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EXHIBIT 10.4
SECOND AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
THIS SECOND AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT, dated this
1st day of November, 2002, is entered into by and among TOLERRX, INC., a
Delaware corporation (the "CORPORATION") and those stockholders of the
Corporation listed on SCHEDULE I hereto (hereinafter referred to collectively as
the "INVESTORS").
WHEREAS, the Corporation and certain of the Investors are entering
into the Series C Preferred Stock Purchase Agreement in connection with which
the Corporation is selling shares of its Series C Convertible Preferred Stock,
par value $.001 per share (the "SERIES C PREFERRED STOCK");
WHEREAS, the Corporation and certain Investors entered into separate
Convertible Preferred Stock Purchase Agreements dated November 6, 2000 and
September 28, 2001 in connection with which the Corporation sold shares of its
Series A Convertible Preferred Stock, par value $.001 per share (the "SERIES A
PREFERRED STOCK") and Series B Convertible Preferred Stock, par value $.001 per
share (the "SERIES B PREFERRED STOCK");
WHEREAS, the Corporation and certain of the Investors entered into an
Amended and Restated Stockholders' Agreement dated September 28, 2001 which they
desire to amend and restate in its entirety as set forth herein; and
WHEREAS, as a condition to the Investors entering into the Series C
Stock Purchase Agreement, the Investors have agreed to certain restrictions on
their rights to dispose of their shares of Common Stock, par value $0.001 per
share, of the Corporation as set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the
respective covenants and undertakings of the Investors hereunder and under the
Series C Stock Purchase Agreement, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. As used herein, the following terms shall have
the following respective meanings:
BOARD shall mean the Board of Directors of the Corporation.
BUDGET shall have the meaning set forth in Section 2.8 hereof.
CERTIFICATE shall mean the Third Restated Certificate of Incorporation of
the Corporation, as amended to date.
COMMISSION shall mean the U.S. Securities and Exchange Commission.
COMMON STOCK shall mean the Common Stock, par value $.001 per share, of the
Corporation.
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ENVIRONMENTAL LAWS shall mean all applicable federal, state and local laws,
ordinances, rules and regulations that regulate, fix liability for, or otherwise
relate to, the handling, use (including use in industrial processes, in
construction, as building materials, or otherwise), storage and disposal of
hazardous and toxic wastes and substances, and to the discharge, leakage,
presence, migration, threatened release or release (whether by disposal, a
discharge into any water source or system or into the air, or otherwise) of any
pollutant or effluent. Without limiting the preceding sentence, the term
"ENVIRONMENTAL LAWS" shall specifically include the following federal and state
laws, as amended:
FEDERAL
Comprehensive Environmental Response, Compensation and Liability Act
of 1980, 42 U.S.C. 9601 ET. SEQ.;
Resource Conservation and Recovery Act of 1976, 42 U.S.C. 6901 ET.
SEQ.;
Federal Water Pollution Control Act, 33 U.S.C. 1251 ET. SEQ.; and
Clean Air Act, 42 U.S.C. 7401 ET. SEQ.
STATE
MASSACHUSETTS ENVIRONMENTAL STATUTES
Massachusetts Clean Waters Act, Mass. Gen. L. Ch. 21, Section 26, ET.
SEQ., and regulations thereto;
Massachusetts Solid Waste Disposal Laws, Mass. Gen. L. Ch. 16,
Section 18, ET. SEQ., and Ch. 111, Section 105A, and regulations
thereto;
Massachusetts Oil and Hazardous Materials Release Prevention and
Response Act, Mass. Gen. L., Ch. 21E, Section 1, ET. SEQ., and
regulations thereto;
Massachusetts Solid Waste Facilities Law, Mass. Gen. L., Ch. 21H,
Section 1, ET. SEQ., and regulations thereto;
Massachusetts Toxic Use Reduction Act, Mass. Gen. L., Ch. 21I,
Section 1, ET. SEQ., and regulations thereto;
Massachusetts Litter Control Laws, Mass. Gen. L. Ch. 111, Section
150A, ET. SEQ., and regulations thereto;
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Massachusetts Wetlands Protection Laws, Mass. Gen. L., Ch. 130,
Section 105, ET. SEQ., and regulations thereto;
Massachusetts Environmental Air Pollution Control Law, Mass. Gen. L.,
Ch. 101, Section 2B, ET. SEQ., and regulations thereto;
Massachusetts Environmental Policy Act, Mass. Gen. L. 30, Section 61,
ET. SEQ., and regulations thereto; and
Massachusetts Hazardous Waste Laws, Mass. Gen. L. Ch. 21C, Section 1,
ET. SEQ., and regulations thereto.
EQUITY PERCENTAGE shall mean, as to any Investor, that percentage figure
which expresses the ratio that (a) the number of shares of issued and
outstanding Common Stock then owned by such Investor bears to (b) the aggregate
number of shares of issued and outstanding Common Stock then owned by all
Investors. For purposes solely of the computation set forth in clauses (a) and
(b) above and the right of oversubscription, all issued and outstanding
securities held by the Investors that are convertible into or exercisable or
exchangeable for shares of Common Stock (including any issued and issuable
shares of Preferred Stock) or for any such convertible, exercisable or
exchangeable securities, shall be treated as having been so converted, exercised
or exchanged at the rate or price at which such securities are convertible,
exercisable or exchangeable for shares of Common Stock in effect at the time in
question (which, for purposes of Section 2.3 of this Agreement, shall be at the
time of delivery by the Corporation of the Notice contemplated by Section
2.3(b)), whether or not such securities are at such time immediately
convertible, exercisable or exchangeable.
EXCHANGE ACT shall mean the Securities Exchange Act of 1934, as amended.
EXCHANGE ACT REGISTRATION STATEMENT shall have the meaning set forth in
Section 2.5 hereof.
EXCLUDED FORMS shall have the meaning given such term in Section 3.5
hereof.
EXCLUDED SECURITIES shall mean, collectively:
(i) the Reserved Shares and shares issuable upon conversion of
Preferred Stock;
(ii) Common Stock issued or issuable to officers, directors or
employees of or consultants or independent contractors to the Corporation,
pursuant to any written agreement, plan or arrangement, including pursuant to
any options granted under the 2000 Equity Incentive Plan, as amended, of the
Corporation to purchase, or rights to subscribe for, such Common Stock, that has
been approved in form and in substance by the holders of a majority of the then
outstanding Preferred Stock, voting together as a single class, on a Converted
Basis, and which, as a condition precedent to the issuance of such shares,
provides for the vesting of such shares and subjects such shares to restrictions
on transfers and rights of first offer in favor of the
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Corporation; PROVIDED, HOWEVER, that the maximum number of shares of Common
Stock heretofore or hereafter issuable pursuant to the 2000 Equity Incentive
Plan, as amended, and all such agreements, plans and arrangements shall not
exceed 5,085,000 shares (as adjusted for any stock split, reverse stock split,
stock dividend, stock combination, reclassification or other similar change with
respect to such security);
(iii) Common Stock or other securities issued as a stock dividend
payable in shares of Common Stock, or capital stock of any class issuable upon
any subdivision, recombination, split-up or reverse stock split of all the
outstanding shares of such class of capital stock of the Corporation, in each
case without consideration;
(iv) any securities issued pursuant to the acquisition by the
Corporation of any other corporation, partnership, joint venture, trust or other
entity by any merger, stock acquisition, reorganization, purchase of
substantially all assets or otherwise in which the Corporation, or its
stockholders of record immediately prior to the effective date of such
transaction, directly or indirectly, own at least a majority of the voting power
of the acquired entity or the resulting entity after such transaction, so long
as approved by a majority of the Preferred Directors;
(v) Common Stock or other securities issued or issuable to banks,
lenders or landlords, provided that each such issuance is approved by the Board;
(vi) Common Stock or Preferred Stock issued or issuable to third
parties in connection with strategic partnerships or alliances, joint ventures
or other licensing transactions, provided that each such transaction and related
issuance is approved by the Board (including the consent of a majority of the
Preferred Directors);
(vii) Common Stock or other securities, the issuance of which is
approved by holders of a majority of the then outstanding shares of Preferred
Stock, voting together as a single class, on a Converted Basis; and
(viii) Up to 40,000,000 Shares of Series C Preferred Stock issuable
pursuant to the Series C Stock Purchase Agreement.
GROUP shall mean: (i) as to a Stockholder, (a) any "affiliate" of such
Stockholder (as defined in Section 405 of the Securities Act), including,
without limitation, any investment vehicle now existing or hereafter formed that
is affiliated with or under common control with one or more of the controlling
stockholders, partners or members of such Stockholder and any predecessor or
successor thereto and (b) any or all members of a class of persons consisting of
such Stockholder, his or her spouse or equivalent domestic partner and/or
descendants, or a trust of which all of the beneficiaries are members of such
class, and (ii) in the case of HCV VI, the HCV Group.
HAZARDOUS MATERIALS shall include without limitation, any flammable
explosives, petroleum products, petroleum byproducts, radioactive materials,
hazardous wastes, hazardous substances, toxic substances or other similar
materials regulated by Environmental Laws.
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HCV GROUP shall mean, (i) HCV VI, (ii) any venture capital limited
partnership now existing or hereafter formed which is affiliated with or under
common control with one or more general partners of any general partner of HCV
VI (an "HCV FUND"); (iii) any limited partners or affiliates of HCV VI or any
other HCV Fund; and (iv) any successors or assigns of any of the foregoing.
HCV VI shall mean HealthCare Ventures VI, L.P., a Delaware limited
partnership, including any successor thereto or any assignee of the interest, in
whole or in part, of HCV VI under this Agreement.
INVESTORS shall mean each of the persons listed on SCHEDULE I hereto,
severally, but not jointly and severally.
NOTICE OF ACCEPTANCE shall have the meaning set forth in Section
2.3(a)(iii) hereof.
OFFER shall have the meaning set forth in Section 2.3(a)(ii) hereof.
ON A CONVERTED BASIS shall have the meaning set forth in Section 8 hereof.
OFFERED SECURITIES shall mean, except for Excluded Securities, (i) any
shares of Common Stock, Preferred Stock or any other equity security of the
Corporation, (ii) any debt security or capitalized lease with any equity feature
with respect to the Corporation, or (iii) any option, warrant or other right to
subscribe for, purchase or otherwise acquire any such equity security, debt
security or capitalized lease.
OTHER SHARES shall have the meaning set forth in Section 3.5(e) hereof.
PREFERRED DIRECTORS shall have the meaning set forth in Section A.6(b)(i)
of the Certificate.
PREFERRED SHARES shall mean the shares of Series A Preferred Stock, the
Series B Preferred Stock and the Series C Preferred Stock.
PREFERRED STOCK shall mean, collectively, the Series A Preferred Stock, the
Series B Preferred Stock and the Series C Preferred Stock.
PREFERRED STOCKHOLDERS shall mean, collectively, all holders of shares of
Preferred Stock of the Corporation.
PROPERTY shall include, without limitation, land, buildings and laboratory
facilities owned or leased by the Corporation or as to which the Corporation now
has any duties, responsibilities (for clean-up, remedy or otherwise) or
liabilities under any Environmental Laws, or as to which the Corporation or any
subsidiary of the Corporation may have such duties, responsibilities or
liabilities because of past acts or omissions of the Corporation or any such
subsidiary or their predecessors, or because the Corporation or any such
subsidiary or their predecessors in the past
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was such an owner or operator of, or bore some other relationship with, such
land, buildings and/or laboratory facilities.
REFUSED SECURITIES shall have the meaning set forth in Section 2.3(a)(v)
hereof.
RESERVED SHARES shall mean any shares of Common Stock reserved by the
Corporation for issuance upon the conversion of the Preferred Shares.
RESTRICTED SECURITIES shall mean any of the Preferred Shares and the Common
Stock issued or issuable upon the conversion of the Preferred Shares, all shares
of Common Stock issued or issuable in respect thereof by way of stock splits,
stock dividends, stock combinations, recapitalizations or like occurrences, and
any other shares of Common Stock or other securities of the Corporation which
may be issued hereafter to any of the Investors or any member of their Group
which are convertible into or exercisable for shares of Common Stock (including,
without limitation, other classes or series of convertible preferred stock,
warrants, options or other rights to purchase Common Stock or convertible
debentures or other convertible debt securities) and the Common Stock issued or
issuable upon such conversion or exercise of such other securities, which have
not been sold (a) in connection with an effective registration statement filed
pursuant to the Securities Act, or (b) pursuant to Rule 144 or Rule 144A
promulgated by the Commission under the Securities Act.
RESTRICTED SHARES shall mean the shares of Common Stock issued or issuable
upon the conversion or exchange of the Restricted Securities or otherwise
constituting a portion of the Restricted Securities.
SECURITIES ACT shall mean the Securities Act of 1933, as amended.
SERIES A PREFERRED STOCK shall have the meaning set forth in the Recitals
hereto.
SERIES B PREFERRED STOCK shall have the meaning set forth in the Recitals
hereto.
SERIES C PREFERRED STOCK shall have the meaning set forth in the Recitals
hereto.
SERIES C STOCK PURCHASE AGREEMENT shall mean the Series C Convertible
Preferred Stock Agreement dated as of the date hereof, among the Corporation and
the Investors listed on Schedule 1 thereto, as it may be amended.
SKYLINE shall mean Skyline Venture Partners, including any affiliates
thereof or successor thereto.
STOCK RESTRICTION AGREEMENT shall mean the Second Amended and Restated
Stock Restriction Agreement dated as of the date hereof, among the Corporation
and the Investors listed on Schedule I thereto, as it may be amended.
STOCKHOLDER(s) shall mean a holder (when singular) and all holders (when
plural) of capital stock of the Corporation.
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SUBSEQUENT CLOSINGS shall have the meaning set forth in Section 3.2 of the
Series C Stock Purchase Agreement.
TARGET MONTH shall have the meaning set forth in Section 2.7(a) hereof.
21-DAY PERIOD shall have the meaning set forth in Section 2.3(a)(ii)
hereof.
TRANSFER shall include any disposition of any Restricted Securities or of
any interest therein which would constitute a sale thereof within the meaning of
the Securities Act.
SECTION 2. CERTAIN COVENANTS OF THE CORPORATION.
2.1 MEETINGS OF THE BOARD OF DIRECTORS. The Corporation shall
call, and use its best efforts to have, regular meetings of the Board not less
often than quarterly. The Corporation shall pay all reasonable and appropriately
documented travel expenses and other out-of-pocket expenses incurred by
directors who are not employed by the Corporation in connection with attendance
at meetings to transact the business of the Corporation or attendance at
meetings of the Board or any committee thereof.
2.2 RESERVATION OF SHARES OF COMMON STOCK AND PREFERRED STOCK,
ETC. The Corporation shall at all times have authorized and reserved out of its
authorized but unissued shares of Common Stock, a sufficient number of shares of
Common Stock to provide for the conversion of the Preferred Shares. Neither the
issuance of the Preferred Shares nor the shares of Common Stock issuable upon
the conversion of the Preferred Shares shall be subject to a preemptive right of
any other Stockholder.
2.3 RIGHT OF FIRST REFUSAL.
(a) SALES BY THE CORPORATION.
(i) The Corporation shall not issue, sell or
exchange, agree to issue, sell or exchange, or reserve or set aside for
issuance, sale or exchange, any Offered Securities other than Excluded
Securities unless in each case the Corporation shall have first offered to sell
to the Investors all of such Offered Securities on the terms set forth herein.
Each Investor shall be entitled to purchase up to its Equity Percentage of the
Offered Securities. In addition, each Investor shall have a right of
oversubscription ("RIGHT OF OVERSUBSCRIPTION") such that if any Investor fails
to accept the Offer as to its Equity Percentage of the Offered Securities, the
remaining Investors (who shall have accepted the Offer) shall, among them, have
the right to purchase up to the balance of the Offered Securities not so
purchased. Such Right of Oversubscription may be exercised by an Investor (an
"OVERSUBSCRIBING INVESTOR") by accepting the Offer as to more than its Equity
Percentage of the Offered Securities. If as a result thereof, such
oversubscriptions exceed the total number of the Offered Securities available in
respect of such oversubscription privilege, the Oversubscribing Investors shall
be cut back with respect to their oversubscriptions pro rata in accordance with
their Equity Percentage. Each Investor may delegate its rights and obligations
with respect to such Offer to one or more members of its
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Group, which members shall thereafter be deemed to be "Investors" for the
purpose of applying this Section 2.3 to such Offer.
(ii) The Corporation shall deliver to each Investor
written notice of the offer to sell the Offered Securities, specifying the price
and terms and conditions of the offer (the "OFFER"). The Offer by its terms
shall remain open and irrevocable for a period of 21 days from the date of its
delivery to such Investor (the "21-DAY PERIOD").
(iii) Each Investor shall evidence its intention to
accept the Offer by delivering a written notice signed by the Investor setting
forth the number of shares that the Investor elects to purchase (the "NOTICE OF
ACCEPTANCE"). The Notice of Acceptance must be delivered to the Corporation
prior to the end of the 21-Day Period.
(iv) If the Investors tender their Notice of
Acceptance prior to the end of the 21-Day Period indicating their intention to
purchase all of the Offered Securities, the Corporation shall schedule a closing
of the sale of all such Offered Securities. Upon the closing of the sale of the
Offered Securities to be purchased by the Investors, each Investor shall (x)
purchase from the Corporation that portion of the Offered Securities as
determined in accordance with this Section 2.3, upon the terms specified in the
Offer, and (y) execute and deliver an agreement further restricting transfer of
such Offered Securities substantially as set forth in Section 3.1, 3.2 and 3.3
of this Agreement. In addition, with respect to the Offered Securities being
purchased by the Investors, the Corporation shall provide each such Investor
with the rights and benefits set forth in this Agreement. The obligation of the
Investors to purchase such Offered Securities is further conditioned upon the
preparation of a purchase agreement embodying the terms of the Offer, which
shall be reasonably satisfactory in form and substance to such Investor and the
Investor's counsel.
(v) The Corporation shall have ninety (90) days from
the expiration of the 21-Day Period to sell the Offered Securities refused by
the Investors (the "REFUSED SECURITIES") to any other person or persons, but
only upon terms and conditions which are in all material respects (including,
without limitation, price and interest rate) no more favorable to such other
person or persons, and no less favorable to the Corporation, than those set
forth in the Offer. Upon and subject to the closing of the sale of all of the
Refused Securities (which shall include full payment to the Corporation), each
Investor shall (x) purchase from the Corporation that portion of the Offered
Securities as determined in accordance with this Section 2.3, upon the terms
specified in the Offer, and (y) execute and deliver an agreement restricting
transfer of such Offered Securities substantially as set forth in Sections 3.1,
3.2 and 3.3 of this Agreement. In addition, with respect to the Offered
Securities being purchased by the Investors, the Corporation shall provide each
such Investor with the rights and benefits set forth in this Agreement. The
obligation of the Investor to purchase such Offered Securities is further
conditioned upon the preparation of a purchase agreement embodying the terms of
the Offer, which shall be reasonably satisfactory in form and substance to such
Investor and the Investor's counsel.
(vi) In each case, any Offered Securities not
purchased either by the Investors or by any other person in accordance with this
Section 2.3 may not be sold or
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otherwise disposed of until they are again offered to the Investors under the
procedures specified in Paragraphs (i), (ii), (iii), (iv) and (v) hereof.
(vii) Each Investor may, by prior written consent,
waive its rights under this Section 2.3. Such a waiver shall be deemed a limited
waiver and shall only apply to the extent specifically set forth in the written
consent of such Investor.
(b) SALES BY PREFERRED STOCKHOLDERS. Except as otherwise
expressly provided herein and except in connection with the sale of Stock by a
Preferred Stockholder pursuant to Section 4 of the Stock Restriction Agreement,
each Preferred Stockholder and each other Stockholder holding greater than 2.5%
of the outstanding shares of the Corporation (other than a Principal Stockholder
(or any of his successors or permitted assigns) as that term is defined in the
Stock Restriction Agreement), hereby agrees that he, she or it shall not sell
any Stock (as defined in subsection (v) below) to any entity or individual that
is not a member of such Stockholder's Group, except in accordance with the
following procedures:
(i) Such Stockholder shall first deliver to the
Corporation a written notice (the "NOTICE"), which Notice shall (a) specifically
identify the party or parties to whom or which the Stockholder proposes to sell
Stock (such party or parties hereinafter referred to as the "IDENTIFIED
PARTIES"), pursuant to a BONA FIDE written offer from such Identified Parties
("THIRD PARTY OFFER"), (b) include a copy of the Third Party Offer, and (c) be
irrevocable for a period of 30 days after delivery thereof, offering to the
Corporation, and then to the Preferred Stockholders, all of the Stock proposed
to be sold by such Stockholder to such Identified Parties at the purchase price
and on the terms specified therein. The Corporation shall have the right and
option, at its sole discretion, for a period of 15 days after its receipt of the
Notice, to accept to purchase any or all of the Stock offered at the purchase
price and upon the terms stated in the Notice. Such acceptance will be made by
delivery of a written notice to such Stockholder within said 15 day period. Each
Preferred Stockholder then shall have the right and option, for a period of 15
days after the termination of the Corporation's 15-day period, (a) to accept up
to its or his or her Equity Percentage of the Stock so offered and not
subscribed to be purchased by the Corporation pursuant to its first option at
the purchase price and upon the terms stated in the Notice, and (b) to subscribe
to purchase, in a written notice of acceptance, any of such Stock not accepted
by the other Preferred Stockholders pursuant to clause (a), in which case such
Stock not accepted by the other Preferred Stockholders shall be deemed to have
been offered to and accepted by the Preferred Stockholders which exercise their
option under this clause (b) PRO RATA in accordance with their respective Equity
Percentages (computed without including the Preferred Stockholders which have
not so subscribed), on the above-described terms and conditions. Such acceptance
and subscription shall be made by delivery of a written notice to the
Corporation and the offering Preferred Stockholder within said 15-day period.
(ii) Sales of Stock under the terms of section (i)
above shall be made at the offices of the Corporation on a mutually satisfactory
business day within 10 days after the expiration of the aforesaid periods.
Delivery of certificates or other instruments evidencing such Stock duly
endorsed for transfer shall be made on such date against payment of the purchase
price therefor. Payment of the purchase price will be made, at the option of the
Corporation or the Preferred Stockholders exercising their rights of first
refusal (i) in cash (by
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check), (ii) by wire transfer or (iii) by cancellation of all or a portion of
any outstanding indebtedness of the offering Stockholder to the Corporation or
to an exercising Preferred Stockholder, as the case may be, or (iv) by any
combination of the foregoing. If the purchase price includes consideration other
than cash, the cash equivalent value of the non-cash consideration will be
determined by the Board in good faith, which determination will be binding upon
the Corporation, each exercising Preferred Stockholder and the offering
Stockholder, absent fraud or error.
(iii) If effective acceptance shall not be received
pursuant to section (i) above with respect to all Stock offered for sale
pursuant to the Notice, then such Stockholder may sell to the Identified Parties
all but not less than all of the Stock so offered for sale and not so accepted
by the Corporation and the Preferred Stockholders at a price not less than the
price, an on terms not more favorable to the purchaser thereof than the terms,
stated in the Notice at any time within 90 days after the expiration of the
10-day period required by section (ii) above; PROVIDED that each such transferee
shall agree in writing to be bound by the provisions set forth in this Agreement
to the same extent as the transferor. In the event that the Stock is not sold by
the such Stockholder, during such 90-day period, the right of the such
Stockholder to sell such Stock shall expire and the obligations of this section
shall be reinstated, PROVIDED HOWEVER, that in the event that the Preferred
Stockholder determines, at any time during such 90-day period, that the sale to
the Identified Parties of all or any part of the remaining Stock on the terms
set forth in the Notice is impractical, the Preferred Stockholder can terminate
the offer to the Identified Parties and reinstate the procedure provided in this
section without waiting for the expiration of such 90-day period.
(iv) Anything contained herein to the contrary
notwithstanding, Stock held by the Stockholders shall no longer be subject to
this section upon and after a Qualified Public Offering (as defined in Section
2.15 hereof).
(v) For purposes of this section, "STOCK" shall mean
the Common Stock, Series A Preferred Stock, Series B Preferred Stock and Series
C Preferred Stock of the Corporation owned by such Stockholder.
2.4 NEGATIVE COVENANTS.
(a) MAJORITY APPROVALS. The Corporation shall not, directly
or indirectly, take any of the actions specified in Article III, Section A.6(c)
of the Certificate without the prior written consent or vote of the holders of
at least a majority of the then outstanding Preferred Stock, voting together as
a single class, on a Converted Basis. In addition, the Corporation shall not,
directly or indirectly, take any of the actions specified in Article V,
Section A.2 of the Certificate without the written approval of the Board,
including at least a majority of the Preferred Directors.
(b) STOCK AND OPTION AGREEMENTS. Without the prior written
consent or vote of the holders of a majority of the then outstanding Preferred
Stock, voting together as a single class, on a Converted Basis, the Corporation
shall not issue any shares of Common Stock or options, warrants or other rights
to acquire Common Stock or other securities of the
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Corporation to any employee, officer, director, consultant, independent
contractor or other person or entity except for Excluded Securities.
(c) REGISTRATION RIGHTS. The Corporation shall not hereafter
grant to any persons any rights to register or qualify stock of the Corporation
under federal or state securities laws, unless it shall have first obtained the
written consent of the holders of a majority of the then outstanding Preferred
Stock, voting together as a single class, on a Converted Basis.
2.5 FILING OF REPORTS UNDER THE EXCHANGE ACT.
(a) The Corporation shall give prompt notice to the holders
of Preferred Stock of (i) the filing of any registration statement (an "EXCHANGE
ACT REGISTRATION STATEMENT") pursuant to the Exchange Act, relating to any class
of equity securities of the Corporation, (ii) the effectiveness of such Exchange
Act Registration Statement, and (iii) the number of shares of such class of
equity securities outstanding, as reported in such Exchange Act Registration
Statement, in order to enable the Investors to comply with any reporting
requirements under the Exchange Act or the Securities Act. Upon the written
request of holders of a majority of the Preferred Shares, voting together as a
single class, on a Converted Basis, the Corporation shall, at any time after the
Corporation has registered any shares of Common Stock under the Securities Act,
file an Exchange Act Registration Statement relating to any class of equity
securities of the Corporation then held by the holders of Preferred Stock or
issuable upon conversion or exercise of any class of debt or equity securities
or warrants or options of the Corporation then held by the Investors, whether or
not the class of equity securities with respect to which such request is made
shall be held by the number of persons which would require the filing of a
registration statement under Section 12(g)(1) of the Exchange Act.
(b) If the Corporation shall have filed an Exchange Act
Registration Statement or a registration statement (including an offering
circular under Regulation A promulgated under the Securities Act) pursuant to
the requirements of the Securities Act, which shall have become effective (and
in any event, at all times following the initial public offering of any of the
securities of the Corporation), then the Corporation shall comply with all of
the reporting requirements of the Exchange Act (whether or not it shall be
required to do so) and shall comply with all other public information reporting
requirements of the Commission as a condition to the availability of an
exemption from the Securities Act for the sale of any of the Restricted
Securities by any Preferred Stockholder (including any such exemption pursuant
to Rule 144 or Rule 144A thereof, as amended from time to time, or any successor
rule thereto or otherwise). The Corporation shall cooperate with each Preferred
Stockholder in supplying such information as may be necessary for such holder to
complete and file any information reporting forms presently or hereafter
required by the Commission as a condition to the availability of an exemption
from the Securities Act (under Rule 144 or Rule 144A thereunder or otherwise)
for the sale of any of the Restricted Securities by any Preferred Stockholder.
2.6 ACCESS TO RECORDS. The Corporation shall afford to each of the
Investors and such Investor's employees, counsel and other authorized
representatives, free and full access, at all reasonable times and for
reasonable periods of time, to all of the books, records and properties of the
Corporation and to all officers and employees of the Corporation.
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2.7 FINANCIAL REPORTS. Until such time that the Corporation has a
class of its equity securities registered under the Exchange Act and is required
to file reports thereunder pursuant to Sections 13 or 15(d) of the Exchange Act,
except with respect to the obligation set forth in Section 2.7(e)(i) hereunder
which shall survive such time, the Corporation shall furnish each of the
Investors with the financial information described below:
(a) Within 20 days after the last day of each month (the
"TARGET MONTH") (or such other calendar period as is approved by the Board),
financial statements, including a balance sheet as of the last date of such
Target Month, a statement of income (or monthly operating expenses) for such
month, together with a cumulative statement of income from the first day of the
current year to the last day of such month, which statements shall be prepared
from the books and records of the Corporation, a cash flow analysis, together
with cumulative cash flow analyses from the first day of the current year to the
last day of such month, and a comparison between the actual monthly operating
expenses and the projected figures for such month and the comparable figures for
the prior year, subject to the provisions of Section 2.9 hereof.
(b) Within 45 days after the end of such quarterly accounting
period, unaudited financial statements for such quarterly accounting period,
certified by the Chief Financial Officer or the Treasurer of the Corporation, as
presenting fairly the financial condition and results of operations of the
Corporation and as having been prepared on a basis consistent with the
accounting principles reflected in the Corporation's annual audited financial
statements, accompanied by a report, signed by the Chief Financial Officer or
the Treasurer of the Corporation, summarizing the operating and financial
highlights of the Corporation for such quarterly accounting period, which report
shall include (a) a comparison between the actual quarterly operating and
financial results, the Budget (as defined in Section 2.8 hereof) and the results
of the similar quarterly accounting period for the prior fiscal year of the
Corporation, together with an explanation of material variances from the Budget
and such similar quarterly accounting period, as the case may be, and (b) a
narrative analysis of operations and trends in the business of the Corporation
during such quarterly accounting period.
(c) Within 90 days after the end of each fiscal year of the
Corporation, audited financial statements of the Corporation, which shall
include an income statement and a statement of cash flow for such fiscal year
and a balance sheet as of the last day thereof, each prepared in accordance with
U.S. generally accepted accounting principles consistently applied, and
accompanied by the report of such independent certified public accountants as
shall have been approved by the Board.
(d) If for any period the Corporation shall have any
subsidiary or subsidiaries whose accounts are consolidated with those of the
Corporation, then the financial statements delivered for such period pursuant to
paragraphs (a), (b) and (c) of this Section 2.7 shall be the consolidated and
consolidating financial statements of the Corporation for all such consolidated
subsidiaries.
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(e) Promptly upon becoming available:
(i) copies of all financial statements, reports,
press releases, notices, proxy statements and other documents sent by the
Corporation to its Stockholders or released to the public and copies of all
regular and periodic reports, if any, filed by the Corporation with the
Commission or any securities exchange or self-regulatory organization; and
(ii) any other financial or other information
available to management of the Corporation that any of the Investors shall have
reasonably requested on a timely basis.
2.8 BUDGET AND OPERATING FORECAST. The Corporation shall prepare
and submit to the Board and each of the Investors an operating plan with monthly
and quarterly breakdowns (the "BUDGET") for each fiscal year at least 45 days
prior to the beginning of each fiscal year of the Corporation. The Budget shall
be deemed accepted as the Budget for such fiscal year only when it has been
approved by the Board. The Budget shall be reviewed by the Corporation
periodically and all changes therein, and all material deviations therefrom,
shall be reviewed by the Board on at least a quarterly basis.
2.9 SYSTEM OF ACCOUNTING. The Corporation shall maintain, and
cause each of its subsidiaries, when and if any shall exist, to maintain, its
books of accounts, related records and system of accounting in accordance with
good business practices and U.S. generally accepted accounting principles, and
shall cause the matters contained therein to be appropriately and accurately
reflected in the financial reports (which shall be prepared in accordance with
U.S. generally accepted accounting principles) furnished pursuant to this
Agreement.
2.10 RESTRICTION ON TRANSFER RIGHTS; CONFIDENTIALITY.
Notwithstanding Section 8 below, the rights granted to each of the Investors
pursuant to Sections 2.6 through 2.8 hereof shall not be transferred or assigned
by any Investor to, and shall not inure to the benefit of, any successor,
transferee or assignee of any Investor, which is engaged in any business
directly competitive with the Corporation.
2.11 CONFIDENTIALITY AND NON-COMPETITION AGREEMENTS FOR KEY
EMPLOYEES. The Corporation shall cause each person who is presently an employee
of or a consultant or independent contractor to the Corporation or who becomes
an employee of or a consultant to the Corporation subsequent to the date hereof
and who shall have or be proposed to have access to confidential or proprietary
information of the Corporation, to execute a confidentiality agreement, and with
respect to officers and key employees, a non-competition agreement, in either
case, in form and substance attached hereto or otherwise approved by the Board
prior to the commencement of such person's employment by the Corporation in such
capacity.
2.12 STOCK RESTRICTION AGREEMENT FOR DIRECTORS, OFFICERS, EMPLOYEES
AND CONSULTANTS WHO ARE OR BECOME STOCKHOLDERS. The Corporation shall cause each
of its directors, officers and employees who own any shares of capital stock of
the Corporation, or any options, warrants or other rights to purchase any shares
of such capital stock, or who may own in the future any such shares, or options,
warrants or other rights to purchase such shares, to execute a
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Stock Restriction Agreement and/or a Stock Option Agreement, as the case may be,
all with stock transfer restrictions and rights of first refusal in favor of the
Corporation in a form approved by the Board. In addition, each such agreement
shall contain a vesting schedule approved by the Board. For purposes of this
Section 2.12, in the event the shares of capital stock, options, warrants or
other rights are not Excluded Securities, then any such Stock Restriction
Agreement or Stock Options Agreement shall be approved by holders of a majority
of the Preferred Shares, voting together as a single class, on a Converted
Basis.
2.13 MARKETING AND PROMOTIONAL MATERIAL. Each of the Investors will
have the right to review and approve, in advance of publication, distribution or
dissemination, any reference to such Investor or any entity affiliated with such
Investor (other than the Corporation), contained in any document, instrument,
report or filing or in any advertising, marketing, promotional and similar
materials.
2.14 ENVIRONMENTAL MATTERS. The Corporation shall promptly advise
the Investors in writing of any pending or threatened claim, demand or action by
any governmental authority or third party relating to any Hazardous Materials
affecting the Property of which it has knowledge. The Corporation shall not
discharge, place, release, spill or dispose of any Hazardous Materials or any
other pollutants or effluents upon the Property or elsewhere (including, but not
limited to, underground injection of such substances), and the Corporation shall
not discharge into the air any emission which would require a permit under the
Clean Air Act or its state counterparts or any other Environmental Laws, except
in compliance with the Environmental Laws. The Stockholders of the Corporation
shall have no control over, or authority with respect to, the waste disposal
operations of the Corporation. The Corporation hereby indemnifies, defends and
holds harmless the Investors from and against any and all manner of actions,
causes of action, suits, debts, accounts, controversies, judgments, claims,
demands, losses or liabilities of any nature (including reasonable attorneys'
fees) directly or indirectly arising out of or attributable to (a) any
misrepresentation or breach of the representations and covenants set forth in
Section 5.18 of the Series C Stock Purchase Agreement, or (b) the use,
generation, storage, release, threatened release, discharge, disposal or
presence of Hazardous Materials on, under or about the Property by any person
during the period that the Corporation was the legal or equitable owner of the
Property or which occurred prior to such time and was otherwise actually known
by, or should have been known by, the Corporation. The obligation of the
Corporation to indemnify the Investors shall specifically cover and include,
without limitation, all fines and penalties imposed by federal, state or local
authorities, costs of removing or neutralizing the Hazardous Materials, injury
to the property adjoining the Property, injury to persons living or working on
or about the Property or adjoining or otherwise affecting property, and all
other indirect or consequential damages incurred by the Investors.
2.15 DURATION OF SECTION. This Section 2 and the rights and
obligations of the parties hereunder (other than rights and obligations set
forth in Section 2.4(c), 2.5, 2.7(e)(i), 2.11 and 2.14) shall automatically
terminate upon the earlier to occur of (a) on the consummation of a firm
commitment underwritten public offering of Common Stock registered under the
Securities Act pursuant to which (x) Common Stock is offered to the public at a
price of at least $2.00 per share of Common Stock (subject to adjustment for
stock splits, stock dividends, stock combinations, recapitalizations and like
occurrences) and (y) the net proceeds to the Corporation
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are at least $30 million ("QUALIFIED PUBLIC OFFERING") and (b) the Investors
ceasing to own any shares of Preferred Stock.
SECTION 3. TRANSFER OF SECURITIES.
3.1 RESTRICTION ON TRANSFER. The Restricted Securities shall not
be transferable, except upon the conditions specified in this Section 3, which
conditions are intended solely to ensure compliance with the provisions of the
Securities Act in respect of the Transfer thereof.
3.2 RESTRICTIVE LEGEND. Each certificate evidencing any Restricted
Securities and each certificate evidencing any such securities issued to
subsequent transferees of any Restricted Securities shall (unless otherwise
permitted by the provisions of Section 3.3 or 3.10 hereof) be stamped or
otherwise imprinted with a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW. THE SECURITIES MAY
NOT BE PLEDGED, HYPOTHECATED, SOLD OR TRANSFERRED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE SECURITIES LAW OR AN
EXEMPTION THEREFROM UNDER SUCH ACT OR LAW. ADDITIONALLY, THE
TRANSFER OF THESE SECURITIES IS SUBJECT TO THE CONDITIONS SPECIFIED
IN THE SECOND AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT DATED
NOVEMBER 1, 2002, AS AMENDED FROM TIME TO TIME, AMONG TOLERRX, INC.
AND CERTAIN OTHER SIGNATORIES THERETO, AND NO TRANSFER OF SUCH
SECURITIES SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE
BEEN FULFILLED. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST
BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE
TO THE SECRETARY OF TOLERRX, INC.
The provisions of this Section 3.2 shall be satisfied with respect to
certificates issued prior to the date hereof which bear legends substantially
similar to the above legend.
3.3 NOTICE OF TRANSFER. By acceptance of any Restricted
Securities, the holder thereof agrees to give prior written notice to the
Corporation of such holder's intention to effect any Transfer and to comply in
all other respects with the provisions of this Section 3.3. Each such notice
shall describe the manner and circumstances of the proposed Transfer and shall
be accompanied by:
(a) the written opinion of counsel for the holder of such
Restricted Securities, and/or, at the Corporation's option, a representation
letter of such holder, addressed to the Corporation (which opinion and counsel,
or representation letter, as the case may be, shall be
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reasonably acceptable to the Corporation), as to whether, in the case of a
written opinion, in the opinion of such counsel, such proposed Transfer involves
a transaction requiring registration of such Restricted Securities under the
Securities Act and applicable state securities laws or an exemption thereunder
is available, or, in the case of a representation letter, such letter sets forth
a factual basis for concluding that such proposed Transfer involves a
transaction requiring registration of such Restricted Securities under the
Securities Act and applicable State Securities laws or that an exemption
thereunder is available; PROVIDED, HOWEVER, that no such opinion of counsel or
such representation letter shall be necessary:
(i) in the case of a Transfer by a holder to a member
of such holder's Group; or
(ii) in the case of any holder of Restricted
Securities that is a partnership or a trust, in connection with a Transfer by
such holder to a partner or a trust grantor of such holder, or a retired partner
of such holder who retires after the date hereof, or the estate of any such
partner or retired partner if, with respect to such Transfer by a partnership,
such Transfer is made in accordance with the partnership agreement of such
partnership.
(b) if such registration is required and if the provisions of
Section 3.4 hereof are applicable, a written request addressed to the
Corporation by the holder of such Restricted Securities, describing in detail
the proposed method of disposition and requesting the Corporation to effect the
registration of such Restricted Shares pursuant to the terms and provisions of
Section 3.4 hereof.
If in such opinion of counsel or as reasonably concluded from the facts set
forth in the representation letter of the holder (which opinion of counsel, or
representation letter, as the case may be, shall be reasonably acceptable to the
Corporation), the proposed Transfer may be effected without registration under
the Securities Act and any applicable state securities laws or "blue sky" laws,
then the holder of Restricted Securities shall thereupon be entitled to effect
such Transfer in accordance with the terms of the notice delivered by it to the
Corporation. Each certificate or other instrument evidencing the securities
issued upon such Transfer (and each certificate or other instrument evidencing
any such securities not Transferred) shall bear the legend set forth in
Section 3.2 hereof unless: (a) in such opinion of such counsel or as is
concluded by the Corporation from the representation letter of such holder
(which opinion of counsel or representation letter shall be reasonably
acceptable to the Corporation) the registration of future Transfers is not
required by the applicable provisions of the Securities Act and state
securities laws, or (b) the Corporation shall have waived the requirement
of such legend; PROVIDED, HOWEVER, that such legend shall not be required
on any certificate or other instrument evidencing the securities issued
upon such Transfer in the event such Transfer shall be made in compliance
with the requirements of Rule 144 (as amended from time to time or any
similar or successor rule) promulgated under the Securities Act. The holder
of Restricted Securities shall not effect any Transfer until such opinion
of counsel or representation letter of such holder has been given to and
accepted by the Corporation (unless waived by the Corporation) or until
registration of the Restricted Shares involved in the above-mentioned
request has become effective under the Securities Act. In the event that an
opinion of counsel is required by the registrar or transfer agent of the
Corporation to effect a transfer of Restricted Securities in the
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future, the Corporation shall seek and obtain such opinion from its counsel, and
the holder of such Restricted Securities shall provide such reasonable
assistance as is requested by the Corporation (other than the furnishing of an
opinion of counsel) to satisfy the requirements of the registrar or transfer
agent to effectuate such transfer.
3.4 REQUIRED REGISTRATION. At any time following the date that is
the earlier of (i) the third anniversary of the Initial Closing Date (as defined
under the Series C Stock Purchase Agreement) and (ii) six months following the
closing of a Qualified Public Offering, if the Corporation shall be requested
(x) by holders of at least 50% of the then outstanding Restricted Securities
held by Investors, to effect the registration under the Securities Act of
Restricted Shares, or (y) after the first registration pursuant to this Section
3.4, by one or more of the Investors holding Restricted Securities, to effect
the registration under the Securities Act of Restricted Shares, then the
Corporation shall promptly give written notice of such proposed registration to
all Investors holding Restricted Securities, and thereupon the Corporation shall
promptly use its best efforts to effect the registration under the Securities
Act of the Restricted Shares that the Corporation has been requested to register
for disposition as described in the request of such Investors holding Restricted
Securities and in any response received from any of the Investors holding
Restricted Securities within 30 days after the giving of the written notice by
the Corporation; PROVIDED, HOWEVER, that the Corporation shall not be obligated
to effect any registration under the Securities Act except in accordance with
the following provisions and Section 3.6:
(a) Subject to Section 3.6, the Corporation shall not be
obligated to file and cause to become effective more than two (2) registration
statements in which Restricted Shares are registered under the Securities Act
pursuant to this Section 3.4. Notwithstanding anything in this Section 3 to the
contrary, if the Corporation shall furnish to the Investors holding Restricted
Securities who request registration hereunder a certificate signed by the
President or Chief Executive Officer of the Corporation stating that the Board
of the Corporation has made the good faith determination (i) that use or
continued use by the holders of the registration statement filed by the
Corporation pursuant to this Section 3 for purposes of effecting offers or sales
of Restricted Securities pursuant hereto would require, under the Securities Act
and the rules and regulations promulgated thereunder, premature disclosure in
the registration statement (or the prospectus relating thereto) of material,
nonpublic information concerning the Corporation, (ii) that such premature
disclosure would be materially adverse to the Corporation, its business or
prospects or any such proposed material transaction would make the successful
consummation by the Corporation of any such material transaction significantly
less likely and (iii) that it is therefore essential to delay or suspend the use
by the holders of such registration statement (and the prospectus relating
thereto) for purposes of effecting offers or sales of Restricted Securities
pursuant thereto, then the right of the Investors to use such registration
statement (and the prospectus relating thereto) for purposes of effecting offers
or sales of Restricted Securities pursuant thereto shall be delayed and/or
suspended for a period (the "SUSPENSION PERIOD") of not more than 90 days after
delivery by the Corporation of the certificate referred to above in this Section
3.4(a). During the Suspension Period, the Corporation shall not be obligated to
file any registration statement and/or the Investors shall not offer or sell any
Restricted Securities pursuant to or in reliance upon such registration
statement (or the prospectus relating thereto). The Corporation agrees that, as
promptly as practicable after the
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consummation, abandonment or public disclosure of the event or transaction that
caused the Corporation to delay or suspend the use of the registration statement
(and the prospectus relating thereto), the Corporation will provide the holders
with revised prospectuses, if required, and will notify the investors of their
ability to effect offers or sales of Registrable Shares pursuant to or in
reliance upon such registration statement.
(b) Notwithstanding the foregoing, the Corporation may
include in each such registration requested pursuant to this Section 3.4 any
authorized but unissued shares of Common Stock (or authorized treasury shares)
for sale by the Corporation or any issued and outstanding shares of Common Stock
for sale by others; PROVIDED, HOWEVER, that, if the number of shares of Common
Stock so included pursuant to this clause (b) exceeds the number of Restricted
Shares requested by the Investors holding Restricted Shares requesting such
registration, then such registration shall be deemed to be a registration in
accordance with and pursuant to Section 3.5; and PROVIDED FURTHER, HOWEVER, that
in the event such registration is pursuant to this Section 3.4, the inclusion of
such previously authorized but unissued shares by the Corporation or issued and
outstanding shares of Common Stock by others in such registration does not
adversely affect, in the sole opinion of the Investors holding Restricted
Securities requesting such registration, the ability of the Investors holding
Restricted Securities requesting such registration to market the entire number
of Restricted Shares requested by them.
3.5 PIGGYBACK REGISTRATION.
(a) Each time that the Corporation proposes for any reason to
register any of its securities under the Securities Act, other than a Qualified
Public Offering or pursuant to a registration statement on Form S-4 or Form S-8
or similar or successor forms (collectively, "EXCLUDED FORMS"), the Corporation
shall promptly give written notice of such proposed registration to all
Investors holding Restricted Securities, which shall offer such Investors the
right to request inclusion of any Restricted Shares in the proposed
registration.
(b) Each Investor holding Restricted Securities shall have 14
days from the receipt of such notice to deliver to the Corporation a written
request specifying the number of Restricted Shares such holder intends to
include in such registration and the Investor's intended method of disposition.
(c) In the event that the proposed registration by the
Corporation is, in whole or in part, an underwritten public offering of
securities of the Corporation, any request under Section 3.5(b) may specify that
the Restricted Shares be included in the underwriting (i) on the same terms and
conditions as the shares of Common Stock, if any, otherwise being sold through
underwriters under such registration, or (ii) on terms and conditions comparable
to those normally applicable to offerings of common stock in reasonably similar
circumstances in the event that no shares of Common Stock other than Restricted
Shares are being sold through underwriters under such registration.
(d) Upon receipt of a written request pursuant to
Section 3.5(b), the Corporation shall promptly use its best efforts to cause all
such Restricted Shares to be registered
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under the Securities Act, and, to the extent required, to permit sale or
disposition as set forth in the written request.
(e) Notwithstanding the foregoing, if the managing
underwriter of any such proposed registration determines and advises in writing
that the inclusion of all Restricted Shares proposed to be included in the
underwritten public offering, together with any other issued and outstanding
shares of Common Stock proposed to be included therein by holders other than the
Investors holding Restricted Securities (such other shares hereinafter
collectively referred to as the "OTHER SHARES"), would interfere with the
successful marketing of the Corporation's securities, then the total number of
such securities proposed to be included in such underwritten public offering
shall be reduced, (i) first by the shares requested to be included in such
registration by the holders of Other Shares, and (ii) second, if necessary, (A)
one-half by the securities proposed to be registered on behalf of the
Corporation, and (B) one-half by the Restricted Shares proposed to be included
in such registration by the holders thereof, in each case on a PRO RATA basis,
based upon the number of Restricted Shares or other securities, as the case may
be, sought to be registered by each such holder. The shares that are excluded
from the underwritten public offering pursuant to the preceding sentence shall
be withheld from the market by the holders thereof for a period, not to exceed
180 days from the closing of such underwritten public offering, that the
managing underwriter reasonably determines as necessary in order to effect such
underwritten public offering.
3.6 REGISTRATIONS ON FORM S-2 AND S-3. At such time as the
Corporation shall have qualified for the use of Form S-2 or Form S-3 (or any
successor form promulgated under the Securities Act), each Investor holding
Restricted Securities shall have the right to request in writing an unlimited
number (but not more than two (2) annually) of registrations on Form S-2 or
Form S-3. Each such request by an Investor holding Restricted Securities
shall: (a) specify the number of Restricted Shares which the Investor
intends to sell or dispose of, (b) state the intended method by which the
Investor intends to sell or dispose of such Restricted Shares, and (c)
request registration of Restricted Shares having a proposed aggregate
offering price of at least $1,000,000. Upon receipt of a request pursuant
to this Section 3.6, the Corporation shall use its best efforts to effect
such registration or registrations on Form S-2 or Form S-3.
3.7 PREPARATION AND FILING. If and whenever the Corporation is
under an obligation pursuant to the provision of this Section 3 to use its best
efforts to effect the registration of any Restricted Shares, the Corporation
shall, as expeditiously as practicable:
(a) prepare and file with the Commission a registration
statement with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective in accordance with
Section 3.7(b) hereof;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective
until the earlier of (i) the sale of all Restricted Shares covered thereby or
(ii) nine months, and to comply with the provisions of the Securities Act with
respect to the sale or other disposition of all Restricted Shares covered by
such registration statement;
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(c) furnish to each Investor whose Restricted Shares are
being registered pursuant to this Section 3 such number of copies of any summary
prospectus or other prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other documents
as such Investor may reasonably request in order to facilitate the public sale
or other disposition of such Restricted Shares;
(d) use its best efforts to register or qualify the
Restricted Shares covered by such registration statement under the securities or
blue sky laws of such jurisdictions as each holder whose Restricted Shares are
being registered pursuant to this Section 3 shall reasonably request and do any
and all other acts or things which may be necessary or advisable to enable such
holder to consummate the public sale or other disposition in such jurisdictions
of such Restricted Shares; PROVIDED, HOWEVER, that the Corporation shall not be
required to consent to general service of process for all purposes in any
jurisdiction where it is not then subject to process, qualify to do business as
a foreign corporation where it would not be otherwise required to qualify or
submit to liability for state or local taxes where it is not otherwise liable
for such taxes;
(e) at any time when a prospectus covered by such
registration statement and relating thereto is required to be delivered under
the Securities Act within the appropriate period mentioned in Section 3.7(b)
hereof, notify each holder whose Restricted Shares are being registered pursuant
to this Section 3 of the happening of any event as a result of which the
prospectus included in such registration, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing and, at the request of such holder,
prepare, file and furnish to such holder a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such shares, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing;
(f) if the Corporation has delivered preliminary or final
prospectuses to the Investors holding Restricted Shares that are being
registered pursuant to this Section 3 and after having done so the prospectus is
amended to comply with the requirements of the Securities Act, the Corporation
shall promptly notify such holders and, if requested, such holders shall
immediately cease making offers of Restricted Shares and return all prospectuses
to the Corporation. The Corporation shall promptly provide such holders with
revised prospectuses and, following receipt of the revised prospectuses, such
holders shall be free to resume making offers of the Restricted Shares; and
(g) furnish, at the request of any Investor whose Restricted
Shares are being registered pursuant to this Section 3, on the date that such
Restricted Shares are delivered to the underwriters for sale in connection with
a registration pursuant to this Section 3, if such securities are being sold
through underwriters, or, on the date that the registration statement with
respect to such securities becomes effective, if such securities are not being
sold through underwriters, (i) an opinion, dated such date, of the counsel
representing the Corporation for the
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purposes of such registration, in form and substance as is customarily given to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the holder or holders making such request, and (ii) a letter
dated such date, from the independent certified public accountants of the
Corporation, in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
addressed to the underwriters, if any, and to the holder or holders making such
request.
3.8 EXPENSES. The Corporation shall pay all expenses incurred by
the Corporation in complying with this Section 3, including, without limitation,
all registration and filing fees (including all expenses incident to filing with
the National Association of Securities Dealers, Inc.), fees and expenses of
complying with the securities and blue sky laws of all such jurisdictions in
which the Restricted Shares are proposed to be offered and sold, printing
expenses and fees and disbursements of counsel (including with respect to each
registration effected pursuant to Sections 3.4, 3.5 and 3.6, the reasonable fees
and disbursements of counsel appointed by a majority of the holders of
Restricted Shares held by the Investors that are being registered pursuant to
this Section 3); PROVIDED, HOWEVER, that all underwriting discounts and selling
commissions applicable to the Restricted Shares covered by registrations
effected pursuant to Section 3.4, 3.5 or 3.6 hereof shall be borne by the seller
or sellers thereof, in proportion to the number of Restricted Shares sold by
each such seller or sellers.
3.9 INDEMNIFICATION.
(a) In the event of any registration of any Restricted Shares
under the Securities Act pursuant to this Section 3 or registration or
qualification of any Restricted Shares pursuant to Section 3.7(d) hereof, the
Corporation shall indemnify and hold harmless the seller of such shares, each
underwriter of such shares, if any, each broker or any other person acting on
behalf of such seller and each other person, if any, who controls any of the
foregoing persons, within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which any of the foregoing
persons may become subject under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in any registration statement under which such
Restricted Shares were registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, or any document incident to registration or qualification of any
Restricted Shares pursuant to Section 3.7(d) hereof, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading or, with respect to any prospectus, necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, or any violation by the Corporation of the Securities Act or any
state securities or blue sky laws applicable to the Corporation and relating to
action or inaction required of the Corporation in connection with such
registration or qualification under the Securities Act or such state securities
or blue sky laws. The Corporation shall reimburse on demand of such seller,
underwriter, broker or other person acting on behalf of such seller and each
such controlling person for any legal or any other expenses reasonably incurred
by any of them in connection with investigating or defending any such loss,
claim, damage, liability or action; PROVIDED, HOWEVER, that the Corporation
shall not be liable in any such case to the extent
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that any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in said registration statement, preliminary or final prospectus or
amendment or supplement thereto or any document incident to registration or
qualification of any Restricted Shares pursuant to Section 3.7(d) hereof, in
reliance upon and in conformity with written information furnished to the
Corporation by such seller, underwriter, broker, other person or controlling
person specifically for use in the preparation thereof.
(b) In the event of any registration of any Restricted
Securities under the Securities Act pursuant to this Section 3 or registration
or qualification of any Restricted Shares pursuant to Section 3.7(d) hereof, the
Investors severally, but not jointly, shall indemnify and hold harmless the
Corporation and its directors, officers, employees, agents and affiliates and
any other person, if any, who controls any of the foregoing persons, within the
meaning of the Securities Act, against any losses, claims, damages or
liabilities (or actions in respect thereof) arising out of or based upon an
untrue statement or alleged untrue statement of a material fact contained in any
registration statement under which such Restricted Shares were registered under
the Securities Act, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto, or any document incident to
registration or qualification of any Restricted Securities pursuant to Section
3.7(d) hereof, arising out of or based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading or, with respect to any prospectus,
necessary to make statements therein, in light of the circumstances under which
they were made, not misleading, or any violation of the Securities Act or any
state securities or applicable blue sky laws relating to action or inaction
required of the Corporation in connection with such registration or
qualification under the Securities Act or such state securities or blue sky laws
arising out of or based upon written information furnished to the Corporation by
such Investor or other selling stockholder specifically for use in the
preparation thereof; provided, that the maximum liability of each Investor
hereunder shall be limited to an amount equal to the net proceeds actually
received by such Investor from the sale of Restricted Shares as contemplated
herein.
(c) Before Restricted Shares held by any prospective seller
shall be included in any registration pursuant to this Section 3, such
prospective seller and any underwriter acting on its behalf shall have agreed to
indemnify and hold harmless (in the same manner and to the same extent as set
forth in paragraph (a)(ii)) the Corporation, each director of the Corporation,
each officer of the Corporation who signs such registration statement and any
person who controls the Corporation within the meaning of the Securities Act,
with respect to any untrue statement or omission from such registration
statement, any preliminary prospectus or final prospectus contained therein, or
any amendment or supplement thereto, if such untrue statement or omission was
made in reliance upon and in conformity with written information furnished to
the Corporation through an instrument duly executed by such seller or such
underwriter specifically for use in the preparation of such registration
statement, preliminary prospectus, final prospectus or amendment or supplement;
PROVIDED, HOWEVER, that the maximum amount of liability in respect of such
indemnification shall be limited, in the case of each prospective seller, to an
amount equal to the net proceeds actually received by such prospective seller
from the sale of Restricted Shares effected pursuant to such registration.
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(d) Promptly after receipt by an indemnified party of notice
of the commencement of any action involving a claim referred to in Section
3.9(a) or (b) hereof, such indemnified party will, if a claim in respect thereof
is to be made against the indemnifying party under this Section 3.9, give
written notice to the latter of the commencement of such action. In case any
such action is brought against an indemnified party, the indemnifying party will
be entitled to participate in and to assume the defense thereof, jointly with
any other indemnifying party similarly notified to the extent that it may wish,
with counsel reasonably satisfactory to such indemnified party, and, after
notice to such indemnified party from the indemnifying party of its election to
assume the defense thereof, the indemnifying party shall be responsible for any
legal or other expenses subsequently incurred by the latter in connection with
the defense thereof; PROVIDED, HOWEVER, that, if any indemnified party shall
have reasonably concluded that there may be one or more legal defenses available
to such indemnified party which are different from or additional to those
available to the indemnifying party, or that such claim or litigation involves
or could have an effect upon matters beyond the scope of the indemnity agreement
provided in this Section 3.9, the indemnifying party shall not have the right to
assume the defense of such action on behalf of such indemnified party, and such
indemnifying party shall reimburse such indemnified party and any person
controlling such indemnified party for the fees and expenses of counsel retained
by the indemnified party which are reasonably related to the matters covered by
the indemnity agreement provided in this Section 3.9. The indemnifying party
shall not make any settlement of any claims indemnified against hereunder
without the written consent of the indemnified party or parties, which consent
shall not be unreasonably withheld.
(e) In order to provide for just and equitable contribution
to joint liability under the Securities Act in any case in which either (i) any
holder of Restricted Shares exercising rights under this Agreement, or any
controlling person of any such holder, makes a claim for indemnification
pursuant to this Section 3.9, but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 3.9 provides for indemnification in such case, or (ii) contribution
under the Securities Act may be required on the part of any such holder or any
such controlling person in circumstances for which indemnification is provided
under this Section 3.9; then, in each such case, the Corporation and such holder
will contribute to the aggregate losses, claims, damages or liabilities to which
they may be subject as is appropriate to reflect the relative fault of the
Corporation and such holder in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities, it being understood
that the parties acknowledge that the overriding equitable consideration to be
given effect in connection with this provision is the ability of one party or
the other to correct the statement or omission which resulted in such losses,
claims, damages or liabilities, and that it would not be just and equitable if
contribution pursuant hereto were to be determined by PRO RATA allocation or by
any other method of allocation which does not take into consideration the
foregoing equitable considerations. Notwithstanding the foregoing, (i) no such
holder will be required to contribute any amount in excess of the net proceeds
to it of all Restricted Shares sold by it pursuant to such registration
statement, and (ii) no person or entity guilty of fraudulent misrepresentation,
within
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the meaning of Section 11(f) of the Securities Act, shall be entitled to
contribution from any person or entity who is not guilty of such fraudulent
misrepresentation.
(f) Notwithstanding any of the foregoing, if, in connection
with an underwritten public offering of any Restricted Shares, the Corporation,
the holders of such Restricted Shares and the underwriters enter into an
underwriting or purchase agreement relating to such offering which contains
similar provisions covering indemnification among the parties, then the
indemnification provision of this Section 3.9 shall be deemed inoperative for
purposes of such offering.
3.10 REMOVAL OF LEGENDS, ETC. Notwithstanding the foregoing
provisions of this Section 3, the restrictions imposed by this Section 3 upon
the transferability of any Restricted Securities shall cease and terminate when
(a) any such Restricted Securities are sold or otherwise disposed of in
accordance with the intended method of disposition by the seller or sellers
thereof set forth in a registration statement or such other method contemplated
by Section 3.3 hereof that does not require that the securities transferred bear
the legend set forth in Section 3.2 hereof, including a Transfer pursuant to
Rule 144 or a successor rule thereof (as amended from time to time), or (b) the
holder of Restricted Securities has met the requirements for transfer of such
Restricted Securities pursuant to subparagraph (k) of Rule 144 or a successor
rule thereof (as amended from time to time) promulgated by the Commission under
the Securities Act. Whenever the restrictions imposed by this Section 3 have
terminated, a holder of a certificate for Restricted Securities as to which such
restrictions have terminated shall be entitled to receive from the Corporation,
without expense, a new certificate not bearing the restrictive legend set forth
in Section 3.2 hereof and not containing any other reference to the restrictions
imposed by this Section 3.
3.11 LOCK-UP. Each holder of Restricted Securities hereby agrees
that, at the written request of any managing underwriter of an underwritten
initial public offering of securities of the Corporation in connection with the
Corporation's initial public offering of securities, such holder shall not,
without the prior written consent of such managing underwriter, sell, assign,
transfer, make a short sale of, loan, grant any option for the purchase of,
pledge, hypothecate, encumber or otherwise convey or dispose of, or exercise
registration rights with respect to any Restricted Securities for such period of
time, not to exceed 180 days after the closing of such underwritten initial
public offering, as the Corporation or such managing underwriter shall request.
Without limiting the generality of the foregoing provisions of this Section 3,
in connection with any underwritten public offering of securities of the
Corporation, the Corporation may require any holder of Restricted Securities to
enter into a standard form of lock-up agreement, as may be requested by the
managing underwriter thereof (such lock-up not to exceed 180 days after the
closing of such underwritten public offering); PROVIDED that all holders of
Restricted Securities and directors and executive officers of the Corporation
are being required to enter into a lock-up agreement with similar, or more
restrictive, terms.
SECTION 4. SECURITIES ACT REGISTRATION STATEMENTS. Except for securities
of the Corporation registered on Excluded Forms, the Corporation shall not file
any registration statement under the Securities Act covering any securities
unless it shall first have given each Investor holding Restricted Securities
written notice thereof. The Corporation further covenants
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that each Investor holding Restricted Securities shall have the right, at any
time when it may be deemed to be a controlling person of the Corporation, within
the meaning of the Securities Act, to participate in the preparation of such
registration statement and to request the insertion therein of material
furnished to the Corporation in writing which in such holder's judgment should
be included. In connection with any registration statement referred to in this
Section 4, the Corporation shall indemnify, to the extent permitted by law, each
holder of Restricted Securities, its officers, partners and directors and each
person, if any, who controls any such holder within the meaning of the
Securities Act in the same manner and to the same extent as the Corporation is
required to indemnify a seller of Restricted Securities in Section 3.9 hereof.
If, in connection with any such registration statement, any holder of Restricted
Securities shall furnish written information to the Corporation expressly for
use in the registration statement, then such holder shall indemnify the
Corporation, each director of the Corporation, each officer of the Corporation
who signs such registration statement and each person, if any, who controls the
Corporation within the meaning of the Securities Act to the same extent as a
seller of Restricted Securities is required to indemnify such persons in
Section 3.9 hereof.
SECTION 5. ELECTION OF DIRECTORS.
5.1 VOTING FOR DIRECTORS. At each annual meeting of the
stockholders of the Corporation and at each special meeting of the stockholders
of the Corporation called for the purposes of electing directors of the
Corporation, and at any time at which stockholders of the Corporation shall have
the right to, or shall, vote for or consent to the election of directors, then,
in each such event, each Investor and each of the founders of the Corporation
listed on the signature pages hereto (the "FOUNDERS") shall vote all shares of
Preferred Stock and any other shares of voting stock of the Corporation then
owned (or controlled as to voting rights) by it, or her or him, whether by
purchase, exercise of rights, warrants or options, stock dividends or otherwise:
(a) to fix and maintain the number of directors on the Board
of the Corporation at seven (7);
(b) pursuant to Paragraph A.6(b)(i) of Article III of the
Certificate, to elect to the Board two (2) directors designated by HCV VI, one
(1) of whom shall have the right to sit on each committee of the Board and who
shall initially be Chris Mirabelli and Hal Werner;
(c) pursuant to Paragraph A.6(b)(i) of Article III of the
Certificate, to elect to the Board one (1) director designated by Skyline
Ventures, who shall have the right to sit on each committee of the Board and who
shall initially be Yasunori Kaneko;
(d) to elect to the Board three (3) directors to be
designated by the other members of the Board of the Corporation; and
(e) to elect to the Board the Chief Executive Officer of the
Corporation, to remain a member of the Board so long as he or she is the Chief
Executive Officer of the Corporation.
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5.2 COOPERATION OF THE CORPORATION. The Corporation shall use its
best efforts to effectuate the purposes of this Section 5, including promoting
the adoption of any necessary amendment of the By-laws of the Corporation and
the Certificate.
5.3 NOTICES. The Corporation shall provide the Investors with at
least twenty (20) days' prior notice in writing of any intended mailing of
notice to the Investors of the Corporation for a meeting at which directors are
to be elected, and such notice shall include the names of the persons designated
pursuant to this Section 5. Each of HCV VI and Skyline shall notify the
Corporation in writing at least three (3) days prior to such mailing of the
persons designated by it, pursuant to Paragraph A.6(b)(i) of Article III of the
Certificate and Section 5.1 above, as nominees for election to the Board. In the
absence of any notice from HCV VI, the director(s) then serving and previously
designated by HCV VI shall be renominated. In the absence of any notice from
Skyline, the director(s) then serving and previously designated by Skyline shall
be renominated.
5.4 REMOVAL. Except as otherwise provided in this Section 5, no
Investor shall vote to remove any member of the Board designated in accordance
with the foregoing provisions of this Section 5 unless the party who designated
such director (the "DESIGNATING PARTY") shall so vote or otherwise consent, and,
if the Designating Party shall so vote or otherwise consent, then the
non-designating Investors shall likewise so vote. Any vacancy on the Board
created by the resignation, removal, incapacity or death of any person
designated under the foregoing provisions of this Section 5 shall be filled by
another person designated by the original Designating Party. Each Investor and
Founder shall vote all voting shares of Preferred Stock of the Corporation and
all other shares of voting stock of the Corporation owned or controlled by such
Investor or Founder, respectively, in accordance with each such new designation,
and no such vacancy shall be filled in the absence of a new designation by the
original Designating Party.
5.5 BOARD OBSERVER. Vertex Life Science Inc. and Vertex Technology
Fund (III) Limited ("VERTEX"), Rho Ventures IV (QP), L.P. ("RHO") and Artal
Services N.V ("ARTAL") shall have the board observer rights set forth herein
(which shall be several and not joint): So long as Vertex, Rho or Artal, as the
case may be, together with its "affiliates" (as defined in Section 405 of the
Securities Act) hold at least 2,750,000 shares of Preferred Stock (such number
to be proportionately adjusted for stock splits, stock dividends, and similar
events), the Corporation will permit one (1) representative designated by each
of Vertex, Rho and Artal, who is acceptable to majority of the members of the
Board (each an "OBSERVER"), to attend in person, at the Observer's own expense,
all meetings of the Corporation's Board in a non-voting, observer capacity and
shall provide to each Observer, at the Corporation's expense, concurrently with
the members of the Board, and in the same manner, notice of such meeting and a
copy of all materials provided to such members; PROVIDED, HOWEVER, that the
majority of the Board of Directors shall have the right to exclude any Observer
from portions of meetings of the Board of Directors or committees thereof or
omit to provide the Observer with certain information, if such members of the
Board of Directors believe in good faith, based on the advice of Corporation
counsel, that such exclusion or omission is necessary in order to (x) preserve
the attorney-client privilege, or (y) fulfill the Corporation's obligations with
respect to confidential or proprietary information of third parties (PROVIDED
HOWEVER, that the Observer shall not be so excluded unless
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all other persons whose receipt of such materials or presence at a meeting would
result in a violation of such third party confidentiality are also excluded).
5.6 DURATION OF SECTION. This Section 5 and the rights and
obligations of the parties hereunder shall automatically terminate on the
consummation of a Qualified Public Offering. Prior to such termination, (x) the
rights and obligations of any Investor under Sections 5.1, 5.2, 5.3 and 5.4
shall terminate upon the date on which such Investor no longer owns any
Preferred Stock, whereupon the obligations of the remaining Investors to vote in
favor of the designee of such Investor shall also terminate, and (y) the rights
and obligations of Vertex, Rho and Artal under Section 5.5 shall terminate upon
the date on which such Investor no longer holds at least 2,750,000 shares of
Preferred Stock, whereupon the obligations of the Corporation and the Board
shall also terminate.
5.7 RESTRICTION ON TRANSFER RIGHTS; CONFIDENTIALITY.
(a) Notwithstanding Section 8 below, the rights and
obligations described in Section 5.5 hereof shall not be assignable by Vertex,
Rho or Artal, as the case may be, and shall not inure to the benefit of any
successor, transferee or assignee of any such Investor.
(b) Each of Vertex, Rho and Artal acknowledge that the
information received by its Observer pursuant to Section 5.5 of this Agreement
may be confidential, and each of Vertex, Rho and Artal agree that it will not
use such confidential information in violation of the Exchange Act or reproduce,
disclose or disseminate such information to any other person (other than its
employees or agents having a need to know the contents of such information, and
its attorneys), except in connection with the exercise of Observer rights under
this Agreement, unless the Corporation has made such information available to
the public generally.
SECTION 6. INDEMNIFICATION.
6.1 INDEMNIFICATION OF INVESTORS. In the event that any Investor
or any director, officer, employee, affiliate or agent thereof (the
"INDEMNITEES") become involved in any capacity in any action, proceeding,
investigation or inquiry in connection with or arising out of any matter related
to the Corporation or any Indemnitee's role or position with the Corporation,
the Corporation shall reimburse each Indemnitee for its legal and other expenses
(including the cost of any investigation and preparation) as they are incurred
by such Indemnitee in connection therewith, provided however, that the
Corporation shall not be obligated to indemnify any Indemnitee found by a court
of final jurisdiction to have acted with willful misconduct or gross negligence
in connection with the matter. The Corporation also agrees to indemnify each
Indemnitee, pay on demand and protect, defend, save and hold harmless from and
against any and all liabilities, damages, losses, settlements, claims, actions,
suits, penalties, fines, costs or expenses (including, without limitation,
attorneys' fees) (any of the foregoing, a "CLAIM") incurred by or asserted
against any Indemnitee of whatever kind or nature, arising from, in connection
with or occurring as a result of this Agreement or the matters contemplated by
this Agreement. The foregoing agreement shall be in addition to any rights that
any Indemnitee may have at common law or otherwise.
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6.2. ADVANCEMENT OF EXPENSES. The Corporation shall advance all
expenses reasonably incurred by or on behalf of the Indemnitees in connection
with any Claim or potential Claim within twenty (20) days after the receipt by
the Corporation of a statement or statements from the Indemnitee requesting such
advance payment or payments from time to time.
SECTION 7. REMEDIES. In case any one or more of the covenants and/or
agreements set forth in this Agreement shall have been breached by any party
hereto, the party or parties entitled to the benefit of such covenants or
agreements may proceed to protect and enforce its or their rights, either by
suit in equity and/or action at law, including, but not limited to, an action
for damages as a result of any such breach and/or an action for specific
performance of any such covenant or agreement contained in this Agreement.
Notwithstanding the generality of the foregoing, in the event that the
Corporation breaches any of its covenants and/or agreements set forth herein,
the Investors shall have the additional remedy, in their sole discretion,
provided that such breach has not been cured by the later to occur of 15 days
after receipt of notice of such breach by the Corporation or 30 days after the
occurrence of such breach, of electing to immediately exercise their right of
redemption set forth in Article III, Section A.5 of the Certificate, as provided
therein, irrespective of whether such right of redemption otherwise is mature.
The rights, powers and remedies of the parties under this Agreement are
cumulative and not exclusive of any other right, power or remedy which such
parties may have under any other agreement or law. No single or partial
assertion or exercise of any right, power or remedy of a party hereunder shall
preclude any other or further assertion or exercise thereof.
SECTION 8. SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, this Agreement shall bind and inure to the benefit of the Corporation
and each of the Investors and the respective successors and assigns of the
Corporation and each of the Investors. Subject to the requirements of Sections 2
and 3 hereof, this Agreement and the rights and duties of the Investors set
forth herein may be freely assigned, in whole or in part, by each Investor to
any member of such Investor's Group and to any other person or entity acquiring
at least $50,000 of Restricted Securities, such value to be determine pursuant
to the provisions set forth in Section A.7 of the Certificate. Any transferee
(other than an Investor) to whom rights under Sections 2 and 3 are transferred
shall, as a condition to such transfer, deliver to the Corporation a written
instrument by which such transferee identifies itself, gives the Corporation
notice of the transfer of such rights, identifies the securities of the
Corporation owned or acquired by it and agrees to be bound by the obligations
imposed hereunder to the same extent as if such transferee were an Investor
hereunder. A transferee to whom rights are transferred pursuant to this
Section 8 will be thereafter deemed to be an "Investor" for the purpose of
the execution of such transferred rights and may not again transfer such
rights to any other person or entity, other than as provided in this
Section 8. Neither this Agreement nor any of the rights or duties of the
Corporation set forth herein shall be assigned by the Corporation, in whole
or in part, without having first received the written consent of the
Investors holding a majority of the voting power of the outstanding
Preferred Shares, with each such holder entitled to the number of votes for
each such share of Preferred Stock as equals the number of shares of Common
Stock (including fractional shares) into which each such share of Preferred
Stock is then convertible, rounded up to the nearest one-tenth of a share
("ON A CONVERTED BASIS").
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SECTION 9. DURATION OF AGREEMENT. Except as otherwise set forth herein,
the rights and obligations of the Corporation and each Investor set forth herein
shall survive indefinitely, unless and until, by their respective terms, they
are no longer applicable.
SECTION 10. ENTIRE AGREEMENT. This Agreement, together with the other
writings referred to herein or delivered pursuant hereto which form a part
hereof, contains the entire agreement among the parties with respect to the
subject matter hereof and amends, restates and supersedes all prior and
contemporaneous arrangements or understandings with respect thereto; including
the Amended and Restated Stockholders' Agreement date September 28, 2001, by and
among the Corporation and the Investors listed on Schedule I thereto.
SECTION 11. NOTICES. All notices, requests, consents and other
communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in person or duly sent by first
class registered, certified or overnight mail, postage prepaid, or telecopied
with a confirmation copy by regular mail, addressed or telecopied, as the case
may be, to such party at the address or telecopier number, as the case may be,
set forth below or such other address or telecopier number, as the case may be,
as may hereafter be designated in writing by the addressee to the addressor
listing all parties:
(a) If to the Corporation, to:
TolerRx, Inc.
300 Technology Square
Cambridge, MA 02139
Attention: Douglas J. Ringler, President
Telecopier: (617) 868-1747
with a copy to:
Bingham McCutchen, LLP
150 Federal Street
Boston, Massachusetts 02110
Attention: Julio E. Vega, Esquire
Telecopier: (617) 951-8736
(b) If to the Investors, as set forth on SCHEDULE I.
with a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304-1050
Attention: Kenneth Clark, Esq.
Fax: (650) 493-6811
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All such notices, requests, consents and communications shall be deemed to have
been received (a) in the case of personal delivery, on the date of such
delivery, (b) in the case of mailing, on the third business day following the
date of such mailing, (c) in the case of overnight mail, on the first business
day following the date of such mailing, and (d) in the case of facsimile
transmission, when confirmed by facsimile machine report.
SECTION 12. CHANGES. The terms and provisions of this Agreement may not be
modified or amended, or any of the provisions hereof waived, temporarily or
permanently, except pursuant to the written consent of the Corporation and the
holders of at least a majority of the then outstanding Preferred Stock, voting
together as a single class, on a Converted Basis. Notwithstanding the foregoing,
Subsequent Investors in any Subsequent Closing under the Series C Preferred
Stock Purchase Agreement may be added as a party hereto and be deemed an
"Investor" hereunder without the consent of the Investors. Following the date of
this Agreement, the Corporation shall require each Stockholder (who is not an
"Investor" hereunder) holding greater than 2.5% of the outstanding shares of the
Corporation (excluding the Principal Stockholders as that term is defined in the
Stock Restriction Agreement) to agree to be bound by Section 2.3(b) of this
Agreement as if such Stockholder had executed this Agreement on the date hereof
(PROVIDED that no rights shall run to such Stockholder under this Agreement,
only the obligations set forth in Section 2.3(b) shall be applicable). Each such
Stockholder shall be listed on SCHEDULE II hereto, and such schedule shall be
made available to the Investors hereunder.
SECTION 13. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
SECTION 14. HEADINGS. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be a part of this Agreement.
SECTION 15. NOUNS AND PRONOUNS. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of names and pronouns shall include the
plural and vice-versa.
SECTION 16. SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 17. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, excluding choice
of law rules thereof.
SECTION 18. EFFECTIVENESS. Notwithstanding any other provision of this
Agreement, this Agreement shall not be effective until the Initial Closing (as
such term is defined in the Series C Stock Purchase Agreement).
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SECTION 19. DELAYS OR OMISSIONS. Except as expressly provided herein, no
delay or omission to exercise any right, power or remedy accruing to any party
to this Agreement upon any breach or default of any other party under this
Agreement shall impair any such right, power or remedy of such non-defaulting
party, nor shall it be construed to be a waiver of any such breach or default,
or an acquiescence therein, or of or in any similar breach or default thereafter
occurring, nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any
party of any breach or default under this Agreement, or any waiver on the part
of any party 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 or by law or otherwise
afforded to any party to this Agreement, shall be cumulative and not
alternative.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF the parties hereto have executed this Second Amended and
Restated Stockholders' Agreement on the date first above written.
CORPORATION:
TOLERRX, INC.
By: /s/ Douglas J. Ringler
---------------------------
Douglas J. Ringler
President
PRINCIPAL STOCKHOLDERS
By: /s/ Douglas J. Ringler
---------------------------
Douglas J. Ringler
By: /s/ Herman Waldmann
---------------------------
Herman Waldman
By: /s/ Stephen Cobbold
---------------------------
Stephen Cobbold
By: /s/ Geoffrey Hale
---------------------------
Geoffrey Hale
SIGNATURE PAGE TO SECOND AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT.
<Page>
INVESTORS:
SKYLINE VENTURE PARTNERS II, L.P.
By: Skyline Venture Management II, LLC
Its: General Partner
By: /s/ Yasunori Kaneko
--------------------------
Yasunori Kaneko
Managing Director
SKYLINE VENTURE PARTNERS QUALIFIED
PURCHASER FUND II, L.P.
By: Skyline Venture Management II, LLC
Its: General Partner
By: /s/ Yasunori Kaneko
---------------------------
Yasunori Kaneko
Managing Director
SKYLINE VENTURE PARTNERS III, L.P.
By: Skyline Venture Management III, LLC
Its: General Partner
By: /s/ Yasunori Kaneko
---------------------------
Yasunori Kaneko
Managing Director
SKYLINE VENTURE PARTNERS QUALIFIED
PURCHASER FUND III, L.P.
By: Skyline Venture Management III, LLC
Its: General Partner
By: /s/ Yasunori Kaneko
---------------------------
Yasunori Kaneko
Managing Director
SKYLINE EXPANSION FUND, L.P.
By: Skyline Expansion Fund Management, LLC
Its: General Partner
By: /s/ Yasunori Kaneko
---------------------------
Yasunori Kaneko
Managing Director
SIGNATURE PAGE TO SECOND AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT.
<Page>
HEALTHCARE VENTURES VI, L. P.
By: HealthCare Partners VI, L.P.
Its: General Partner
By: /s/ Jeffrey B. Steinberg
---------------------------
Jeffrey B. Steinberg,
Administrative Partner
RHO VENTURES IV, L.P.
By: Rho Management Ventures IV, L.L.C.
Its: General Partner
By: /s/ Mark Leschly
---------------------------
Name: Mark Leschly
Title: Managing Director
RHO VENTURES IV GMBH & CO.
BETEILIGUNGS KG
By: Rho Capital Partners Verwaltungs GmbH
Its: General Partner
By: /s/ Mark Leschly
---------------------------
Name: Mark Leschly
Title: Managing Director
RHO VENTURES IV (QP) L.P.
By: Rho Management Ventures IV, L.L.C.
Its: General Partner
By: /s/ Mark Leschly
---------------------------
Name: Mark Leschly
Title: Managing Director
RHO MANAGEMENT TRUST I
By: Rho Capital Partners, Inc.
Its: Investment Advisor
By: /s/ Mark Leschly
---------------------------
Name: Mark Leschly
Title: Managing Director
SIGNATURE PAGE TO SECOND AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT.
<Page>
VERTEX LIFE SCIENCE INC.
By: /s/ Toh Kim Huat
---------------------------
Name: Toh Kim Huat
Title: Director
VERTEX TECHNOLOGY FUND (III) LIMITED
By: /s/ Lee Kheng Nam
---------------------------
Name: Lee Kheng Nam
Title: Director
ARTAL SERVICES N.V.
By: /s/ Bernard Darihont
---------------------------
Name: Bernard Darihont
Title: Director
THE YASUDA ENTERPRISE DEVELOPMENT II,
LIMITED PARTNERSHIP
By: Yasuda Enterprise Development Co., Ltd.
Its: General Partner
By: /s/ Minoru Okq
---------------------------
Name: Minoru Okq
Title: President and Representative Director
SIGNATURE PAGE TO SECOND AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT.
<Page>
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
By: /s/ Steven Berkenfeld
---------------------------
Name: Steven Berkenfeld
Its: Senior Vice President
LEHMAN BROTHERS P.A. LLC
By: /s/ Steven Berkenfeld
---------------------------
Name: Steven Berkenfeld
Its: Senior Vice President
LEHMAN BROTHERS PARTNERSHIP ACCOUNT
2000/2001, L.P.
By: Lehman Brothers Partnership GP 2000/2001,
L.P., its General Partner
By: LB I Group Inc., its General Partner
By: /s/ Steven Berkenfeld
---------------------------
Name: Steven Berkenfeld
Its: Senior Vice President
LEHMAN BROTHERS OFFSHORE PARTNERSHIP
ACCOUNT 2000/2001, L.P.
By: Lehman Brothers Offshore Partnership GP
2000/2001, L.P., its General Partner
By: Lehman Brothers Offshore Partners, Ltd.,
its General Partner
By: /s/ Steven Berkenfeld
---------------------------
Name: Steven Berkenfeld
Its: Senior Vice President
<Page>
IT WITNESS WHEREOF, the parties hereto have executed this Second Amended and
Restated Stockholders' Agreement on the date first above written.
INVESTORS:
SPROUT CAPITAL IX, L.P.
By: DLJ Capital Corporation
Its: Managing General Partner
By: /s/ Philippe Chambon
---------------------------
Philippe Chambon
Managing Director
SPROUT IX PLAN INVESTORS, L.P.
By: DLJ LBO Plans Management Corporation
Its: General Partner
By: /s/ Philippe Chambon
---------------------------
Philippe Chambon
Attorney in Fact
SPROUT ENTREPRENEURS FUND, L.P.
By: DLJ Capital Corporation
Its: General Partner
By: /s/ Philippe Chambon
---------------------------
Philippe Chambon
Managing Director
DR. JAMES NIEDEL
By: /s/ James Niedel
---------------------------
Dr. James Niedel
<Page>
IT WITNESS WHEREOF, the parties hereto have executed this Second Amended and
Restated Stockholders' Agreement on the date first above written.
INVESTORS:
GENENTECH, INC.
By: /s/ Thomas T. Thomas
---------------------------
Name: Thomas T. Thomas
Its: Treasure
<Page>
IT WITNESS WHEREOF, the parties hereto have executed this Second Amended and
Restated Stockholders' Agreement on the date first above written.
INVESTORS:
MIZUHO CAPITAL CO., LTD.
By: /s/ Osamu Kita
---------------------------
Name: Osamu Kita
Its: President
<Page>
IT WITNESS WHEREOF, the parties hereto have executed this Second Amended and
Restated Stockholders' Agreement on the date first above written.
INVESTORS:
AOZORA INVESTMENT I VENTURE CAPITAL
LIMITED PARTNERSHIP
By: /s/ Yukimichi Nakatani
---------------------------
Name: Yukimichi Nakatani
Its: President of Aozora Investment CO., LTD
<Page>
IT WITNESS WHEREOF, the parties hereto have executed this Second Amended and
Restated Stockholders' Agreement on the date first above written.
INVESTORS:
DUKE UNIVERSITY SPECIAL VENTURES FUND
By: /s/ David R. Shumate
---------------------------
David R. Shumate, Vice President
Duke Management Company, Authorized Agent
By: /s/ James A. Mason, Jr.
---------------------------
James A. Mason, Jr.
Director, Priate Capital & Real Estate
Duke Management Company, Authorized Agent
<Page>
SCHEDULE I
HealthCare Ventures VI, L.P.
44 Nassau Street
Princeton, NJ 08542
Johnson & Johnson Development Corporation
One Johnson & Johnson Plaza
New Brunswick, NJ 08933
Attention: Ting Pau Oei, Vice President
Priceworth Investments Limited
51 Cuppage Road
#09-01 StarHub Centre
Singapore 229469
Attn: Mr. Thomas Premod
The DC Investment Trust FBO Lee Casty
707 Skokie Boulevard, Suite 580
Northbrook, IL 60062
Vertex Life Science Inc.
77 Science Park Drive
#02-15 Cintech III
Singapore Science Park
Singapore 118256
Vertex Technology Fund (III) Limited
77 Science Park Drive
#02-15 Cintech III
Singapore Science Park
Singapore 118256
Rho Ventures IV, L.P.
152 W. 57th Street, 23rd Floor
New York, NY 10019
Rho Ventures IV GmbH & Co.
Beiteligungs KG
152 W. 57th Street, 23rd Floor
New York, NY 10019
Rho Ventures IV (QP), L.P.
152 W. 57th Street, 23rd Floor
New York, NY 10019
Rho Management Trust I
152 W. 57th Street, 23rd Floor
New York, NY 10019
<Page>
SCHEDULE I
Skyline Venture Partners II, L.P.
125 University Ave.
Palo Alto, CA 94301
Skyline Venture Partners Qualified Purchaser Fund II, L.P.
125 University Ave.
Palo Alto, CA 94301
Skyline Venture Partners III, L.P
125 University Ave.
Palo Alto, CA 94301
Skyline Venture Partners Qualified Purchaser Fund III, L.P.
125 University Ave.
Palo Alto, CA 94301
Skyline Expansion Fund, L.P.
125 University Avenue
Palo Alto, CA 94301
Artal Services N.V.
135 East 57th Street, 30th Floor
New York, New York 10022
The Yasuda Enterprise Development II, Limited Partnership
BYGS SHINJUKU Bldg. 6F
19-1, 2-chome Shinjuku
Shinjuku-ku Tokyo 160-0022
Japan
Lehman Brothers Healthcare Venture Capital L.P.
c/o Lehman Brothers
399 Park Avenue
New York, NY 10022
Attn: Fred Steinberg
Lehman Brothers P.A. LLC
c/o Lehman Brothers
399 Park Avenue
New York, NY 10022
Attn: Fred Steinberg
Lehman Brothers Partnership Account 2000/2001, L.P.
c/o Lehman Brothers
399 Park Avenue
New York, NY 10022
Attn: Fred Steinberg
Lehman Brothers Offshore Partnership Account 2000/2001, L.P.
c/o Lehman Brothers
399 Park Avenue
New York, NY 10022
Attn: Fred Steinberg
<Page>
SCHEDULE I
Sprout Capital IX, L.P.
3000 Sand Hill Road
Building 3, Suite 170
Menlo Park, CA 94025
Sprout IX Plan Investors, L.P.
3000 Sand Hill Road
Building 3, Suite 170
Menlo Park, CA 94025
Sprout Entrepreneurs Fund, L.P.
3000 Sand Hill Road
Building 3, Suite 170
Menlo Park, CA 94025
Dr. James Niedel
158 Seaspray Avenue
Palm Beach, Florida 33480
Genentech, Inc.
1 DNA Way
South San Francisco, CA 94080-4990
Mizuho Capital Co., Ltd.
4-3, Nihombashi-kabutocho
Chuo-ku, Tokyo 103-0026 Japan
Aozora Investment I Venture Capital Limited Partnership
13-10, Kudan-kita 1-chome
Chiyoda-ku, Toyko 102-8660 Japan
Duke University Special Ventures Fund
2200 W. Main Street, Suite 1000
Durham, NC 27705
<Page>
AMENDMENT
TO
SECOND AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
This AMENDMENT TO SECOND AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT,
dated as of December 26, 2002 (the "AMENDMENT"), relates to the Second Amended
and Restated Stockholders' Agreement (as amended and in effect from time to time
the "STOCKHOLDERS' AGREEMENT"), dated as of November 1, 2002, by and among
TolerRx, Inc., a Delaware corporation (the "CORPORATION") and those stockholders
of the Corporation listed therein.
WHEREAS, the parties hereto have agreed that it is desirable to increase
the number of directors of the Board of Directors of the Corporation;
NOW THEREFORE, in consideration of the foregoing, the parties hereto do
hereby agree as follows:
1. AMENDMENT TO THE STOCKHOLDERS' AGREEMENT. The Stockholders' Agreement
is hereby amended as follows:
(a) Section 5.1(a) of the Stockholders' Agreement is hereby deleted
in its entirety and the following new Section 5.1(a) is hereby inserted in
lieu thereof:
"(a) to fix and maintain the number of directors on the Board of
the Corporation at eight (8);"
(b) Section 5.1 of the Stockholders' Agreement is hereby amended by
inserting the following new Section 5.1(f) thereto:
"(f) to elect to the Board one (1) director designated by The
Sprout Group, who shall initially be James E. Niedel."
2. NO OTHER AMENDMENTS. Except as expressly provided in this Amendment,
all of the terms and conditions of the Stockholders' Agreement remain in full
force and effect.
3. EXECUTION IN COUNTERPARTS. This Amendment may be executed in any
number of counterparts, and each such counterpart shall be deemed to be an
original instrument, but all such counterparts together shall constitute but one
agreement.
4. GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the laws of the State of Delaware, excluding choice of law rules
thereof.
<Page>
IN WITNESS WHEREOF the parties hereto have executed this Amendment on the
date first above written.
TOLERRX, INC.
By: /s/ Douglas J. Ringler
---------------------------
Douglas J. Ringler
Chief Executive Officer
/s/ Douglas J. Ringler
------------------------------
DOUGLAS J. RINGLER
/s/ Herman Waldmann
------------------------------
HERMAN WALDMANN
------------------------------
STEPHEN COBBOLD
------------------------------
GEOFFREY HALE
<Page>
SKYLINE VENTURE PARTNERS II, L.P.
By: Skyline Venture Management II, LLC
Its: General Partner
By: /s/ Yasunori Kaneko
---------------------------
Yasunori Kaneko
Managing Director
SKYLINE VENTURE PARTNERS QUALIFIED
PURCHASER FUND II, L.P.
By: Skyline Venture Management II, LLC
Its: General Partner
By: /s/ Yasunori Kaneko
---------------------------
Yasunori Kaneko
Managing Director
SKYLINE VENTURE PARTNERS III, L.P.
By: Skyline Venture Management III, LLC
Its: General Partner
By: /s/ Yasunori Kaneko
---------------------------
Yasunori Kaneko
Managing Director
SKYLINE VENTURE PARTNERS QUALIFIED
PURCHASER FUND III, L.P.
By: Skyline Venture Management III, LLC
Its: General Partner
By: /s/ Yasunori Kaneko
---------------------------
Yasunori Kaneko
Managing Director
SKYLINE EXPANSION FUND, L.P.
By: Skyline Expansion Fund Management, LLC
Its: General Partner
By: /s/ Yasunori Kaneko
---------------------------
Yasunori Kaneko
Managing Director
<Page>
HEALTHCARE VENTURES VI, L. P.
By: HealthCare Partners VI, L.P.
Its: General Partner
By: /s/ Jeffrey B. Steinberg
---------------------------
Jeffrey B. Steinberg,
Administrative Partner
RHO VENTURES IV, L.P.
By: Rho Management Ventures IV, L.L.C.
Its: General Partner
By: /s/ Mark Leschly
---------------------------
Name: Mark Leschly
Title: Managing Director
RHO VENTURES IV GMBH & CO.
BETEILIGUNGS KG
By: Rho Capital Partners Verwaltungs GmbH
Its: General Partner
By: /s/ Mark Leschly
---------------------------
Name: Mark Leschly
Title: Managing Director
RHO VENTURES IV (QP) L.P.
By: Rho Management Ventures IV, L.L.C.
Its: General Partner
By: /s/ Mark Leschly
---------------------------
Name: Mark Leschly
Title: Managing Director
RHO MANAGEMENT TRUST I
By: Rho Capital Partners, Inc.
Its: Investment Advisor
By: /s/ Mark Leschly
---------------------------
Name: Mark Leschly
Title: Managing Director