EXHIBIT 4.1
EXECUTION VERSION
ALGORX PHARMACEUTICALS, INC.
SECOND AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
THIS SECOND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT (the
"Agreement") is entered into as of this 17th day of February 2004, by and among
ALGORX PHARMACEUTICALS, INC., a Delaware corporation (the "Company") and the
investors listed on Exhibit A hereto, referred to hereinafter as the "Investors"
and each individually as an "Investor."
WITNESSETH
WHEREAS, the Investors listed under the caption "Series A Preferred Stock"
on Exhibit A hereto (the "Series A Investors") hold shares of the Company's
Series A Preferred Stock, par value $0.001 per share (the "Series A Preferred
Stock"), pursuant to that certain Series A Preferred Stock Purchase Agreement
(the "Series A Purchase Agreement") dated as of April 4, 2001 by and among the
Company and the Series A Investors;
WHEREAS, the Investors (other than PowderJect Research Limited) listed
under the caption "Series B Preferred Stock" on Exhibit A hereto (the "Series B
Investors") hold shares of the Company's Series B Preferred Stock, par value
$0.001 per share (the "Series B Preferred Stock"), pursuant to that certain
Series B Preferred Stock Purchase Agreement (the "Series B Purchase Agreement")
dated as of March 22, 2002 by and among the Company and the Series B Investors;
WHEREAS, PowderJect Research Limited ("PowderJect Research"), holds shares
of the Company's Series B Preferred Stock issued by the Company in connection
with the acquisition of MF Spinoff, Inc. pursuant to that certain Acquisition
Agreement (the "Acquisition Agreement") by and among the Company, PowderJect
Technologies, Inc., PowderJect Research and MF Spinoff, Inc. dated as of March
15, 2002;
WHEREAS, the Company granted the Series A Investors and the Series B
Investors registration, information rights and other rights pursuant to that
certain Amended and Restated Investor Rights Agreement, dated as of March 22,
2002 by and among the Company, the Series A Investors and the Series B Investors
(the "Original Agreement");
WHEREAS, the Investors listed under the caption "Series C Preferred Stock"
on Exhibit A hereto (the "Series C Investors") are purchasing shares of the
Company's Series C Preferred Stock, par value $0.001 per share (the "Series C
Preferred Stock" and, together with the Series A Preferred Stock and Series B
Preferred Stock, the "Preferred Stock") pursuant to that certain Series C
Preferred Stock Purchase Agreement (the "Series C Purchase Agreement") of even
date herewith (the "Series C Financing");
WHEREAS, the obligations in the Series C Purchase Agreement are
conditioned upon the execution and delivery of this Agreement for the purpose of
setting forth the terms and conditions pursuant to which the Investors shall be
granted registration, information rights and other rights; and
WHEREAS, in connection with the consummation of the Series C Financing,
the Company and the Investors each desire to facilitate the investors' rights
set forth in this Agreement by agreeing to the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, and for other consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereby agree that the Original Agreement shall
be superseded and replaced in its entirety by this Agreement, and the parties
hereby further agree as follows:
SECTION 1. GENERAL.
1.1 DEFINITIONS. As used in this Agreement the following terms shall
have the following respective meanings:
(a) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(b) "Form S-3" means such form under the Securities Act as in
effect on the date hereof or any successor or similar registration form under
the Securities Act subsequently adopted by the SEC which permits inclusion or
incorporation of substantial information by reference to other documents filed
by the Company with the SEC.
(c) "Holder" means any person owning of record Registrable
Securities that have not been sold to the public or any assignee of record of
such Registrable Securities in accordance with Section 2.10 hereof.
(d) "Initial Offering" means the Company's first firm commitment
underwritten public offering of its Common Stock registered under the Securities
Act, in which (x) the per share price is at least one dollar and eighteen cents
($1.18) (as adjusted for stock splits, dividends, recapitalizations and the like
after the date hereof), and (y) the gross cash proceeds to the Company (before
underwriting discounts, commissions and fees) are at least thirty million
dollars ($30,000,000).
(e) "Register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of
effectiveness of such registration statement or document.
(f) "Registrable Securities" means (a) Common Stock of the Company
issued or issuable upon conversion of the Shares and (b) any Common Stock of the
Company issued as (or issuable upon the conversion or exercise of any warrant,
right or other security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of, such above-described
securities. Notwithstanding the foregoing, Registrable Securities shall not
include any securities sold by a person to the public either pursuant to a
registration
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statement or Rule 144 or sold in a private transaction in which the transferor's
rights under Section 2 of this Agreement are not assigned.
(g) "Registrable Securities then outstanding" shall be the number
of shares determined by calculating the total number of shares of the Company's
Common Stock that are Registrable Securities and either (a) are then issued and
outstanding or (b) are issuable pursuant to then exercisable or convertible
securities.
(h) "Registration Expenses" shall mean all expenses incurred by
the Company in complying with Sections 2.2, 2.3 and 2.4 hereof, including,
without limitation, all registration and filing fees, printing expenses, fees
and disbursements of counsel for the Company, reasonable fees and disbursements
not to exceed twenty-five thousand dollars ($25,000) of a single special counsel
for the Holders, blue sky fees and expenses and the expense of any special
audits incident to or required by any such registration (but excluding the
compensation of regular employees of the Company which shall be paid in any
event by the Company).
(i) "SEC" or "Commission" means the Securities and Exchange
Commission.
(j) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(k) "Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale.
(l) "Shares" shall mean the Company's Series A Preferred Stock
issued pursuant to the Series A Purchase Agreement, the Company's Series B
Preferred Stock issued pursuant to the Series B Purchase Agreement and the
Acquisition Agreement and the Company's Series C Preferred Stock issued pursuant
to the Series C Purchase Agreement and held by the Investors listed on Exhibit A
hereto and their permitted assigns.
(m) "Special Registration Statement" shall mean (i) a registration
statement relating to any employee benefit plan or (ii) with respect to any
corporate reorganization or transaction under Rule 145 of the Securities Act,
including any registration statements related to the resale of securities issued
in such a transaction or (iii) a registration related to stock issued upon
conversion of debt securities.
SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER.
2.1 RESTRICTIONS ON TRANSFER
(a) Each Holder agrees not to make any disposition of all or any
portion of the Shares or Registrable Securities unless and until:
(i) There is then in effect a registration statement under
the Securities Act covering such proposed disposition and such disposition is
made in accordance with such registration statement; or
(ii) (A) The transferee has agreed in writing to be bound by
the terms of this Agreement, (B) such Holder shall have notified the Company of
the proposed disposition
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and shall have furnished the Company with a detailed statement of the
circumstances surrounding the proposed disposition, and (C) if reasonably
requested by the Company, such Holder shall have furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration of such shares under the Securities
Act. It is agreed that the Company will not require opinions of counsel for
transactions made pursuant to Rule 144, except in unusual circumstances. After
its Initial Offering, the Company will not require the transferee to be bound by
the terms of this Agreement.
(iii) Notwithstanding the provisions of paragraphs (i) and
(ii) above, no such registration statement or opinion of counsel shall be
necessary for a transfer by a Holder that is (A) a partnership transferring to
its partners or former partners in accordance with partnership interests, (B) a
corporation transferring to a wholly-owned subsidiary or a parent corporation
that owns all of the capital stock of the Holder, (C) a limited liability
company transferring to its members or former members in accordance with their
interests in the limited liability company, or (D) an individual transferring to
the Holder's family member or trust for the benefit of an individual Holder,
provided that in each case the transferee will be subject to the terms of this
Agreement to the same extent as if he were an original Holder hereunder.
(b) Each certificate representing Shares or Registrable Securities
shall (unless otherwise permitted by the provisions of the Agreement) be stamped
or otherwise imprinted with a legend substantially similar to the following (in
addition to any legend required under applicable state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT
SUCH REGISTRATION IS NOT REQUIRED.
(c) The Company shall be obligated to reissue promptly unlegended
certificates at the request of any Holder thereof if the Holder shall have
obtained an opinion of counsel (which counsel may be counsel to the Company)
reasonably acceptable to the Company to the effect that the securities proposed
to be disposed of may lawfully be so disposed of without registration,
qualification or legend.
(d) Any legend endorsed on an instrument pursuant to applicable
state securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal.
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2.2 DEMAND REGISTRATION.
(a) Subject to the conditions of this Section 2.2, if the Company
shall receive a written request from the Holders of a majority of the
Registrable Securities (the "Initiating Holders") that the Company file a
registration statement under the Securities Act covering the registration of at
least a majority of the Registrable Securities then outstanding (or a lesser
percent if the anticipated aggregate offering price, net of underwriting
discounts and commissions, would exceed ten million dollars ($10,000,000)), then
the Company shall, within thirty (30) days of the receipt thereof, give written
notice of such request to all Holders, and subject to the limitations of this
Section 2.2, effect, as expeditiously as reasonably possible, the registration
under the Securities Act of all Registrable Securities that the Holders request
to be registered.
(b) If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall so
advise the Company as a part of their request made pursuant to this Section 2.2
or any request pursuant to Section 2.4 and the Company shall include such
information in the written notice referred to in Section 2.2(a) or Section
2.4(a), as applicable. In such event, the right of any Holder to include its
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
enter into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by a majority in interest of the
Initiating Holders (which underwriter or underwriters shall be reasonably
acceptable to the Company) Notwithstanding any other provision of this Section
2.2 or Section 2.4, if the underwriter advises the Company that marketing
factors require a limitation of the number of securities to be underwritten
(including Registrable Securities) then the Company shall so advise all Holders
of Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares that may be included in the underwriting shall be
allocated to the Holders of such Registrable Securities on a pro rata basis
based on the number of Registrable Securities held by all such Holders
(including the Initiating Holders); provided, however, that the number of shares
of Registrable Securities to be included in such underwriting and registration
shall not be reduced unless all other securities of the Company are first
entirely excluded from the underwriting and registration. Any Registrable
Securities excluded or withdrawn from such underwriting shall be withdrawn from
the registration.
(c) The Company shall not be required to effect a registration
pursuant to this Section 2.2:
(i) prior to the earlier of (A) the fourth anniversary of
the date of this Agreement or (B) one hundred eighty (180) days following the
effective date of the registration statement pertaining to the Initial Offering;
(ii) after the Company has effected two (2) registrations
pursuant to this Section 2.2, and such registrations have been declared or
ordered effective;
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(iii) during the period starting with the date of filing of,
and ending on the date one hundred eighty (180) days following the effective
date of the registration statement pertaining to the Initial Offering; provided
that the Company makes reasonable good faith efforts to cause such registration
statement to become effective;
(iv) if within thirty (30) days of receipt of a written
request from Initiating Holders pursuant to Section 2.2(a), the Company gives
notice to the Holders of the Company's intention to file a registration
statement for a public offering, other than pursuant to a Special Registration
Statement within ninety (90) days;
(v) if the Company shall furnish to Holders requesting a
registration statement pursuant to this Section 2.2, a certificate signed by the
Chairman of the Board stating that in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the Company and
its stockholders for such registration statement to be effected at such time, in
which event the Company shall have the right to defer such filing for a period
of not more than one hundred twenty (120) days after receipt of the request of
the Initiating Holders; provided that such right to delay a request shall be
exercised by the Company not more than twice in any twelve (12) month period; or
(vi) if the Initiating Holders propose to dispose of shares
of Registrable Securities that may be immediately registered on Form S-3
pursuant to a request made pursuant to Section 2.4 below.
2.3 PIGGYBACK REGISTRATIONS. The Company shall notify all Holders of
Registrable Securities in writing at least fifteen (15) days prior to the filing
of any registration statement under the Securities Act for purposes of a public
offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, but excluding Special Registration Statements) and will afford each
such Holder an opportunity to include in such registration statement all or part
of such Registrable Securities held by such Holder. Each Holder desiring to
include in any such registration statement all or any part of the Registrable
Securities held by it shall, within fifteen (15) days after the above-described
notice from the Company, so notify the Company in writing. Such notice shall
state the intended method of disposition of the Registrable Securities by such
Holder. If a Holder decides not to include all of its Registrable Securities in
any registration statement thereafter filed by the Company, such Holder shall
nevertheless continue to have the right to include any Registrable Securities in
any subsequent registration statement or registration statements as may be filed
by the Company with respect to offerings of its securities, all upon the terms
and conditions set forth herein.
(a) UNDERWRITING. If the registration statement under which the
Company gives notice under this Section 2.3 is for an underwritten offering, the
Company shall so advise the Holders of Registrable Securities. In such event,
the right of any such Holder to be included in a registration pursuant to this
Section 2.3 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the
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Company. Notwithstanding any other provision of this Agreement, if the
underwriter determines in good faith that marketing factors require a limitation
of the number of shares to be underwritten, the number of shares that may be
included in the underwriting shall be allocated, first, to the Company; second,
to the Holders on a pro rata basis based on the total number of Registrable
Securities held by the Holders; and third, to any stockholder of the Company
(other than a Holder) on a pro rata basis. No such reduction shall reduce the
amount of securities of the selling Holders included in the registration below
twenty-five percent (25%) of the total amount of securities included in such
registration, unless such offering is the Initial Offering and such registration
does not include shares of any other selling stockholders, in which event any or
all of the Registrable Securities of the Holders may be excluded in accordance
with the immediately preceding sentence. In no event will shares of any other
selling stockholder be included in such registration that would reduce the
number of shares which may be included by Holders without the written consent of
Holders of not less than sixty-six and two thirds percent (66 2/3%) of the
Registrable Securities proposed to be sold in the offering. If any Holder
disapproves of the terms of any such underwriting, such Holder may elect to
withdraw therefrom by written notice to the Company and the underwriter,
delivered at least ten (10) business days prior to the effective date of the
registration statement. Any Registrable Securities excluded or withdrawn from
such underwriting shall be excluded and withdrawn from the registration. For any
Holder which is a partnership or corporation, the partners, retired partners and
stockholders of such Holder, or the estates and family members of any such
partners and retired partners and any trusts for the benefit of any of the
foregoing person shall be deemed to be a single "Holder," and any pro rata
reduction with respect to such "Holder" shall be based upon the aggregate amount
of shares carrying registration rights owned by all entities and individuals
included in such "Holder," as defined in this sentence.
(b) RIGHT TO TERMINATE REGISTRATION. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
Section 2.3 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration. The Registration
Expenses of such withdrawn registration shall be borne by the Company in
accordance with Section 2.5 hereof.
2.4 FORM S-3 REGISTRATION. In case the Company shall receive from any
Holder or Holders of Registrable Securities a written request or requests that
the Company effect a registration on Form S-3 (or any successor to Form S-3) or
any similar short-form registration statement and any related qualification or
compliance with respect to all or a part of the Registrable Securities owned by
such Holder or Holders, the Company will:
(a) promptly give written notice of the proposed registration, and
any related qualification or compliance, to all other Holders of Registrable
Securities; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within
fifteen (15) days after receipt of such written notice from the Company;
provided, however, that
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the Company shall not be obligated to effect any such registration,
qualification or compliance pursuant to this Section 2.4:
(i) if Form S-3 is not available for such offering by the
Holders, or
(ii) if the Holders, together with the holders of any other
securities of the Company entitled to inclusion in such registration, propose to
sell Registrable Securities and such other securities (if any) at an aggregate
price to the public of less than five million dollars ($5,000,000), or
(iii) if within thirty (30) days of receipt of a written
request from any Holder or Holders pursuant to this Section 2.4, the Company
gives notice to such Holder or Holders of the Company's intention to make a
public offering within ninety (90) days, other than pursuant to a Special
Registration Statement;
(iv) if the Company shall furnish to the Holders a
certificate signed by the Chairman of the Board of Directors of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its stockholders
for such Form S-3 registration to be effected at such time, in which event the
Company shall have the right to defer the filing of the Form S-3 registration
statement for a period of not more than ninety (90) days after receipt of the
request of the Holder or Holders under this Section 2.4; provided, that such
right to delay a request shall be exercised by the Company not more than once in
any twelve (12) month period, or
(v) if the Company has already effected two (2)
registrations on Form S-3 for the Holders pursuant to this Section 2.4.
(c) Subject to the foregoing, the Company shall file a Form S-3
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
requests of the Holders. Registrations effected pursuant to this Section 2.4
shall not be counted as demands for registration or registrations effected
pursuant to Sections 2.2 or 2.3, respectively.
2.5 EXPENSES OF REGISTRATION. Except as specifically provided herein,
all Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 2.2 or any registration under
Section 2.3 or Section 2.4 herein shall be borne by the Company. All Selling
Expenses incurred in connection with any registrations hereunder, shall be borne
by the holders of the securities so registered pro rata on the basis of the
number of shares so registered. The Company shall not, however, be required to
pay for expenses of any registration proceeding begun pursuant to Section 2.2 or
2.4, the request of which has been subsequently withdrawn by the Initiating
Holders unless (a) the withdrawal is based upon material adverse information
concerning the Company of which the Initiating Holders were not aware at the
time of such request or (b) the Holders of a majority of Registrable Securities
agree to forfeit their right to one requested registration pursuant to Section
2.2 or Section 2.4, as applicable, in which event such right shall be forfeited
by all Holders). If the Holders are required to pay the Registration Expenses,
such expenses shall be borne by the holders of securities (including Registrable
Securities) requesting such registration in proportion to the
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number of shares for which registration was requested. If the Company is
required to pay the Registration Expenses of a withdrawn offering pursuant to
clause (a) above, then the Holders shall not forfeit their rights pursuant to
Section 2.2 or Section 2.4 to a demand registration.
2.6 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use all reasonable efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder, keep
such registration statement effective for up to sixty (60) days or, if earlier,
until the Holder or Holders have completed the distribution related thereto;
provided, however, that at any time, upon written notice to the participating
Holders and for a period not to exceed sixty (60) days thereafter (the
"Suspension Period"), the Company may delay the filing or effectiveness of any
registration statement or suspend the use or effectiveness of any registration
statement (and the Initiating Holders hereby agree not to offer or sell any
Registrable Securities pursuant to such registration statement during the
Suspension Period) if the Company reasonably believes that the Company may, in
the absence of such delay or suspension hereunder, be required under state or
federal securities laws to disclose (i) any corporate development the disclosure
of which could reasonably be expected to have an adverse effect upon the Company
or its stockholders, (ii) a potentially significant transaction or event
involving the Company, or (iii) any negotiations, discussions, or proposals
directly relating thereto. No more than two (2) such Suspension Periods shall
occur in any twelve (12) month period. In the event that the Company shall
exercise its rights hereunder, the applicable time period during which the
registration statement is to remain effective shall be extended by a period of
time equal to the duration of the Suspension Period. The Company may extend the
Suspension Period for an additional consecutive sixty (60) days with the consent
of the holders of a majority of the Registrable Securities proposed to be sold
by the Initiating Holders, which consent shall not be unreasonably withheld. If
so directed by the Company, the Initiating Holders shall use their best efforts
to deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such Initiating Holders' possession, of the
prospectus relating to such Registrable Securities current at the time of
receipt of such notice. The Company shall not be required to file, cause to
become effective or maintain the effectiveness of any registration statement
that contemplates a distribution of securities on a delayed or continuous basis
pursuant to Rule 415 under the Securities Act.
(b) Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement for the period set forth in paragraph (a) above.
(c) Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
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(d) Use its reasonable efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders; provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing. The Company will use reasonable efforts to amend or supplement such
prospectus in order to cause such prospectus not to include any 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.
(g) Use its reasonable efforts to furnish, on the date that such
Registrable Securities are delivered to the underwriters for sale, if such
securities are being sold through underwriters, (i) an opinion, dated as of such
date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and (ii)
a letter, dated as of such date, from the independent certified public
accountants of the Company, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering addressed to the underwriters.
2.7 TERMINATION OF REGISTRATION RIGHTS. All registration rights granted
under this Section 2 shall terminate and be of no further force and effect five
(5) years after the date of the Company's Initial Offering. In addition, a
Holder's registration rights shall expire if (a) the Company has completed its
Initial Offering and is subject to the provisions of the Exchange Act, (b) such
Holder (together with its affiliates) holds less than 1% of the Company's
outstanding Common Stock (treating all shares of convertible Preferred Stock on
an as converted basis) and (c) all Registrable Securities held by and issuable
to such Holder (and its affiliates) may be sold under Rule 144 (without
reference to 144(k)) during any ninety (90) day period.
2.8 DELAY OF REGISTRATION; FURNISHING INFORMATION
(a) No Holder shall have any right to obtain or seek an injunction
restraining or otherwise delaying any such registration as the result of any
controversy that might arise with respect to the interpretation or
implementation of this Section 2.
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(b) It shall be & condition precedent to the obligations of the
Company to take any action pursuant to Section 2.2, 2.3 or 2.4 that the selling
Holders shall furnish to the Company such information regarding themselves, the
Registrable Securities held by them and the intended method of disposition of
such securities as shall be required to effect the registration of their
Registrable Securities.
(c) The Company shall have no obligation with respect to any
registration requested pursuant to Section 2.2 or Section 2.4 if, due to the
operation of subsection 2.2(b), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's obligation
to initiate such registration as specified in Section 2.2 or Section 2.4,
whichever is applicable.
2.9 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under Sections 2.2, 2.3 or 2.4:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, the partners, officers and directors of each Holder,
any underwriter (as defined in the Securities Act) for such Holder and each
person, if any, who controls such Holder or underwriter within the meaning of
the Securities Act or the Exchange Act, against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar' as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any of the following statements, omissions or violations
(collectively a "VIOLATION") by the Company: (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein, in light of the circumstances in which they are
made, not misleading, or (iii) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act, any state securities law or any rule or
regulation promulgated under the Securities Act, the Exchange Act or any state
securities law in connection with the offering covered by such registration
statement; and the Company will pay as incurred to each such Holder, partner,
officer, director, underwriter or controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided however,
that the indemnity agreement contained in this Section 2.9(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Company, which consent
shall not be unreasonably withheld, nor shall the Company be liable in any such
case for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by such Holder, partner, officer, director, underwriter
or controlling person of such Holder.
(b) To the extent permitted by law, each Holder will, if
Registrable Securities held by such Holder are included in the securities as to
which such registration qualifications or compliance is being effected,
indemnify and hold harmless the Company, each of its directors,
11
its officers and each person, if any, who controls the Company within the
meaning of the Securities Act, any underwriter and any other Holder selling
securities under such registration statement or any of such other Holder's
partners, directors or officers or any person who controls such Holder, against
any losses, claims, damages or liabilities (joint or several) to which the
Company or any such director, officer, controlling person, underwriter or other
such Holder, or partner, director, officer or controlling person of such other
Holder may become subject under the Securities Act, the Exchange Act or other
federal or state law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder under an instrument duly executed by such Holder and stated to be
specifically for use in connection with such registration; and each such Holder
will pay as incurred any legal or other expenses reasonably incurred by the
Company or any such director, officer, controlling person, underwriter or other
Holder, or partner, officer, director or controlling person of such other Holder
in connection with investigating or defending any such loss, claim, damage,
liability or action if it is judicially determined that there was such a
Violation; provided, however, that the indemnity agreement contained in this
Section 2.9(b) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Holder, which consent shall not be unreasonably withheld;
provided further, that in no event shall any indemnity under this Section 2.9
exceed the net proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 2.9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 2.9, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 2.9, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 2.9.
(d) If the indemnification provided for in this Section 2.9 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any losses, claims, damages or liabilities referred to
herein, the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation(s)
12
that resulted in such loss, claim, damage or liability, as well as any other
relevant equitable considerations. The relative fault of the indemnifying party
and of the indemnified party shall be determined by a court of law by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to information
supplied by the indemnifying party or by the indemnified party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission; provided, that in no event shall any
contribution by a Holder hereunder exceed the net proceeds from the offering
received by such Holder.
(e) The obligations of the Company and Holders under this Section
2.9 shall survive completion of any offering of Registrable Securities in a
registration statement and the termination of this Agreement. No indemnifying
party, in the defense of any such claim or litigation, shall, except with the
consent of each indemnified party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation.
2.10 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company
to register Registrable Securities pursuant to this Section 2 may be assigned by
a Holder to a transferee or assignee of Registrable Securities that (a) is a
subsidiary, parent, general partner, limited partner, retired partner, member or
retired member, or stockholder of a Holder, (b) is a Holder's child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law
(such a relation, a Holder's "Immediate Family Member", which term shall include
adoptive relationships), (c) is a trust for the benefit of an individual Holder
or such Holder's immediate Family Member, (d) acquires at least fifty thousand
(50,000) shares of Registrable Securities (as adjusted for stock splits and
combinations), or (e) is an entity affiliated by common control (or other
related entity) with such Holder; provided, however, (i) the transferor shall,
within ten (10) days after such transfer, furnish to the Company written notice
of the name and address of such transferee or assignee and the securities with
respect to which such registration rights are being assigned and (ii) such
transferee shall agree to be subject to all restrictions set forth in this
Agreement. For the purposes of determining the number of shares of Registrable
Securities held by a transferee or assignee, the holdings of transferees and
assignees of (x) a partnership who are partners or retired partners of such
partnership or (y) a limited liability company who are members or retired
members of such limited liability company (including Immediate Family Members of
such partners or members who acquire Registrable Securities by gift, will or
intestate succession) shall be aggregated together and with the partnership or
limited liability company; provided that all assignees and transferees who would
not qualify individually for assignment of registration rights shall have a
single attorney-in-fact for the purpose of exercising any rights, receiving
notices or taking any action under this Section 2.
2.11 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Section 2
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holders of at least a majority of the
Registrable Securities then outstanding. Any amendment or waiver effected in
accordance with this Section 2.11 shall be binding upon each Holder and the
13
Company. By acceptance of any benefits under this Section 2, Holders of
Registrable Securities hereby agree to be bound by the provisions hereunder.
2.12 LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. Other than as provided
in Section 5.11, after the date of this Agreement, the Company shall not,
without the prior written consent of the Holders of at least a majority of the
Registrable Securities then outstanding, enter into any agreement with any
holder or prospective holder of any securities of the Company that would grant
such holder registration rights senior to, or which in any way would conflict
with, those granted to the Holders hereunder, other than the right to a Special
Registration Statement.
2.13 "MARKET STAND-OFF" AGREEMENT. Each Holder hereby agrees that such
Holder shall not sell, transfer, make any short sale of, grant any option for
the purchase of, or enter into any hedging or similar transaction with the same
economic effect as a sale, any Common Stock (or other securities) of the Company
held by such Holder (other than those included in the registration) for a period
specified by the representative of the underwriters of Common Stock (or other
securities) of the Company not to exceed one hundred eighty (180) days following
the effective date of a registration statement of the Company filed under the
Securities Act; provided that:
(i) such agreement shall apply only to the Company's Initial
Offering; and
(ii) all officers and directors of the Company and holders of
at least two percent (2%) of the Company's voting securities enter into similar
agreements.
2.14 AGREEMENT TO FURNISH INFORMATION. Each Holder agrees to execute and
deliver such other agreements as may be reasonably requested by the Company or
the underwriter that are consistent with the Holder's obligations under Section
2.13 or that are necessary to give further effect thereto. In addition, if
requested by the Company or the representative of the underwriters of Common
Stock (or other securities) of the Company, each Holder shall provide, within
ten (10) days of such request, such information as may be required by the
Company or such representative in connection with the completion of any public
offering of the Company's securities pursuant to a registration statement filed
under the Securities Act. The obligations described in Section 2.13 and this
Section 2.14 shall not apply to a Special Registration. The Company may impose
stop-transfer instructions with respect to the shares of Common Stock (or other
securities) subject to the foregoing restriction until the end of said one
hundred eighty (180) day period. Each Holder agrees that any transferee of any
shares of Registrable Securities shall be bound by Sections 2.13 and 2.14. The
underwriters of the Company's stock are intended third party beneficiaries of
Sections 2.13 and 2.14 and shall have the right, power and authority to enforce
the provisions hereof as though they were a party hereto.
2.15 RULE 144 REPORTING. With a view to making available to the Holders
the benefits of certain rules and regulations of the SEC which may permit the
sale of the Registrable Securities to the public without registration, the
Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the
14
Securities Act, at all times after the effective date of the first registration
filed by the Company for an offering of its securities to the general public;
(b) File with the SEC, in a timely manner, all reports and other
documents required of the Company under the Exchange Act; and
(c) So long as a Holder owns any Registrable Securities, furnish
to such Holder forthwith upon request: a written statement by the Company as to
its compliance with the reporting requirements of said Rule 144 of the
Securities Act, and of the Exchange Act (at any time after it has become subject
to such reporting requirements); a copy of the most recent annual or quarterly
report of the Company; and such other reports and documents as a Holder may
reasonably request in availing itself of any rule or regulation of the SEC
allowing it to sell any such securities without registration.
SECTION 3. COVENANTS OF THE COMPANY AND INVESTORS.
3.1 BASIC FINANCIAL INFORMATION AND REPORTING.
(a) The Company will maintain true books and records of account in
which full and correct entries will be made of all its business transactions
pursuant to a system of accounting established and administered in accordance
with generally accepted accounting principles consistently applied, and will set
aside on its books all such proper accruals and reserves as shall be required
under generally accepted accounting principles consistently applied.
(b) As soon as practicable after the end of each fiscal year of
the Company, and in any event within one hundred twenty (120) days thereafter,
the Company will furnish each Investor a balance sheet of the Company, as at the
end of such fiscal year, and a statement of income and a statement of cash flows
of the Company, for such year, all prepared in accordance with generally
accepted accounting principles consistently applied and setting forth in each
case in comparative form the figures for the previous fiscal year, all in
reasonable detail. Such financial statements shall be accompanied by a report
and opinion thereon by independent public accountants of national standing
selected by the Company's Board of Directors.
(c) The Company will furnish each Investor, as soon as practicable
after the end of each quarterly accounting periods in each fiscal year of the
Company, and in any event within forty-five (45) days thereafter, a balance
sheet of the Company as of the end of each such quarterly period, and a
statement of income and a statement of cash flows of the Company for such period
and for the current fiscal year to date, prepared in accordance with generally
accepted accounting principles, with the exception that no notes need be
attached to such statements and year-end audit adjustments may not have been
made.
(d) So long as an Investor (with its affiliates) shall own not
less than one million (1,000,000) shares of Registrable Securities (as adjusted
for stock splits and combinations) (a "Major Investor"), to the extent requested
by such Major Investor the Company will furnish each such Major Investor: (i) at
least thirty (30) days prior to the beginning of each fiscal year an annual
budget and operating plans for such fiscal year (and as soon as available, any
subsequent revisions thereto); (ii) as soon as practicable after the end of each
month, and in any event within twenty (20) days thereafter, a balance sheet of
the Company as of the end of
15
each such month, and a statement of income and a statement of cash flows of the
Company for such month and for the current fiscal year to date, including a
comparison to plan figures for such period, prepared in accordance with
generally accepted accounting principles consistently applied, with the
exception that no notes need be attached to such statements and year-end audit
adjustments may not have been made; and (iii) promptly after the occurrence
thereof, notice of any material adverse change in the business, assets,
properties, management, prospects, operations or financial condition of the
Company.
(e) The Company will furnish to each Investor such written
information as the Investor may reasonably request concerning the Company, if
such information is otherwise available to the Company in the form requested by
such Investor or in a form that can be obtained without unreasonable time or
expense.
Neither the foregoing provisions of this Section 3.1 nor any other
provision of this Agreement shall be in limitation of any rights which an
Investor may have with respect to the books and records of the Company, or to
inspect their properties or discuss their affairs, finances and accounts, under
the laws of the jurisdictions in which it is incorporated.
3.2 INSPECTION RIGHTS. Each Major Investor shall have the right to visit
and inspect any of the properties of the Company or any of its subsidiaries, and
to discuss the affairs, finances and accounts of the Company or any of its
subsidiaries with its officers, and to review such information as is reasonably
requested all at such reasonable times and as often as may be reasonably
requested; provided, however, that the Company shall not be obligated under this
Section 3.2 with respect to a competitor of the Company or with respect to
information which the Board of Directors determines in good faith is
confidential and should not, therefore, be disclosed.
3.3 CONFIDENTIALITY OF RECORDS. Each Investor agrees to use, and to use
its best efforts to insure that its authorized representatives use, the same
degree of care as such Investor uses to protect its own confidential information
to keep confidential any information furnished to it which the Company
identifies as being confidential or proprietary (so long as such information is
not in the public domain), except (i) that such Investor may disclose such
proprietary or confidential information to any partner, subsidiary, parent or
its attorneys, accountants, consultants, and other professionals of such
Investor for the purpose of evaluating its investment in the Company as long as
such partner, subsidiary, parent or other service providers is advised of the
confidentiality provisions of this Section 3.3, (ii) to the extent such
confidential information may be made publicly available by the Company, (iii) to
any prospective purchaser of any shares from such Investor as long as such
prospective purchaser agrees to be bound by the provisions of this Section 3.3,
and (iv) as may otherwise be required by law (including applicable securities
laws), provided that such Investor gives reasonable notice to the Company of its
intent to disclose in order to permit the Company to obtain protective relief
and takes other reasonable steps to minimize the extent of any such required
disclosure.
3.4 RESERVATION OF COMMON STOCK. The Company will at all times reserve
and keep available, solely for issuance and delivery upon the conversion of the
Preferred Stock, all Common Stock issuable from time to time upon such
conversion.
16
3.5 STOCK VESTING. Unless otherwise approved by the Board of Directors,
all stock options and other stock equivalents issued after the date of this
Agreement to employees, directors, consultants and other service providers shall
be subject to vesting as follows: (a) twenty-five percent (25%) of such stock
shall vest at the end of the first year following the earlier of the date of
issuance or such person's services commencement date with the company, and (b)
seventy-five percent (75%) of such stock shall vest over the remaining three (3)
years. With respect to any shares of stock purchased by any such person, the
Company's repurchase option shall provide that upon such person's termination of
employment or service with the Company, with or without cause, the Company or
its assignee shall have the option to purchase at cost any unvested shares of
stock held by such person.
3.6 KEY MAN INSURANCE. The Company will use its best efforts to maintain
in full force and effect term life insurance in the amount of not less than five
million ($5,000,000) dollars on the life of each of Ronald Burch M.D, Ph.D. and
Jeff Lazar, naming, in each case, the Company as beneficiary. The Company will
include each of the Major Investors as a notice party to such term life
insurance policies, and will request that the issuer of such policy provide each
such stockholder with thirty (30) days' notice before such policy is terminated
(for failure to pay premiums or otherwise) or assigned, or before any change is
made in the designation of the beneficiary thereof.
3.7 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT. The Company and
any of its subsidiaries shall require all employees and consultants to execute
and deliver a Proprietary Information and Inventions Agreement substantially in
the form attached hereto as Exhibit B.
3.8 ASSIGNMENT OF RIGHT OF FIRST REFUSAL. In the event the Company
elects not to exercise any right of first refusal or right of first offer the
Company may have on a proposed transfer of any of the Company's outstanding
capital stock pursuant to the Company's charter documents, by contract or
otherwise, the Company shall, to the extent it may do so, assign such right of
first refusal or right of first offer to each Major Investor. In the event of
such assignment, each Major Investor shall have a right to purchase its pro rata
portion of the capital stock proposed to be transferred. Each Major Investor's
pro rata portion shall be equal to the product obtained by multiplying (i) the
aggregate number of shares proposed to be transferred by (ii) a fraction, the
numerator of which is the number of shares of Registrable Securities held by
such Major Investor at the time of the proposed transfer and the denominator of
which is the total number of shares owned by all Major Investors at the time of
such proposed transfer. Notwithstanding the foregoing, nothing in this Section
3.8 shall affect the rights of the Company and the Investors under that certain
Co-Sale Agreement dated as of the date hereof by and among the Company and
certain of its stockholders.
3.9 DIRECTORS' LIABILITY AND INDEMNIFICATION. The Company's Third
Amended and Restated Certificate of Incorporation and Bylaws shall provide (a)
for elimination of the liability of director to the maximum extent permitted by
law and (b) for indemnification of directors for acts on behalf of the Company
to the maximum extent permitted by law.
3.10 COOPERATION OF OTHER INVESTORS. Each Investor agrees to cooperate
with the Company in all reasonable respects in complying with the terms and
provisions of the letter agreement between the Company and J.P. Morgan Partners
(SBIC), LLC ("JPMP"), a copy of
17
which is attached hereto as Exhibit C, regarding regulatory matters (the
"Regulatory Sideletter"), including without limitation, voting to approve
amending the Company's Third Amended and Restated Certificate of Incorporation,
the Company's Bylaws or this Agreement in a manner reasonably acceptable to the
Investors and JPMP or any affiliate of JPMP entitled to make such request
pursuant to the Regulatory Sideletter in order to remedy a Regulatory Problem
(as defined in the Regulatory Sideletter). Anything contained in this Section
3.10 to the contrary notwithstanding, no Investor shall be required under this
Section 3.10 to take any action that would adversely affect in any material
respect such Investor's rights under this Agreement or as a stockholder of the
Company.
3.11 COVENANT NOT TO AMEND. The Company and each Investor agree to not
amend or waive the voting or other provisions of the Company's Third Amended and
Restated Certificate of Incorporation, the Company's Bylaws or this Agreement if
such amendment or waiver would cause JPMP or any of its affiliates to have a
Regulatory Problem (as defined in the Regulatory Sideletter). JPMP agrees to
notify the Company as to whether or not it would have a Regulatory Problem
promptly after JPMP has notice of such amendment or waiver.
3.12 TERMINATION OF COVENANTS. All covenants of the Company contained in
Section 3 of this Agreement (other than the provisions of Section 3.9, 3.10,
3.11 and 3.12) shall expire and terminate as to each Investor upon the earlier
of (i) the effective date of the registration statement pertaining to the
Initial Offering, which results in the Preferred Stock being converted into
Common Stock or (ii) upon (a) the sale, lease or other disposition of all or
substantially all of the assets of the Company or (b) an acquisition of the
Company by another corporation or entity by consolidation, merger or other
reorganization in which the holders of the Company's outstanding voting stock
immediately prior to such transaction own, immediately after such transaction,
securities representing less than fifty percent (50%) of the voting power of
the corporation or other entity surviving such transaction (a "Change in
Control"), provided that this Section 3.12(ii)(b) shall not apply to a merger
effected exclusively for the purpose of changing the domicile of the Company.
SECTION 4. RIGHTS OF FIRST REFUSAL.
4.1 SUBSEQUENT OFFERINGS. Each Major Investor shall have a right of
first refusal to purchase its pro rata share of all Equity Securities, as
defined below, that the Company may, from time to time, propose to sell and
issue after the date of this Agreement, other than the Equity Securities
excluded by Section 4.6 hereof Each Investor's pro rata share is equal to the
ratio of (a) the number of shares of the Company's Common Stock (including all
shares of Common Stock issued or issuable upon conversion of the Shares) of
which such Investor is deemed to be a holder immediately prior to the issuance
of such Equity Securities to (b) the total number of shares of the Company's
outstanding Common Stock (including all shares of Common Stock issued or
issuable upon conversion of the Shares or upon the exercise of any outstanding
warrants or options) immediately prior to the issuance of the Equity Securities.
The term "Equity Securities" shall mean (i) any Common Stock, Preferred Stock or
other security of the Company, (ii) any security convertible, with or without
consideration, into any Common Stock, Preferred Stock or other security
(including any option to purchase such a convertible security), (iii) any
security carrying any warrant or right to subscribe to or purchase any Common
Stock, Preferred Stock or other security or (iv) any such warrant or right.
18
4.2 EXERCISE OF RIGHTS. If the Company proposes to issue any Equity
Securities, it shall give each Major Investor written notice of its intention,
describing the Equity Securities, the price and the terms and conditions upon
which the Company proposes to issue the same. Each Major Investor shall have
fifteen (15) days from the giving of such notice to agree to purchase its pro
rata share of the Equity Securities for the price and upon the terms and
conditions specified in the notice by giving written notice to the Company and
stating therein the quantity of Equity Securities to be purchased.
Notwithstanding the foregoing, the Company shall not be required to offer or
sell such Equity Securities to any Major Investor who would cause the Company to
be in violation of applicable federal securities laws by virtue of such offer or
sale.
4.3 ISSUANCE OF EQUITY SECURITIES TO OTHER PERSONS. If not all of the
Major Investors elect to purchase their pro rata share of the Equity Securities,
then the Company shall promptly notify in writing the Major Investors who do so
elect and shall offer such Major Investors the right to acquire such
unsubscribed shares. The Major Investors shall have five (5) days after receipt
of such notice to notify the Company of its election to purchase all or a
portion thereof of the unsubscribed shares. The Company shall have ninety (90)
days thereafter to sell the Equity Securities in respect of which the Major
Investor's rights were not exercised, at a price and upon general terms and
conditions materially no more favorable to the purchasers thereof than specified
in the Company's notice to the Major Investors pursuant to Section 4.2 hereof.
If the Company has not sold such Equity Securities within ninety (90) days of
the notice provided pursuant to Section 4.2, the Company shall not thereafter
issue or sell any Equity Securities, without first offering such securities to
the Major Investors in the manner provided above.
4.4 TERMINATION AND WAIVER OF RIGHTS OF FIRST REFUSAL. The rights of
first refusal established by this Section 4 shall not apply to, and shall
terminate upon the earlier of (i) the effective date of the registration
statement pertaining to the Company's Initial Offering or (ii) a Change in
Control. The rights of first refusal established by this Section 4 may be
amended, or any provision waived with the written consent of Major Investors
holding at least sixty five percent (65%) of the Registrable Securities held by
all Major Investors, or as permitted by Section 5.6.
4.5 TRANSFER OF RIGHTS OF FIRST REFUSAL. The rights of first refusal of
each Major Investor under this Section 4 may be transferred to the same parties,
subject to the same restrictions as any transfer of registration rights pursuant
to Section 2.10.
4.6 EXCLUDED SECURITIES. The rights of first refusal established by this
Section 4 shall have no application to any of the following Equity Securities:
(a) Shares of Common Stock and/or options, warrants or other
Common Stock purchase rights and the Common Stock issued pursuant to such
options, warrants or other rights (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like after the filing of the
Company's Third Amended and Restated Certificate of Incorporation) issued or to
be issued after the Series C Original Issue Date (as defined in the Company's
Third Amended and Restated Certificate of Incorporation) to employees, officers
or directors of, or consultants or advisors to the Company or any subsidiary,
pursuant to stock purchase or stock
19
option plans or other arrangements that are approved by the Board of Directors
including the affirmative vote of a majority of the representatives designated
by the holders of the Shares;
(b) stock issued or issuable pursuant to any rights or agreements
outstanding as of the date of this Agreement, options and warrants outstanding
as of the date of this Agreement, and stock issued pursuant to any such rights
or agreements granted after the date of this Agreement; provided that the rights
of first refusal established by this Section 4 applied with respect to the
initial sale or grant by the Company of such rights or agreements;
(c) any Equity Securities issued for consideration other than cash
pursuant to a merger, consolidation, acquisition or similar business combination
approved by the Board of Directors;
(d) shares of Common Stock issued in connection with any stock
split, stock dividend or recapitalization by the Company;
(e) shares of Common Stock issued upon conversion of shares of the
Company's Preferred Stock;
(f) shares of Common Stock or Preferred Stock issued pursuant to
any equipment loan or leasing arrangement, real property leasing arrangement or
debt financing from a bank or similar financial institution approved by the
Board of Directors, including the affirmative vote of a majority of the
representatives designated by the holders of the Shares;
(g) any Equity Securities that are issued by the Company pursuant
to a registration statement filed under the Securities Act;
(h) any Equity Securities issued in connection with strategic
alliances, joint ventures, manufacturing, marketing or distribution arrangements
or technology transfer' or development arrangements; provided that such
strategic transaction and the issuance of shares therein, has been approved by
the Company's Board of Directors, including the affirmative vote of a majority
of the representatives designated by the holders of the Shares; and provided,
further, that such strategic transaction and the issuance of the shares therein
is not principally for equity financing purposes; and
(i) up to an aggregate of fifty thousand (50,000) shares of stock
of the Company issued to any charitable organization described in Section 170(c)
of the Internal Revenue Code provided that such donation has been approved by
the Company's Board of Directors, including the affirmative vote of a majority
of the representatives designated by the holders of the Shares.
SECTION 5. MISCELLANEOUS.
5.1 GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the laws of the State of Delaware, without giving effect to that
body of laws pertaining to conflict of laws.
20
5.2 SURVIVAL. The representations, warranties, covenants, and agreements
made herein shall survive any investigation made by any Holder and the closing
of the transactions contemplated hereby. All statements as to factual matters
contained in any certificate or other instrument delivered by or on behalf of
the Company pursuant hereto in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties by the Company
hereunder solely as of the date of such certificate or instrument.
5.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of Registrable Securities from time to time;
provided, however, that prior to the receipt by the Company of adequate written
notice of the transfer of any Registrable Securities specifying the full name
and address of the transferee, the Company may deem and treat the person listed
as the holder of such shares in its records as the absolute owner and holder of
such shares for all purposes, including the payment of dividends or any
redemption price.
5.4 ENTIRE AGREEMENT. This Agreement supersedes and replaces in its
entirety the Original Agreement, and this Agreement, the Exhibits and Schedules
hereto, the Series B Purchase Agreement and the other documents delivered
pursuant thereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and no party shall be
liable or bound to any other in any manner by any representations, warranties,
covenants and agreements except as specifically set forth herein and therein.
5.5 SEVERABILITY. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
5.6 AMENDMENT AND WAIVER.
(a) Except as otherwise expressly provided, this Agreement may be
amended or modified only upon the written consent of (i) the Company and (ii)
the holders of at least sixty five percent (65%) of the Registrable Securities;
provided, however, that Sections 3.10 and 3.11 may be amended or modified only
with the written consent of JPMP.
(b) Except as otherwise expressly provided, the obligations of the
Company and the rights of the Holders under this Agreement may be waived only
with the written consent of the holders of at least sixty five percent (65%) of
the Registrable Securities; provided, however, that Sections 3.10 and 3.11 may
be waived only with the written consent of JPMP.
(c) For the purposes of determining the number of Holder or
Investors entitled to vote or exercise any rights hereunder, the Company shall
be entitled to rely solely on the list of record holders of its stock as
maintained by or on behalf of the Company.
5.7 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any Holder, upon any breach,
default or noncompliance of the
21
Company under this Agreement shall impair any such right, power, or remedy, nor
shall it be construed to be a waiver of any such breach, default or
noncompliance, or any acquiescence therein, or of any similar breach, default or
noncompliance thereafter occurring. It is further agreed that any waiver,
permit, consent, or approval of any kind or character on any Holder's part of
any breach, default or noncompliance under the Agreement or any waiver on such
Holder's part of any provisions or conditions of this Agreement must be in
writing and shall be effective only to the extent specifically set forth in such
writing- All remedies, either under this Agreement, by law, or otherwise
afforded to Holders, shall be cumulative and not alternative.
5.8 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified; (ii) when sent by confirmed electronic mail or facsimile
if sent during normal business hours of the recipient, if not, then on the next
business day; (iii) for stockholders who are residents of the United States, (A)
five (5) days after having been sent by registered or certified mail, return
receipt requested, postage prepaid, or (B) one (1) day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt; or (iv) for stockholders who are foreign
residents, one (1) day after deposit with a recognized international overnight
courier, specifying next day delivery, with verification of receipt. All
communications shall be sent to the party to be notified at the address as set
forth on the signature pages hereof or Exhibit A hereto or at such other address
as such party may designate by ten (10) days advance written notice to the other
parties hereto.
5.9 ATTORNEYS' FEES. In the event that any suit or action is instituted
to enforce any provision in this Agreement, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
5.10 TITLES AND SUBTITLES. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
5.11 ADDITIONAL INVESTORS. Notwithstanding anything to the contrary
contained herein, if the Company shall issue Equity Securities in accordance
with Section 4.6 (c), (f) or (h) of this Agreement, any purchaser of such Equity
Securities may become a party to this Agreement by executing and delivering an
additional counterpart signature page to this Agreement and shall be deemed an
"INVESTOR," A "HOLDER" and a party hereunder.
5.12 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
5.13 AGGREGATION OF STOCK. All shares of Registrable Securities held or
acquired by affiliated entities or persons or persons or entities under common
management or control shall be aggregated together for the purpose of
determining the availability of any rights under this Agreement.
22
5.14 FURTHER ASSURANCES. The parties agree to execute such further
documents and instruments and to take such further actions as may be reasonably
necessary to carry out the purposes and intent of this Agreement.
5.15 FACSIMILE SIGNATURES. This Agreement may be executed and delivered
by facsimile and upon such delivery the facsimile signature will be deemed to
have the same effect as if the original signature had been delivered to the
other party.
5.16 NO PARTNERSHIP RELATIONSHIP. Notwithstanding, but not in limitation
of, any other provision of this Agreement, the parties understand and agree that
the creation, management and operation of the Company shall not create or imply
a general partnership between or among the Investors and shall not make any
Investor the agent or partner of any other Investor for any purpose.
5.17 ENFORCEMENT. Each of the parties hereto acknowledges and agrees that
the rights acquired by each party hereunder are unique and that irreparable
damage would occur in the event that any of the provisions of this Agreement to
be performed by the other parties were not performed in accordance with their
specific terms or were otherwise breached. Accordingly, in addition to any other
remedy to which the parties hereto are entitled at law or in equity, each party
hereto shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement by any other party and to enforce specifically the terms and
provisions hereof in any federal or state court to which the parties have agreed
hereunder to submit to jurisdiction.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
23
[SECOND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT SIGNATURE PAGE]
IN WITNESS WHEREOF, the parties hereto have executed this INVESTOR RIGHTS
AGREEMENT as of the date set forth in the first paragraph hereof.
COMPANY: INVESTOR(S):
ALGORX PHARMACEUTICALS, INC. INTERWEST PARTNERS VIII, L.P.
INTERWEST INVESTORS VIII, L.P.
INTERWEST INVESTORS Q VIII, L.P.
Signature: /s/ Ronald Burch Signature: /s/ Arnold Oronsky
--------------------------- -------------------------
Print Name: Ronald Burch, M.D., Ph.D.
Title: Chief Executive Officer By: InterWest Management Partners
VIII, LLC
Address: 101 Interchange Plaza, Suite 102 General Partner
Cranbury, NJ 08512
Name: Arnold Oronsky Ph.D.
Title: Managing Director
SOFINNOVA VENTURES PARTNERS V, LP
SOFINNOVA VENTURES AFFILIATES V, LP
SOFINOVA VENTURES PRINCIPALS V, LP
Signature: /s/ Mike Powell
------------------------
Name: Mike Powell
Title:
415-228-3387
[SECOND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT SIGNATURE PAGE]
GC&H INVESTMENTS
Signature:
_____________________________________________
Name:
Title:
POWDERJECT RESEARCH LIMITED
Signature: __________________________________
Name:
Title:
ADVENT HEALTHCARE AND LIFE
SCIENCES III LIMITED PARTNERSHIP
ADVENT HEALTHCARE AND LIFE
SCIENCES III-A LIMITED PARTNERSHIP
By: AHLS III GP Limited Partnership,
General Partner
By: Advent International LLC, General
Partner
By: Advent International Corporation,
Manager
Signature: /s/ ILLEGIBLE
-------------------------------
Vice President/Senior Vice President
ADVENT PARTNERS HLS III LIMITED
PARTNERSHIP
ADVENT PARTNERS II LIMITED
PARTNERSHIP
By: Advent International Corporation,
General Partner
Signature: /s/ ILLEGIBLE
----------------------------------
Vice President/Senior Vice President
[SECOND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT SIGNATURE PAGE]
J.P. MORGAN PARTNERS (SBIC), LLC(1)
Signature: /s/ Rodney A. Ferguson
-----------------------------------
Name: Rodney A. Ferguson J.D., Ph.D.
Title: Managing Director
J.P. MORGAN PARTNERS GLOBAL INVESTORS, L.P.
By: JPMP GLOBAL INVESTORS, L.P.
A General Partner
By: JPMP CAPITAL CORP
Its General Partner
Signature: /s/ Rodney A. Ferguson
-----------------------------------
Name: Rodney A. Ferguson J.D., Ph.D.
Title: Managing Director
By: JPMP GLOBAL INVESTORS, L.P.
A General Partner
By: JPMP CAPITAL CORP
Its General Partner
Signature: /s/ Rodney A. Ferguson
-----------------------------------
Name: Rodney A. Ferguson J.D., Ph.D.
Title: Managing Director
- ---------------------
(1) A copy of each notice required under this Agreement to be sent to J.P.
Morgan Partners (SBIC), LLC shall also be sent to the following address: J.P.
Morgan Partners, Official Notices Clerk, 1221 Avenue of the Americas, New York,
NY 10020, Fax: (212)899-3401.
[SECOND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT SIGNATURE PAGE]
J.P, MORGAN PARTNERS GLOBAL
INVESTORS A, L.P.
By: JPMP GLOBAL INVESTORS, L.P.
A General Partner
By: JPMP CAPITAL CORP
Its General Partner
Signature: /s/ Rodney A. Ferguson
-----------------------------------
Name: Rodney A. Ferguson J.D., Ph.D.
Title: Managing Director
J.P. MORGAN PARTNERS GLOBAL
INVESTORS (CAYMAN) II, L.P.
By: JPMP GLOBAL INVESTORS, L.P.
A General Partner
By: JPMP CAPITAL CORP
Its General Partner
Signature: /s/ Rodney A. Ferguson
-----------------------------------
Name: Rodney A. Ferguson J.D., Ph.D.
Title: Managing Director
RONALD BURCH M.D., PH.D.
Signature: /s/ Ronald Burch
-----------------------------------
Name: Ronald Burch
[SECOND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
SIGNATURE PAGE]
AXIOM VENTURE PARTNERS III, L.P.
Signature: /s/ Alan Mendelson
--------------------------
Name: Alan Mendelson
Title: General Partner
COGENE BIOTECH VENTURES, L.P.
By: Its General Partner, Cogene Biotech
Ventures GP, L.L.C.
Signature: /s/ C. Thomas Caskey
--------------------------
Name: C. Thomas Caskey, M.D.
Title: President/CEO
[SECOND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
SIGNATURE PAGE]
EGS PRIVATE HEALTHCARE PARTNERSHIP II, L.P.
Signature: /s/ ABHIJEET LELE
---------------------------------
Name:
Title:
EGS PRIVATE HEALTHCARE INVESTORS II, L.P.
Signature: /s/ ABHIJEET LELE
---------------------------------
Name:
Title:
EGS PRIVATE HEALTHCARE CANADIAN PARTNERS, L.P.
Signature: /s/ ABHIJEET LELE
---------------------------------
Name:
Title:
EGS PRIVATE HEALTHCARE PRESIDENTS FUND, L.P.
Signature: /s/ ABHIJEET LELE
---------------------------------
Name:
Title:
LEHMAN BROTHERS HEALTHCARE VENTURE CAPITAL
L.P.
By: Lehman Brothers HealthCare Venture
Capital Associates L.P., its General Partner
By: LB I Group Inc., its General Partner
Signature: /s/ Fred Steinberg
----------------------------------
Name: Fred Steinberg
Title: Vice President
LEHMAN BROTHERS P.A. LLC
Signature: /s/ Fred Steinberg
----------------------------------
Name: Fred Steinberg
Title: Vice President
LEHMAN BROTHERS PARTNERSHIP ACCOUNT
2000/2001, L.P.
By: LB I Group Inc., its General Partner
Signature: /s/ Fred Steinberg
----------------------------------
Name: Fred Steinberg
Title: Vice President
[SECOND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
SIGNATURE PAGE]
HUNT VENTURES, L.P.
Signature: /s/ Michael T. Bierman
---------------------------------
Name: Michael T. Bierman
Title: Managing Director
INDEX VENTURES II (JERSEY) L.P.
Signature: /s/ Kyle Cullinane
---------------------------------
Name: Kyle Cullinane
Title: Director-for & on behalf of Index
Venture Associates II Limited-
General Partner
INDEX VENTURES II (DELAWARE) L.P.
Signature: /s/ Kyle Cullinane
---------------------------------
Name: Kyle Cullinane
Title: Director-for & on behalf of Index
Venture Associates II Limited-
General Partner
INDEX VENTURES II GMBH & CO. KG
Signature: /s/ Kyle Cullinane
---------------------------------
Name: Kyle Cullinane
Title: Director-for & on behalf of Index
Ventures Limited-Special
Limited Partner
INDEX VENTURES II PARALLEL ENTREPRENEUR FUND
(JERSEY-A) L.P.
Signature: /s/ Kyle Cullinane
---------------------------------
Name: Kyle Cullinane
Title: Director-for & on behalf of Index
Venture Associates II Limited-
General Partner
INDEX VENTURES II PARALLEL ENTREPRENEUR FUND
(JERSEY-B) L.P.
Signature: /s/ Kyle Cullinane
---------------------------------
Name: Kyle Cullinane
Title: Director-for & on behalf of Index
Venture Associates II Limited-
General Partner
[SECOND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
SIGNATURE PAGE]
INDEX VENTURE MANAGEMENT SA
ON BEHALF OF INDEX EMPLOYEE
INVESTMENT PLAN
Signature: /s/ ILLEGIBLE
-------------------------------
Name:
Title: Director partner
LEHMAN BROTHERS HEALTHCARE
VENTURE CAPITAL L.P.
By: Lehman Brothers Healthcare Venture
Capital Associates L.P., its General
Partner
By: LB I group Inc., its General Partner
Signature: /s/ Fred Steinberg
-------------------------------
Name: Fred Steinberg
Title: Vice President
LEHMAN BROTHERS P.A. LLC
Signature: /s/ Fred Steinberg
-------------------------------
Name: Fred Steinberg
Title: Vice President
LEHMAN BROTHERS PARTNERSHIP
ACCOUNT 2000/2001, L.P.
By: LB I Group Inc., its General Partner
Signature: /s/ Fred Steinberg
-------------------------------
Name: Fred Steinberg
Title: Vice President
[SECOND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
SIGNATURE PAGE]
LEHMAN BROTHERS OFFSHORE PARTNERSHIP
ACCOUNT 2000/2001, L.P.
By: Lehman Brothers Offshore Partner Ltd.,
its General Partner
Signature: /s/ Fred Steinberg
-------------------------------
Name: Fred Steinberg
Title: Vice President
NIF VENTURES CO., LTD.
Signature: /s/ Nobuo Suzuki
-------------------------------
Name: Nobuo Suzuki
Title: Executive Officer
INVESTMENT ENTERPRISE PARTNERSHIP
"NIF 21-ONE(1)"
Signature: /s/ Shinichiro Hakuta
-------------------------------
Name: Shinichiro Hakuta
Title: General Manager
PACIFIC RIM AQUA LIFE SCIENCE
NO. 1 INVESTMENT PARTNERSHIP
By: Pacific Rim Ventures Co., Ltd.,
its General Partner
Signature: /s/ Masahiro Michishita
-------------------------------
Name: Masahiro Michishita, M.D., Ph.D.
Title: President and Managing General
Partner
[SECOND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
SIGNATURE PAGE]
PACIFIC RIM AQUA LIFE SCIENCE
NO. 2 INVESTMENT PARTNERSHIP
By: Pacific Rim Ventures Co., Ltd., its
General Partner
Signature: /s/ Masahiro Michishita
-------------------------------
Name: Masahiro Michishita, M.D., Ph.D.
Title: President and Managing General
Partner
PACIFIC RIM AQUA LIFE SCIENCE
NO. 3 INVESTMENT PARTNERSHIP
BY: Pacific Rim Ventures Co., Ltd.,
its General Partner
Signature: /s/ Masahiro Michishita
-------------------------------
Name: Masahiro Michishita, M.D., Ph.D.
Title: President and Managing General
Partner
PACIFIC RIM AQUA LIFE SCIENCE
NO. 4 INVESTMENT PARTNERSHIP
BY: Pacific Rim Ventures Co., Ltd.,
its General Partner
Signature: /s/ Masahiro Michishita
-------------------------------
Name: Masahiro Michishita, M.D., Ph.D.
Title: President and Managing General
Partner
PACIFIC RIM AQUA LIFE SCIENCE
NO. 5 INVESTMENT PARTNERSHIP
BY: Pacific Rim Ventures Co., Ltd.,
its General Partner
Signature: /s/ Masahiro Michishita
-------------------------------
Name: Masahiro Michishita, M.D., Ph.D,
Title: President and Managing General
Partner
[SECOND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
SIGNATURE PAGE]
PIPER JAFFRAY HEALTHCARE FUND IV, L.P.
By: Piper Jaffray Healthcare Management
IV, LLC,
its General Partner
By: /s/ Heath Lukatch
--------------------------------------
Name: Heath Lukatch
Title: Managing Director of Piper
Jaffray Ventures Inc., its General
Partner
S.R. ONE, LIMITED
Signature: /s/ John N. Braca
-------------------------------
Name: John N. Braca
Title: CFO and General Partner
/s/ Eliot M. Fried
__________________________________________
Eliot M. Fried
/s/ Michael G. Ehrlich
------------------------------------------
Michael G. Ehrlich, M.D.
WHI MORULA FUND, LLC
Signature: /s/ Michael S. Resnick
-------------------------------
Name: Michael S. Resnick
Title: Executive VP, William Harris
Investors, Inc., as Manager
[SECOND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
SIGNATURE PAGE]
HEWM/VLG INVESTORS LLC
Signature: /s/ Cathryn S. Chinn
-------------------------------
Name: Cathryn S. Chinn
Title: Manager
EXHIBIT A
SCHEDULE OF INVESTORS
SERIES A PREFERRED STOCK
InterWest Partners VIII, L.P.
InterWest Partners VIII, L.P.
InterWest Partners Q VIII, L.P.
Sofinnova Venture Partners V, LP
Sofinnova Venture Affiliates V, LP
Sofinnova Venture Principals V, LP
J.P. Morgan Partners (SBIC), LLC(2)
Ronald Burch M.D., Ph.D.
GC&H Investments
SERIES B PREFERRED STOCK
InterWest Partners VIII, L.P.
InterWest Investors VIII, L.P.
InterWest Investors Q VIII, L.P.
Sofinnova Venture Partners V, LP
Sofinnova Venture Affiliates V, LP
Sofinnova Venture Principals V, LP
J.P. Morgan Partners (SBIC), LLC
PowderJect Research Limited
- -----------------
(2) A copy of each notice required under this Agreement to be sent to J.P.
Morgan Partners (SBIC), L.L.C shall also be sent to the following address: J.P.
Morgan Partners, Official Notices Clerk, 1221 Avenue of the Americas, New York,
NY 10020, Fax: (212)899-3401.
EXHIBIT A (CONT.)
SCHEDULE OF INVESTORS
SERIES C PREFERRED STOCK
InterWest Partners VIII, L.P.
InterWest Partners VIII, L.P.
InterWest Partners Q VIII, L.P.
Sofinnova Venture Partners V, L.P.
Sofinnova Venture Affiliates V, LP
Sofinnova Venture Principals V, LP
J.P. Morgan Partners (SBIC), LLC
J.P. Morgan Partners Global Investors, L.P.
J.P. Morgan Partners Global Investors (Cayman), L.P.
J.P. Morgan Partners Global Investors A, L.P.
J.P. Morgan Partners Global Investors (Cayman) II, L.P.
Advent Healthcare and Life Sciences III Limited Partnership
Advent Healthcare and Life Sciences III-A Limited Partnership
Advent Partners HLS III Limited Partnership
Advent Partners II Limited Partnership
Axiom Venture Partners III, L.P.
CDIB BioScience Ventures I, Inc.
Cogene Biotech Ventures, L.P.
EGS Private Healthcare Partnership II, L.P.
EGS Private Healthcare Investors II, L.P.
EGS Private Healthcare Canadian Partners, L.P.
EGS Private Healthcare Presidents Fund, L.P.
Hunt Ventures, L.P.
Index Ventures II (Jersey) L.P.
Index Ventures II (Delaware) L.P.
Index Ventures II GmbH & Co. KG
Index Ventures II Parallel Entrepreneur Fund (Jersey - A) L.P.
Index Ventures Parallel Entrepreneur Fund (Jersey - B) L.P.
Index Venture Management SA on behalf of Index Employee Investment Plan
Lehman Brothers HealthCare Venture Capital L.P.
Lehman Brothers P.A. LLC
Lehman Brothers Partnership Account 2000/2001, L.P.
Lehman Brothers Offshore Partnership Account 2000/2001, L.P.
NIF Ventures
Investment Enterprise Partnership "NIF 21-ONE(1)"
Pacific Rim Aqua Life Science No. 1 Investment Partnership
Pacific Rim Aqua Life Science No. 2 Investment Partnership
Pacific Rim Aqua Life Science No. 3 Investment Partnership
Pacific Rim Aqua Life Science No. 4 Investment Partnership
Pacific Rim Aqua Life Science No. 5 Investment Partnership
Piper Jaffray Healthcare Fund IV, L.P.
S.R. One, Limited
Eliot M. Fried
Michael G. Ehrlich, M.D.
WHI Morula Fund, LLC
HEWM/VLG Investments LLC
EXHIBIT B
FORM OF NON-DISCLOSURE AGREEMENT
NONDISCLOSURE AGREEMENT
THIS NONDISCLOSURE AGREEMENT ("Agreement") dated as of
____________________, 200_____is entered into by and between AlgoRx
Pharmaceuticals, Inc., a Delaware corporation ("AlgoRx"),
and_________________________________________________, a
_______________[CORPORATION] (the "Recipient").
1. Confidential Information. For their mutual benefit, AlgoRx intends to
discuss and disclose certain of its confidential information in connection with
[INSERT A DESCRIPTION OF ACTIVITY THAT RECIPIENT IS PERFORMING FOR ALGORX] (the
"AlgoRx Matter"). Confidential Information shall mean information including,
without limitation, a formula, pattern, trade secret, compilation, program,
method, technique, process, biological material, gene sequence, cell line,
assay, chemical compound, model, invention, work of authorship, inventions,
know-how, experimental work, sample, data, design, source code, research plan,
business plan, business opportunity, customer, employee or personnel list, or
financial statement on date proprietary to AlgoRx that derives independent
economic value, actual or potential, for not being generally known to the public
or to other persons who can obtain economic value from its disclosure or use.
Confidential Information includes, but is not limited to, information disclosed
in connection with the AlgoRx Matter. However, Confidential Information shall
not include information that: (i) is now or subsequently becomes generally
available to the public through no wrongful act or omission of the Recipient;
(ii) the Recipient can demonstrate by written records to have had rightfully in
its possession prior to disclosure to the Recipient by AlgoRx; or (iii) the
Recipient rightfully obtains from a third party who has the right to transfer or
disclose it. AlgoRx shall mark the material manifestations of its Confidential
Information as being confidential and proprietary so that the Recipient is aware
that its receipt is governed by the terms of this Agreement. The foregoing
notwithstanding, the terms of this Agreement also pertain to materials not so
marked if AlgoRx informs the Recipient of their confidential nature or if the
Recipient otherwise knows or should reasonably be expected to know of their
confidential nature.
2. Nondisclosure. Except as has been specifically authorized by AlgoRx in
writing, the Recipient shall not reproduce, use, distribute, disclose or
otherwise disseminate the Confidential Information and shall not take any action
causing, or fail to take any reasonable action necessary to prevent, any
Confidential Information disclosed to the Recipient pursuant to this Agreement
to lose its character as Confidential Information. In the event the Recipient is
required to disclose any Confidential Information pursuant to law or government
regulation, the Recipient shall promptly notify AlgoRx in order to allow AlgoRx
the maximum time to obtain protective or confidential treatment of the
Confidential Information before it is disclosed. Upon termination of the
discussion or evaluation of the AlgoRx Matter or upon request by AlgoRx, the
Recipient
shall promptly deliver to AlgoRx or destroy all Confidential Information and all
embodiments thereof then in its custody, control or possession and shall deliver
within five days after such termination or request a written statement to AlgoRx
certifying to such action.
3. Ownership. All Confidential Information shall remain the property of
AlgoRx and no license or other right to such information is granted or implied
hereby. Neither this Agreement nor the disclosing of Confidential Information to
the Recipient constitutes any grant, right, license or assignment to the
Recipient under any copyright, patent, trademark or other rights now or
hereafter owned or controlled by AlgoRx. The AlgoRx Matter and all Confidential
Information developed in connection therewith shall be the sole and exclusive
property of AlgoRx. In the event any such Confidential Information developed in
connection with the AlgoRx Matter is deemed not to be the property of AlgoRx,
the Recipient hereby assigns all rights thereto to AlgoRx and hereby agrees to
sign all instruments reasonably necessary in the opinion of AlgoRx to eliminate
any ambiguity as to ownership by AlgoRx, and Recipient hereby grants to AlgoRx a
limited power-of-attorney to execute any such instrument in the name of and on
behalf of the Recipient to effect such assignment.
4. Duties of the Recipient. The Recipient agrees that access to
Confidential Information will be limited to those employees or other authorized
representatives of the Recipient, as applicable, who: (a) need to know such
Confidential Information in connection with their work on the AlgoRx Matter; and
(b) have agreed with the Recipient obligating them to maintain the
confidentiality of information disclosed to them and designated or defined as
confidential. The Recipient further agrees to inform such employees or
authorized representatives, as applicable, of the confidential nature of
Confidential Information and agrees to take all necessary steps to ensure that
the terms of this Agreement are not violated by them. The Recipient further
agrees to promptly inform AlgoRx of any unauthorized disclosure or use of the
Confidential Information.
5. Equitable Relief. The Recipient hereby acknowledges that unauthorized
disclosure or use of Confidential Information could cause great or irreparable
injury to AlgoRx and that pecuniary compensation would not afford adequate
relief or it would be extremely difficult to ascertain the amount of
compensation which would afford adequate relief. Therefore, the Recipient agrees
that AlgoRx will have the right to seek and obtain injunctive relief (without
the requirement to post a bond) in addition to any other rights and remedies it
may have.
6. Indemnity. The Recipient agrees to indemnify AlgoRx for any loss or
damage suffered as a result of any breach by the Recipient of the terms of this
Agreement
including any reasonable fees and expenses incurred by AlgoRx in the collection
of such indemnity.
7. Term. The Recipient's duty to protect Confidential Information pursuant
to this Agreement expires ten years from the date of disclosure of the
Confidential Information.
8. Agency. The parties do not intend that any agency or partnership
relationship be created between them by this Agreement.
9. Assignment. The Recipient shall not assign its rights or obligations
under this Agreement without the prior written consent of AlgoRx.
10. Modification. All additions or modifications to this Agreement must be
made in writing and must be signed by both parties.
11. Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of New Jersey applicable to contracts entered into
and wholly to be performed in the State of New Jersey by New Jersey residents.
12. Notices. Any notice required or permitted hereunder shall be in
writing and shall be deemed effectively given upon personal delivery, three days
after deposit in the United States mail, by certified mail, postage prepaid,
return receipt requested, or the day after delivery to a recognized overnight
courier, to the following addresses:
ALGORX RECIPIENT
ALGORX PHARMACEUTICALS, INC. _________________________________________
500 Plaza Drive, 2nd Floor _________________________________________
Secaucus, NJ 07094 _________________________________________
_________________________________________
Attention: President
Attention: ______________________________
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
ALGORX PHARMACEUTICALS, INC. _________________________________________
By:______________________________ By:______________________________________
Name:____________________________ Name:____________________________________
Title:___________________________ Title:___________________________________
Date:____________________________ Date:____________________________________
EXHIBIT C
REGULATORY SIDE LETTER
SECOND AMENDED AND RESTATED REGULATORY SIDELETTER
This Second Amended and Restated Regulatory Sideletter (this
"Agreement") is entered into as of February 17, 2004 by and between J.P. MORGAN
PARTNERS (SBIC), LLC ("Investor") and ALGORX PHARMACEUTICALS, INC., (the
"Company).
WHEREAS, Investor is a regulated entity and an indirect subsidiary
of J.P. Morgan Chase & Co. and in connection therewith Investor is subject to
various regulations that may impose restrictions on the type and terms of
Investor's investment in the Company;
WHEREAS, the Company and Investor entered into that certain
Regulatory Sideletter dated as of April 4, 2001, in connection with Investor's
purchase of shares of Series A Preferred Stock of the Company and executed an
Amended and Restated Regulatory Sideletter dated as of March 22, 2002, in
connection with the Investor's purchase of shares of Series B Preferred Stock of
the Company (the "Prior Sideletter");
WHEREAS, the Company and Investor now desire to amend and restate
the Prior Sideletter in connection with Investor's purchase of shares of Series
C Preferred Stock of the Company (the "Series C Shares") pursuant to that
certain Series C Preferred Stock Purchase Agreement of even date herewith, it
being understood that the amendment and restatement of the Prior Sideletter is a
material inducement for Investor's agreement to purchase such Series C Shares
NOW THEREFORE, in connection with the foregoing, the parties hereby
agree as follows:
Section 1. Regulatory Matters Generally.
(a) Regulatory Cooperation.
(i) In the event that Investor reasonably determines that it
has a Regulatory Problem, the Company agrees to take all such actions as
are reasonably requested by Investor in order (A) to effectuate and
facilitate any transfer by Investor of any securities of the Company then
held by Investor to any Person designated by Investor, (B) to permit
Investor (or any of its Affiliates) to exchange all or any portion of the
voting securities then held by such Person on a share-for-share basis for
shares of a class of non-voting securities of the Company, which
non-voting securities shall be identical in all respects to such voting
securities, except that such new securities shall be non-voting and shall
be convertible into voting securities on such terms as are requested by
Investor and reasonably acceptable to the Company in light of regulatory
considerations then prevailing, and (C) to grant Investor or its designee
the reasonable equivalent of any voting rights arising out of Investor's
ownership of voting securities and/or provided for in the Investor Rights
Agreement that were diminished as a result of the transfers and amendments
referred to above. If Investor elects to transfer securities of the
Company in order to avoid a Regulatory Problem to an Affiliate subject to
limitations on its voting or total ownership interest in the Company, the
Company and such Affiliate shall enter into such mutually acceptable
agreements as such Affiliate may reasonably
request in order to assist such Affiliate in complying with Laws to which
it is subject Such agreements may include restrictions on the redemption,
repurchase or retirement of securities of the Company that would result or
be reasonably expected to result in such Affiliate holding more voting
securities or total securities (equity and debt) than it is permitted to
hold under such laws and regulations.
(ii) In the event Investor has the right to acquire any of the
Company's securities from the Company or any other Person (as the result
of a preemptive offer, pro rata offer or otherwise), and Investor
reasonably determines that it has a Regulatory Problem, at Investor's
request the Company will offer to sell to Investor non-voting securities
(or, if the Company is not the proposed seller, will arrange for the
exchange of any voting securities for non-voting securities immediately
prior to or simultaneous with such sale) on the same terms as would have
existed had Investor acquired the securities so offered and immediately
requested their exchange for non-voting securities pursuant to subsection
(1) above.
(iii) In the event that any Affiliate of the Company ever
offers to issue any of its securities to Investor, then the Company will
cause such Affiliate to enter into an agreement with Investor
substantially similar to this Agreement.
Section 2. Cross Marketing Activities.
The Company hereby represents and warrants that except as otherwise
disclosed, neither the Company nor any of its subsidiaries (1) offers or
markets, directly or through any arrangement, any product or service of any
depository institution owned by J.P. Morgan Chase & Co, or (ii) permits any of
its products or services to be offered or marketed, directly or through any
arrangement, by or through any depository institution owned by J.P Morgan Chase
& Co.
Section 3. Lending Activities.
The Company hereby represents and warrants that except as otherwise
disclosed, neither the Company nor any of its subsidiaries currently has or, to
its knowledge, is expected to have a loan facility, credit facility, debt
financing, line of credit or any other extension of credit from any depository
institution owned by J.P Morgan Chase & Co.
Section 4. Covenants
(a) The Company shall give Investor thirty (30) days prior written
notice before taking any affirmative steps which would cause the representations
and warranties contained in Sections 2 or 3 to be untrue.
(b) The Company shall notify Investor promptly at any time in which
the Company reasonably believes the representations contained in Sections 2 or 3
to be untrue whether as a result of the Company's affirmative action or
otherwise.
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Section 5. Participation Interests and Pledge.
(a) Notwithstanding anything to the contrary contained in the
Investor Rights Agreement or other transaction documents relating to Investor's
purchase and ownership of the Company's securities (collectively, the
"Transaction Documents"), Investor shall be permitted to grant participation
interests in the Company's securities held by Investor, subject to applicable
law, to Affiliates of Investor without prior disclosure or consent of the
Company or any other Person, so long as the participation agreement or other
agreement or document pursuant to which such participation interest is granted
requires such Affiliate to comply with the Transaction Documents as if it were a
record owner of such securities and a direct party to the Transaction Documents.
(b) Notwithstanding anything to the contrary contained in the
Transaction Documents relating to the purchase and ownership of the Company's
securities, Investor shall be permitted to pledge the Company's securities held
by Investor to an Affiliate of Investor without prior disclosure to or consent
of the Company or any other Person, so long as such pledge does not affect
Investor's status as being the record owner of such securities and a direct
party to the Transaction Documents.
(c) Notwithstanding anything to the contrary contained in the
Transaction Documents, any and all representations and warranties relating to
Investor's ownership of the Company's securities shall be qualified by the fact
that Investor has (1) granted participation interests in a pro rata portion of
all of its investments, including its purchase of the Company's securities, to
Affiliates of Investor and (ii) has granted a pledge of its assets, including
the Company's securities to an Affiliate of Investor. Such participation
interests and/or pledge, however, do not affect Investor's status as being the
sole record owner of the Company's securities held by Investor, and such
participation interests have been granted in accordance with all applicable
securities laws.
Section 6. Definitions.
"Affiliate" means, with respect to any Person, (i) a director or
executive officer of such Person or any Person identified in clause (ii) below,
and (ii) any other Person that, directly or indirectly through one or more
intermediaries, Controls, is Controlled by or is under common Control with such
Person. When such term is used in the context of a Regulatory Problem, it also
has the meaning ascribed to it in any Law.
"Banking Regulations" means all federal, state and foreign Laws
applicable to banks, bank holding companies and their Affiliates, including
without limitation, the Bank Holding Company Act and the Federal Reserve Act.
"Control" means, with respect to any Person, the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
"Investor Rights Agreement" means the Second Amended and Restated
Investor Rights Agreement to be entered into on the date of the Closing among
the Company and certain shareholders of the Company.
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"Laws" with respect to any Person, means (1) all provisions of all
laws, statutes, ordinances, rules, regulations, permits, certificates or orders
of any governmental authority applicable to such Person or any of its assets or
property or to which such Person or any of its assets or property is subject,
including, without limitation, Banking Regulations and SBA Regulations, and (ii)
all judgments, injunctions, orders and decrees of all courts and arbitrators in
proceedings or actions in which such Person is a party or by which it or any of
its assets or properties is or may be bound or subject.
"Person" shall be construed as broadly as possible and shall include
an individual or natural person, a partnership (including a limited liability
partnership), a corporation, an association, a joint stock company, a limited
liability company, a trust, a joint venture, an unincorporated organization and
a governmental authority.
"Regulatory Problem" means any set of facts or circumstances in
which the Investor's ownership of securities issued by the Company (1) gives
rise to a material violation of Law by Investor or any of its Affiliates, or
gives rise to a reasonable belief by Investor that such a violation is likely to
occur or (ii) gives rise to a limitation in Law that will impair materially the
ability of Investor or any Affiliate to conduct its business or gives rise to a
reasonable belief by Investor that such a limitation is likely to arise.
"SBA" means the United States Small Business Administration.
"SBA Regulations" means the Small Business Investment Act and the
rules and regulations promulgated by the SBA.
Section 7. Amendments; Benefit.
The terms and provisions of this Agreement may not be modified or
amended, unless pursuant to a written agreement executed by each of the parties
hereof. This Agreement shall be for the benefit of Investor and its Affiliates
and shall apply to each acquisition of securities issued by the Company to
Investor or its Affiliates.
Section 8. Counterparts, Facsimile Signatures.
This Agreement may be executed in any number of counterparts,
including by means of facsimile, and each counterpart hereof shall be deemed to
be an original instrument, but all such counterparts together shall constitute
but one agreement.
Section 9. Regulation K Matters.
Check box whether or not this investment is subject to Regulation K
and, therefore, Schedule A applies Yes [ ], No [X]
Section 10. SBA Matters.
Check box whether or not Investor is a Small Business Investment
Company, and therefore, Schedule B applies Yes [X], No [ ]
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Section 11. Section 4(k)(4) (A) through (G) Investments.
Check box whether or not this investment is a Section 4(k)(4) (A)
through (G) investment and therefore, Schedule C applies. Yes [ ] No [X]
Section 12. Notices. All notices, claims, certificates, requests, demands
and other communications to be given to Investor hereunder or relating to
Investor's investment in the Company shall be addressed as follows:
J.P. Morgan Partners (SBIC), LLC
c/o J.P. Morgan Partners, LLC
Attn: Rodney A. Ferguson
50 California Street, 29th Floor
San Francisco, California 94111
Telephone: (415)591-1200
Facsimile: (415)591-1205
with a copy to
J.P. Morgan Partners, LLC
1221 Avenue of the Americas
New York, New York 10020-1080
Telephone: (212)899-3400
Facsimile: (212)899-3401
*****
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first written above.
ALGORX PHARMACEUTICALS, INC.
By: /s/ Ronald M. Burch
---------------------------------------
Name: Ronald M. Burch, M.D., Ph.D.
Title: Chief Executive Officer
J.P. MORGAN PARTNERS (SBIC), LLC
By: /s/ Rodney A. Ferguson
--------------------------------
Name: Rodney A. Ferguson
Title: Managing Director
J.P. MORGAN PARTNERS GLOBAL INVESTORS, L.P.
By: JPMP GLOBAL INVESTORS, L.P.
A General Partner
By: JPMP CAPITAL CORP
Its General Partner
By: /s/ Rodney A. Ferguson
-------------------------------
Name: Rodney A. Ferguson
Title: Managing Director
J.P. MORGAN PARTNERS GLOBAL, INVESTORS
(CAYMAN), L.P.
By: JPMP GLOBAL INVESTORS, L.P.
A General Partner
By: JPMP CAPITAL CORP
Its General Partner
By: /s/ Rodney A. Ferguson
-------------------------------
Name: Rodney A. Ferguson
Title: Managing Director
6
J.P. MORGAN PARTNERS GLOBAL
INVESTORS A, L.P.
By: JPMP GLOBAL INVESTORS, L.P.
A General Partner
By: JPMP CAPITAL CORP
Its General Partner
By: /s/ Rodney A. Ferguson
-------------------------------
Name: Rodney A. Ferguson
Title: Managing Director
J.P. MORGAN PARTNERS GLOBAL
INVESTORS (CAYMAN) II, L.P.
By: JPMP GLOBAL INVESTORS, L.P.
A General Partner
By: JPMP CAPITAL CORP
Its General Partner
By: /s/ Rodney A. Ferguson
-------------------------------
Name: Rodney A. Ferguson
Title: Managing Director
7