is exercised, or
(ii) involve initial or continuing disclosure obligations that might not be in
the best interest of the Corporation's shareholders. Notwithstanding the
foregoing, the Corporation shall not be entitled to exercise its right to defer
filing or effectiveness of or to update a registration pursuant to a Form S-2 or
Form S-3 registration request for more than one hundred eighty (180) consecutive
days.
3.7 Preparation and Filing
------------------------
. If and whenever the Corporation is under an obligation pursuant to the
provision of this Section 3 to use its best efforts to effect the registration
of any Restricted Securities, the Corporation shall, as expeditiously as
practicable:
(a) prepare and file with the Commission a registration statement with
respect to such securities and use its best efforts to cause such registration
statement to become and remain effective in accordance with Section 3.7(b)
hereof;
(b) prepare and file with the Commission such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective until the earlier
of (i) the sale of all Restricted Securities covered thereby or (ii) nine
months, and to comply with the provisions of the Securities Act with respect to
the sale or other disposition of all Restricted Securities covered by such
registration statement;
(c) furnish to each holder whose Restricted Securities are being registered
pursuant to this Section 3 such number of copies of any summary prospectus or
other prospectus, including a preliminary prospectus, in conformity with the
13
requirements of the Securities Act, and such other documents as such holder may
reasonably request in order to facilitate the public sale or other disposition
of such Restricted Securities;
(d) use its best efforts to register or qualify the Restricted Securities
covered by such registration statement under the securities or blue sky laws of
such jurisdictions as each holder whose Restricted Securities are being
registered pursuant to this Section 3 shall reasonably request and do any and
all other acts or things which may be necessary or advisable to enable such
holder to consummate the public sale or other disposition in such jurisdictions
of such Restricted Securities; provided, however, that the Corporation shall not
-------- -------
be required to consent to general service of process for all purposes in any
jurisdiction where it is not then subject to process, qualify to do business as
a foreign corporation where it would not be otherwise required to qualify or
submit to liability for state or local taxes where it is not otherwise liable
for such taxes;
(e) at any time when a prospectus covered by such registration statement and
relating thereto is required to be delivered under the Securities Act within the
appropriate period mentioned in Section 3.7(b) hereof, notify each holder whose
Restricted Securities are being registered pursuant to this Section 3 of the
happening of any event as a result of which the prospectus included in such
registration, as then in effect, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing and, at the request of such holder, prepare, file and furnish to
such holder a reasonable number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such shares, such prospectus shall not include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the light
of the circumstances then existing;
(f) if the Corporation has delivered preliminary or final prospectuses to
the holders of Restricted Securities that are being registered pursuant to this
Section 3 and after having done so the prospectus is amended to comply with the
requirements of the Securities Act, the Corporation shall promptly notify such
holders and, if requested, such holders shall immediately cease making offers of
Restricted Securities and return all prospectuses to the Corporation. The
Corporation shall promptly provide such holders with revised prospectuses and,
following receipt of the revised prospectuses, such holders shall be free to
resume making offers of the Restricted Securities;
(g) furnish, at the request of any holder whose Restricted Securities are
being registered pursuant to this Section 3, on the date that such Restricted
Securities are delivered to the underwriters for sale in connection with a
registration pursuant to this Section 3, if such securities are being sold
through underwriters, or, on the date that the registration statement with
respect to such securities becomes effective, if such securities are not being
sold through underwriters, (i) an opinion, dated such date, of the counsel
representing the Corporation for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the holder or holders
making such request, and (ii) a letter dated such date, from the independent
14
certified public accountants of the Corporation, in form and substance as is
customarily given by independent certified public accountants to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and to
the holder or holders making such request;
(h) permit any holder of Restricted Securities which holder, in the sole and
exclusive judgment, exercised in good faith, of such holder, might be deemed to
be a controlling person of the Corporation, to participate in good faith in the
preparation of such registration and to require the insertion thereof of
material, furnished to the Corporation in writing, which in the reasonable
judgment of such holder and its counsel should be included;
(i) promptly notify the holders of Restricted Securities (or, in the event
of an underwritten offering, the managing underwriters) of the issuance by the
Commission of any stop order or other suspension of effectiveness of the
registration statement, and make every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of the registration
statement at the earliest possible time;
(j) provide a transfer agent and registrar for all Restricted Securities
registered pursuant to this Section 3;
(k) use its best efforts to list the Restricted Securities covered by such
registration statement with any securities exchange on which similar securities
issued by the Corporation are then listed or, if none of the Corporation's
securities are so listed, have the Restricted Securities included on an
interdealer quotation system;
(l) make available for inspection by each holder whose Restricted Securities
are being registered pursuant to this Section 3 reasonable access to all
financial and other records, pertinent corporate documents and properties of the
Corporation, as such parties may reasonably request, and cause the Corporation's
officers, directors and employees to supply all information reasonably requested
by any such holder in connection with such registration;
(m) cooperate with the holders whose Restricted Securities are being
registered pursuant to this Section 3 and the managing underwriter, if any, to
facilitate the timely preparation and delivery of certificates representing
Restricted Securities to be sold, such certificates to be in such denominations
and registered in such names as such holders or the managing underwriter may
request at least two (2) business days prior to any sale of Restricted
Securities; and
(n) comply with all applicable rules and regulations under the Securities
Act and Exchange Act.
3.8 Expenses
--------
. The Corporation shall pay all expenses incurred by the Corporation in
complying with this Section 3, including, without limitation, all registration
and filing fees (including all expenses incident to filing with the National
Association of Securities Dealers, Inc.), fees and expenses of complying with
the securities and blue sky laws of all such jurisdictions in which the
Restricted Securities are proposed to be offered and sold, printing expenses and
fees and disbursements of counsel (including with respect to each registration
15
effected pursuant to Sections 3.4, 3.5 and 3.6, the reasonable fees and
disbursements of counsel for the holders of Restricted Securities that are being
registered pursuant to this Section 3); provided, however, that all underwriting
-------- -------
discounts and selling commissions applicable to the Restricted Securities
covered by registrations effected pursuant to Section 3.4, 3.5 or 3.6 hereof
shall be borne by the seller or sellers thereof, in proportion to the number of
Restricted Securities sold by each such seller or sellers.
3.9 Rule 144 Reporting
--------------------
. With a view to making available the benefits of certain rules and regulations
of the Commission which may at any time permit the sale of the Restricted
Securities to the public without registration, at all times after ninety (90)
days after the effective date of the Corporation's initial registration
statement filed under the Securities Act, the Corporation agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act (or any successor
rule);
(b) use its best efforts to file with the Commission in a timely manner all
reports and other documents required of the Corporation under the Securities Act
and the Exchange Act; and
(c) furnish to each holder of Restricted Securities forthwith upon request a
written statement by the Corporation as to its compliance with the reporting
requirements of Rule 144 (or any successor rule) and, at any time after it has
become subject to such reporting requirements, of the Securities Act and the
Exchange Act, a copy of the most recent annual or quarterly report of the
Corporation, and such other reports and documents so filed by the Corporation as
such holder may reasonably request in availing itself of any rule or regulation
of the Commission allowing such holder to sell any Restricted Securities without
registration.
3.10 Indemnification.
---------------
(a) In the event of any registration of any Restricted Securities under the
Securities Act pursuant to this Section 3 or registration or qualification of
any Restricted Securities pursuant to Section 3.7(d) hereof, the Corporation
shall indemnify and hold harmless the seller of such shares, each underwriter of
such shares, if any, each broker or any other person acting on behalf of
such seller and each other person, if any, who controls any of the foregoing
persons, within the meaning of the Securities Act, against any losses, claims,
damages or liabilities, joint or several, to which any of the foregoing persons
may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any registration statement under which such
Restricted Securities were registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, or any document incident to registration or qualification of any
Restricted Securities pursuant to Section 3.7(d) hereof, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading or, with respect to any prospectus, necessary to make the statements
therein, in light of the circumstances under which they were made, not
16
misleading, or any violation by the Corporation of the Securities Act or any
state securities or blue sky laws applicable to the Corporation in connection
with such registration or qualification under the Securities Act or such state
securities or blue sky laws. The Corporation shall reimburse on demand such
seller, underwriter, broker or other person acting on behalf of such seller and
each such controlling person for any legal or any other expenses reasonably
incurred by any of them in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that the
-------- -------
Corporation shall not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
said registration statement, preliminary or final prospectus or amendment or
supplement thereto or any document incident to registration or qualification of
any Restricted Securities pursuant to Section 3.7(d) hereof, in reliance upon
and in conformity with written information furnished to the Corporation by such
seller, underwriter, broker, other person or controlling person specifically for
use in the preparation thereof.
(b) Before Restricted Securities held by any prospective seller shall be
included in any registration pursuant to this Section 3, such prospective seller
and any underwriter acting on its behalf shall have agreed to indemnify and hold
harmless severally and not jointly (in the same manner and to the same extent as
set forth in paragraph (a)) the Corporation, each director of the Corporation,
each officer of the Corporation who signs such registration statement and any
person who controls the Corporation within the meaning of the Securities Act,
with respect to any untrue statement or omission from such registration
statement, any preliminary prospectus or final prospectus contained therein, or
any amendment or supplement thereto, if such untrue statement or omission was
made in reliance upon and in conformity with written information furnished to
the Corporation through an instrument duly executed by such seller or such
underwriter specifically for use in the preparation of such registration
statement, preliminary prospectus, final prospectus or amendment or supplement;
provided, however, that the maximum amount of liability in respect of such
- -------- -------
indemnification shall be limited, in the case of each prospective seller, to an
- -----
amount equal to the net proceeds actually received by such prospective seller
from the sale of Restricted Securities effected pursuant to such registration.
(c) Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in Section 3.10(a) or
(b) hereof, such indemnified party will, if a claim in respect thereof is to be
made against the indemnifying party under this Section 3.10, give written notice
to the latter of the commencement of such action. In case any such action is
brought against an indemnified party, the indemnifying party will be entitled to
participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and, after notice to
such indemnified party from the indemnifying party of its election to assume the
defense thereof, the indemnifying party shall be responsible for any legal or
other expenses subsequently incurred by the latter in connection with the
defense thereof; provided, however, that, if any indemnified party shall have
-------- -------
reasonably concluded that there may be one or more legal defenses available to
such indemnified party which are different from or additional to those available
to the indemnifying party, or that such claim or litigation involves or could
have an effect upon matters beyond the scope of the indemnity agreement provided
in this Section 3.10, the indemnifying party shall not have the right to assume
the defense of such action on behalf of such indemnified party, and such
indemnifying party shall reimburse such indemnified party and any person
controlling such indemnified party for the fees and expenses of counsel retained
by the indemnified party which are reasonably related to the matters covered by
the indemnity agreement provided in this Section 3.10. The indemnifying party
17
shall not make any settlement of any claims indemnified against hereunder
without the written consent of the indemnified party or parties unless such
settlement includes as an unconditional term thereof a release of any
indemnified party or parties who have not consented thereto from all liabilities
and obligations in respect of such claim or litigation.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any holder of
Restricted Securities exercising rights under this Agreement, or any controlling
person of any such holder, makes a claim for indemnification pursuant to this
Section 3.10, but it is judicially determined (by the entry of a final judgment
or decree by a court of competent jurisdiction and the expiration of time to
appeal or the denial of the last right of appeal) that such indemnification may
not be enforced in such case notwithstanding the fact that this Section 3.10
provides for indemnification in such case, or (ii) contribution under the
Securities Act may be required on the part of any such holder or any such
controlling person in circumstances for which indemnification is provided under
this Section 3.10; then, in each such case, the Corporation and such holder will
contribute to the aggregate losses, claims, damages or liabilities to which they
may be subject as is appropriate to reflect the relative fault of the
Corporation and such holder in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities, it being understood
that the parties acknowledge that the overriding equitable consideration to be
given effect in connection with this provision is the ability of one party or
the other to correct the statement or omission which resulted in such losses,
claims, damages or liabilities, and that it would not be just and equitable if
contribution pursuant hereto were to be determined by pro rata allocation or by
--------
any other method of allocation which does not take into consideration the
foregoing equitable considerations. Notwithstanding the foregoing, (i) no such
holder will be required to contribute any amount in excess of the net proceeds
(after commissions, discounts, etc.) to it of all Restricted Securities sold by
it pursuant to such registration statement, and (ii) no person or entity guilty
of fraudulent misrepresentation, within the meaning of Section 11(f) of the
Securities Act, shall be entitled to contribution from any person or entity who
is not guilty of such fraudulent misrepresentation.
(e) Notwithstanding any of the foregoing, if, in connection with an
underwritten public offering of any Restricted Securities, the Corporation, the
holders of such Restricted Securities and the underwriters enter into an
underwriting or purchase agreement relating to such offering which contains
provisions covering indemnification among the parties, then the indemnification
provision of this Section 3.10 shall be deemed inoperative for purposes of such
offering, but only to the extent that the indemnification provisions contained
in such underwriting or purchase agreement are not inconsistent herewith.
3.11 "Market Stand-Off" Agreement
------------------------------
. Each Investor hereby agrees that, during the period of duration (up to a
maximum of 180 days) specified by the Corporation and an underwriter of Class A
Common Stock or other securities of the Corporation, following the effective
18
date of the Corporation's initial public offering, it shall not, to the extent
requested by the Corporation and such underwriter, directly or indirectly sell,
offer to sell, contract to sell (including, without limitation, any short sale),
grant any option to purchase or otherwise transfer or dispose of (other than to
donees who agree to be similarly bound) any securities of the Corporation held
by it at any time during such period, except Restricted Securities included in
such registration.
3.12 Removal of Legends, Etc.
---------------------------
Notwithstanding the foregoing provisions of this Section 3, the restrictions
imposed by this Section 3 upon the transferability of any Restricted Securities
shall cease and terminate when (a) any such Restricted Securities are sold or
otherwise disposed of in accordance with the intended method of disposition by
the seller or sellers thereof set forth in a registration statement or such
other method contemplated by Section 3.3 hereof that does not require that the
securities transferred bear the legend set forth in Section 3.2 hereof,
including a Transfer pursuant to Rule 144 or a successor rule thereof (as
amended from time to time), or (b) the holder of Restricted Securities has met
the requirements for transfer of such Restricted Securities pursuant to
subparagraph (k) of Rule 144 or a successor rule thereof (as amended from time
to time) promulgated by the Commission under the Securities Act. Whenever the
restrictions imposed by this Section 3 have terminated, a holder of a
certificate for Restricted Securities and Class A Common Stock as to which such
restrictions have terminated shall be entitled to receive from the Corporation,
without expense, a new certificate not bearing the restrictive legend set forth
in Section 3.2 hereof and not containing any other reference to the restrictions
imposed by this Section 3.
3.13 Tag-Along Rights
-----------------
(a) Each Founder shall be entitled to unlimited and proportionate
"tag-along" rights in the event of a sale or other disposition of Restricted
Securities by an Investor to a party other than the Corporation (the
"Purchaser") in a transaction or series of related transactions resulting in the
Purchaser or the Purchaser and its affiliates (as such term is defined in
Rule 12B-2 of the 1934 Act) in the aggregate and for the first time controlling
more than seventy-five percent (75%) of the then issued Restricted Securities (a
"Tag Along Sale"). As a condition to any Tag Along Sale, each Founder shall
have the right to sell to the Purchaser, as a condition to such sale by such
Investor, at the same price per share of Class A Common Stock (calculated as if
Investor's Series A Preferred Stock were converted into Class A Common Stock)
and on the same terms and conditions as involved in such sale by the Investor,
the same percentage of the Class A Common Stock owned by such Founder as the
percentage to be sold by the Investor to the Purchaser represents with respect
to the Restricted Securities owned by the Investor immediately prior to the sale
of any of his Restricted Securities to the Purchaser.
(b) If a Founder wishes to so participate in any sale under this Section
3.13, it shall notify the Investor in writing within fifteen (15) days after the
date the Founder received notice of an intended sale by that Investor.
(c) An Investor and, if any of them so elect, such Founders, shall sell to
the Purchaser all, or at the option of the Purchaser, any part, of the shares
proposed to be sold by them at not less than the price and upon other terms and
19
conditions, if any, not more favorable to the Purchaser than those offered to
that Investor; provided, however that any purchase of less than all of such
-------- -------
shares by the Purchaser shall be made from an Investor and the Founders pro rata
based upon the relative amount of the shares that that Investor and the Founders
are otherwise entitled to sell pursuant to Section 3.13(a).
(d) The Founders' right to participate in sales pursuant to this Section
3.13 shall not apply with respect to sales, transfers or exchanges of Preferred
Stock or Common Stock by an Investor (i) to the Corporation, and (ii) in a
Qualified Public Offering.
(e) Unless otherwise consented to or permitted under Section 3.1(b), each
Investor that holds at least 5% of the Preferred Stock issued to such Investor
as of the date hereof shall be entitled to unlimited and proportionate
"tag-along" rights, in accordance with terms and procedures analogous to those
set forth above for the benefit of the Founders in Section 3.13(a) through (d),
in the event of a sale or other disposition of Class A Common Stock by a Founder
or other Investor.
3.14 Drag-Along Rights.
------------------
(a) If at any time prior to a Qualified Public Offering the Corporation or
any of its Stockholders shall have received an offer from a third party that is
not an Affiliate of the Corporation to purchase a controlling interest of the
Corporation's outstanding capital stock or all or substantially all of the
Corporation's assets determined on a consolidated basis (whether by merger,
recapitalization, consolidation, reorganization, combination or otherwise), such
offer is approved by the Board of Directors, and the holders of two-thirds
or more of the outstanding Class A Common Stock held by the Investors and the
Founders, assuming full conversion of any then outstanding convertible
securities (giving effect to anti-dilution provisions set forth in the
Certificate, if applicable) ("Requesting Holders") shall have given written
-------------------
notice to the Corporation that they wish to accept such offer (an "Approved
--------
Sale"), then the Corporation shall deliver written notice to the same effect to
the other Investors and Founders and all of them shall accept the third-party
purchase offer and sell their shares in accordance with its terms (if
applicable). The Corporation shall use its reasonable best efforts to cause any
stockholders of the Corporation not party to this Agreement to accept the
third-party purchase offer and sell their shares in accordance with its terms
(if applicable).
(b) If the Approved Sale is structured as a merger or consolidation, then
the Investors and the Founders shall waive any dissenters' rights, appraisal
rights or similar rights in connection with such merger or consolidation. If
the Approved Sale is structured as a transfer of stock, then each Investor and
Founder shall sell all (or the applicable portion) of its stock and rights to
acquire stock on the terms and conditions of the Approved Sale.
(c) The obligations of the Investors and the Founders with respect to an
Approved Sale are subject to the satisfaction of the following conditions: (i)
with respect to the Approved Sale, each Investor and Founder shall receive the
same form of consideration and the same portion of the aggregate consideration
such Investor or Founder would have received if such aggregate consideration had
been distributed by the Corporation in complete liquidation pursuant to the
rights and preferences set forth in the Certificate (as may be amended from time
20
to time, including any certificate of designations relating to any future class
or series of capital stock) in effect immediately prior to the consummation of
the Approved Sale (and, if less than all of the outstanding capital stock of the
Corporation is included in the Approved Sale, then the form and portions of
aggregate consideration shall be determined as if the stock included in the
Approved Sale were all of the outstanding stock of the Corporation then
outstanding); (ii) if any of the Investors or Founders are given an option as to
the form and amount of consideration to be received, each Investor or Founder
holding the same class or type of stock shall be given the same option; (iii)
each Investor or Founder holding then currently exercisable rights to acquire
stock shall be given a reasonable opportunity to exercise such rights prior to
the consummation of the Approved Sale and participate in such Approved Sale as a
stockholder; and (iv) each Investor and Founder will bear its respective shares
of the costs of any actual or proposed Approved Sale to the extent such costs
are incurred for the benefit of all stockholders and are not otherwise paid by
the Corporation or the acquiring party. An Investor's or Founder's "share" of
any such costs shall be the amount by which the portion of the proceeds of the
Approved Sale payable to such stockholder as provided in this Section 3.14(c)
would have been reduced had the aggregate consideration in the Approved Sale
been reduced by the full amount of such costs prior to the allocation of such
consideration pursuant to this Section 3.14(c). Costs incurred by any Investor
of Founder on its own behalf will not be considered costs of the Approved Sale.
SECTION 4. Securities Act Registration Statements
-----------------------------------------
. Except for securities of the Corporation registered on Excluded Forms, the
Corporation shall not file any registration statement under the Securities Act
covering any securities unless it shall first have given each holder of
Restricted Securities written notice thereof. The Corporation further covenants
that each holder of Restricted Securities shall have the right, at any time when
it may be deemed to be a controlling person of the Corporation, within the
meaning of the Securities Act, to participate in the preparation of such
registration statement and to request the insertion therein of material
furnished to the Corporation in writing which in such holder's judgment should
be included. In connection with any registration statement referred to in this
Section 4, the Corporation shall indemnify, to the extent permitted by law, each
holder of Restricted Securities, its officers, partners and directors and each
person, if any, who controls any such holder within the meaning of the
Securities Act in the same manner and to the same extent as the Corporation is
required to indemnify a seller of Restricted Securities in Section 3.9 hereof.
If, in connection with any such registration statement, any holder of Restricted
Securities shall furnish written information to the Corporation expressly for
use in the registration statement, then such holder shall indemnify the
Corporation, each director of the Corporation, each officer of the Corporation
who signs such registration statement and each person, if any, who controls the
Corporation within the meaning of the Securities Act to the same extent as a
seller of Restricted Securities is required to indemnify such persons in Section
3.10 hereof.
SECTION 5. Election of Directors.
-----------------------
5.1 Voting for Directors
----------------------
. At each annual meeting of the stockholders of the Corporation and at each
special meeting of the stockholders of the Corporation called for the purposes
of electing directors of the Corporation, and at any time at which stockholders
of the Corporation shall have the right to, or shall, vote for or consent to the
election of directors, then, in each such event, each Investor shall vote all
shares of Preferred Stock and any other shares of voting stock of the
21
Corporation then owned (or controlled as to voting rights) by it, whether by
purchase, exercise of rights, warrants or options, stock dividends or otherwise,
and each Founder shall vote all shares of Class A Common Stock and any other
shares of voting stock of the Corporation then owned (or controlled as to voting
rights) by him or it, whether by purchase, exercise of rights, warrants or
options, stock dividends or otherwise as follows:
(a) to fix and maintain the number of directors on the Board of Directors of
the Corporation at seven (7);
(b) to elect to the Board three (3) directors designated by the New
Investors, one of whom initially shall be as of the date hereof Thomas
Tscherning (the "NI Directors");
(c) to elect to the Board one (1) director designated by the Existing
Investor, who initially shall be as of the date hereof Lee Eppstein, Ph.D. (the
"EI Director", and together with the NI Directors, the "Preferred Directors");
(d) to elect to the Board the Chief Executive Officer of the Corporation,
who initially shall be as of the date hereof Arthur J. Blume, Ph.D.;
(e) to elect to the Board the Chief Scientific Officer of the Corporation;
and
(f) to elect to the Board one (1) director designated by the Investors and
Founders, voting together, who initially shall be as of the date hereof John
Prendergast, Ph.D., and who initially shall be Chairman of the Board.
5.2 Cooperation of the Corporation
---------------------------------
. The Corporation shall use its best efforts to effectuate the purposes of this
Section 5, including promoting the adoption of any necessary amendment of the
By-laws and the Certificate of Incorporation of the Corporation.
5.3 Notices
-------
. The Corporation shall provide the Investors and Founders with at least twenty
(20) days' prior notice in writing of any intended mailing of notice to the
Investors of the Corporation for a meeting at which directors are to be elected,
and such notice shall include the names of the persons designated by the
Corporation pursuant to this Section 5. The Investors and Founders shall notify
the Corporation in writing at least three (3) days prior to such mailing of the
persons designated by it pursuant to Section 5.1 above as nominees for election
to the Board. In the absence of any notice from the Investors or Founders, the
director(s) then serving and previously designated by the Investors shall be
renominated.
5.4 Board of Directors' Committees
---------------------------------
At least one of the NI Directors shall serve on each committee of the Board of
Directors.
5.5 Removal
-------
. Except as otherwise provided in this Section 5, no Investor or Founder shall
vote to remove a Preferred Director unless the party or parties who designated
such director (the "Designating Party") shall so vote or otherwise consent. In
addition, each Investor agrees to vote all shares of Preferred Stock and any
22
other shares of voting stock of the Corporation then owned (or controlled as to
voting rights) by it, whether by purchase, exercise of rights, warrants or
options, stock dividends or otherwise, and each Founder shall vote all shares of
Class A Common Stock and any other shares of voting stock of the Corporation
then owned (or controlled as to voting rights) by him or it, whether by
purchase, exercise of rights, warrants or options, stock dividends or otherwise,
such that any vacancy on the Board created by the resignation, removal,
incapacity or death of any person designated under the foregoing provisions of
this Section 5 shall be filled by another person designated by the original
Designating Party.
5.6 Duration of Section
---------------------
. This Section 5 and the rights and obligations of the parties hereunder shall
automatically terminate on the consummation of a Qualified Public Offering. The
obligation of the parties hereto to vote for an EI Director designated by the
Existing Investor shall automatically terminate on the date on which ninety
percent (90%) of the Series A Preferred Stock originally issued to the Existing
Investor is no longer outstanding, and the obligation of the parties hereto to
vote for any NI Directors designated by the New Investors shall automatically
terminate on the date on which ninety (90%) of the Series B Preferred Stock
issued to the New Investors is no longer outstanding.
SECTION 6. Remedies
--------
. In case any one or more of the covenants and/or agreements set forth in this
Agreement shall have been breached by any party hereto, the party or parties
entitled to the benefit of such covenants or agreements may proceed to protect
and enforce its or their rights, either by suit in equity and/or action at law,
including, but not limited to, an action for damages as a result of any such
breach and/or an action for specific performance of any such covenant or
agreement contained in this Agreement. The rights, powers and remedies of the
parties under this Agreement are cumulative and not exclusive of any other
right, power or remedy which such parties may have under any other agreement or
law. No single or partial assertion or exercise of any right, power or remedy
of a party hereunder shall preclude any other or further assertion or exercise
thereof.
SECTION 7. Successors and Assigns
------------------------
. Except as otherwise expressly provided herein, this Agreement shall bind and
inure to the benefit of the Corporation, the Investors and the Founders and the
respective successors and assigns of the Corporation, the Investors and the
Founders. Subject to the requirements of Section 3 hereof, this Agreement and
the rights and duties of the Investor set forth herein may be freely assigned,
in whole or in part, by an Investor to any Affiliate of such Investors or to any
other person or entity acquiring at least $500,000 of Restricted Securities.
Any transferee (other than an Investor) to whom rights under Section 3 are
transferred shall, as a condition to such transfer, deliver to the Corporation a
written instrument by which such transferee identifies itself, gives the
Corporation notice of the transfer of such rights, identifies the securities of
the Corporation owned or acquired by it and agrees to be bound by the
obligations imposed hereunder to the same extent as if such transferee were an
Investor hereunder. A transferee to whom rights are transferred pursuant to
this Section 7 will be thereafter deemed to be an Investor for the purpose of
the execution of such transferred rights and may not again transfer such rights
to any other person or entity, other than as provided in this Section 7.
Neither this Agreement nor any of the rights or duties of the Corporation set
forth herein shall be assigned by the Corporation, in whole or in part, without
having first received the written consent of the majority of the voting power of
the Preferred Stock issued and outstanding, with each such holder entitled to
23
the number of votes for each such share of Preferred Stock as equals the number
of shares of Class A Common Stock (including fractional shares) into which each
such share of Preferred Stock is then convertible, rounded up to the nearest
one-tenth of a share.
SECTION 8. Duration of Agreement
-----------------------
. The rights and obligations of the Corporation and each Investor and Founder
set forth herein shall survive indefinitely, unless and until, by their
respective terms, they are no longer applicable.
SECTION 9. Entire Agreement
-----------------
. This Agreement, together with the other writings referred to herein or
delivered pursuant hereto which form a part hereof, contains the entire
agreement among the parties with respect to the subject matter hereof and
amends, restates and supersedes all prior and contemporaneous arrangements or
understandings with respect thereto, including, without limitation, the Original
Stockholders Agreement.
SECTION 10. Each Party the Drafter; Construction
----------------------------------------
. This Agreement and the provisions contained in it shall not be construed for
or against any party to this Agreement because that party drafted or caused that
party's legal representative to draft any of its provisions. This Agreement and
the provisions contained in it shall not be construed for or against any party
to this Agreement because that party drafted or caused that party's legal
representative to draft any of its provisions.
SECTION 11. Notices
-------
. All notices, requests, consents and other communications hereunder to any
party shall be deemed to be sufficient if contained in a written instrument
delivered in person or duly sent by first class registered, certified or
overnight mail, postage prepaid, or telecopied with a confirmation copy by
regular mail, addressed or telecopied, as the case may be, to such party at the
address or telecopier number, as the case may be, set forth below or such other
address or telecopier number, as the case may be, as may hereafter be designated
in writing by the addressee to the addressor listing all parties:
(i) If to the Corporation, to:
DGI BioTechnologies, Inc.
40 Talmadge Road
P.O. Box 424
Edison, New Jersey 08818-0424
Attention: Arthur J. Blume, Ph.D.
Telecopier:
with a copy to:
Mintz, Levin, Cohn, Ferris, Glovsky
and Popeo, P.C.
666 Third Avenue
New York, New York 10017-4011
Attention: Faith Charles, Esq.
Telecopier: (212) 983-3115
24
(ii) If to the Existing Investor:
New Brunswick Scientific Co., Inc.
44 Talmadge Road
P.O. Box 4005
Edison, New Jersey 08818-4005
with a copy to:
Norris, McLaughlin & Marcus, P.A.
721 Route 202-206
Somerville, New Jersey 08876
Attn: Peter D. Hutcheon, Esq.
Telecopier: 908-722-0755
(iii) If to BankInvest:
BankInvest Biomedical Venture Fund III ps
Toldbodgade 33
DK-1253 Copenhagen
Denmark
Attn: Thomas Tscherning
Telecopier: 0114533419082
with a copy to:
Satterlee Stephens Burke & Burke LLP
230 Park Avenue
New York, New York 10169-0079
Attn: Howard A. Neuman, Esq.
Telecopier: (212) 818-9606
(iv) If to any other New Investor, to the address set forth opposite such
New Investor's name on the signature page signed by such New Investor.
All such notices, requests, consents and communications shall be deemed to have
been received (a) in the case of personal delivery, on the date of such
delivery, (b) in the case of mailing, on the third business day following the
date of such mailing, (c) in the case of overnight mail, on the first business
day following the date of such mailing, and (d) in the case of facsimile
transmission, when confirmed by facsimile machine report.
SECTION 12. Amendments and Waivers
------------------------
. This Agreement may be amended or modified, and provisions hereof may be
waived, with the written consent of the Corporation and the Investors holding a
majority of the outstanding shares of Class A Common Stock issued or issuable
upon conversion of the Preferred Stock. Any such amendment, modification or
25
waiver shall be binding on all parties, including those not signing such
amendment, modification or waiver, and such consent may be given or withheld for
any reason or for no reason.
SECTION 13. Counterparts
------------
. This Agreement may be executed in any number of counterparts, and each such
counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
SECTION 14. Headings
--------
. The headings of the various sections of this Agreement have been inserted for
convenience of reference only and shall not be deemed to be a part of this
Agreement.
SECTION 15. Nouns and Pronouns
--------------------
. Whenever the context may require, any pronouns used herein shall include the
corresponding masculine, feminine or neuter forms, and the singular form of
names and pronouns shall include the plural and vice-versa.
SECTION 16. Severability
------------
. Any provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 17. Governing Law
--------------
. This Agreement shall be governed by and construed in accordance with the laws
of the State of Delaware, excluding choice of law rules thereof.
SECTION 18. Titles and Subtitles
----------------------
. The titles and subtitles used in this Agreement are for convenience only and
are not to be considered in construing or interpreting any term or provision of
this Agreement.
SECTION 19. Restrictions on Public Disclosure
------------------------------------
. The parties hereto agree than any public announcement related to this
Agreement shall be made only with the prior consent of the Corporation and the
Investors, which consent shall not be unreasonably withheld or delayed.
Nonetheless the Corporation and each Investor is authorized to make any
disclosures as may be required by law, in which event such party shall take all
reasonable measures to minimize the amount of such disclosure, and to provide
the Corporation and the other Investors with a reasonable opportunity to comment
on such disclosure. In that regard, the parties hereto acknowledge that the
Existing Investor is a reporting company under the Securities Exchange Act of
1934, as amended, and that both the investment of the Existing Investor in the
Corporation and the operations of the Corporation are material to the Existing
Investor. Accordingly, the Corporation and each Investor further acknowledge
that the Existing Investor may be required by law to make disclosures without
regard to the limitations on the Corporation under this Section.
26
IN WITNESS WHEREOF the parties hereto have executed this Agreement on the
date first above written.
DGI BIOTECHNOLOGIES, INC.
By: ____________________________
Name: Arthur J. Blume, Ph.D.
Title: President
NEW BRUNSWICK SCIENTIFIC CO., INC.
By: ____________________________
Name: Samuel Eichenbaum
Title: Vice President, Finance
BANKINVEST BIOMEDICAL VENTURE FUND III ps:
_______________________________
By:____________________________
FOUNDERS:
By: ____________________________
Name: Richard J. Murphy
By: ____________________________
Name: Arthur J. Blume
By: ____________________________
Name: Bill Kavanagh
By: ____________________________
Name: Manus O'Donnell
THE ESTATE OF BERNARD LEON
By: ____________________________
Name: Muriel Leon
Title:
Signature Page for Amended and Restated Stockholders' Agreement
SCHEDULE I
FOUNDERS SHARES OF CLASS A COMMON STOCK
- ---------------------------------- ----------------------------------
Richard J. Murphy 125,253
Arthur J. Blume, Ph.D. 222,672
Bill Kavanagh 222,672
Manus O'Donnell 125,253
Estate of
Bernard Leon 28,994
TOTAL: 724,844
EXISTING INVESTOR SHARES OF SERIES A PREFERRED STOCK
- ---------------------------------- ----------------------------------
New Brunswick Scientific Co., Inc. 3,511,144 Series A
552,655 Series A-1
550,741 Series A-2
SCHEDULE II
NEW INVESTORS SHARES OF SERIES B PREFERRED STOCK
- ------------- ----------------------------------
BankInvest 5,000,000
TOTAL: 5,000,000
COUNTERPART SIGNATURE PAGE
Reference is hereby made to that certain Amended and Restated Stockholders'
Agreement dated as of June 15, 2001 (the "Stockholders' Agreement") by and among
DGI Biotechnologies, Inc., a Delaware corporation (the "Corporation"), New
Brunswick Scientific Co., Inc., a Delaware Corporation, BankInvest Biomedical
Venture Fund III ps, and the holders of the Corporation's Class A Common Stock
listed on Schedule I attached thereto.
By execution of this Counterpart Signature Page to the Stockholders' Agreement,
the undersigned hereby (i) acknowledges receipt of a copy of the Stockholders'
Agreement, and all attachments thereto, and (ii) agrees to be bound by and
obtain the benefits of the Stockholders' Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Counterpart Signature Page
as of the 15 day of June, 2001.
NEW INVESTOR:
- --------------
_______________________________
[Print Name]
By:_________________________________
Name:
Title:
Address: