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Exhibit 4.2
ALGORX PHARMACEUTICALS, INC.
INVESTOR RIGHTS AGREEMENT
THIS
INVESTOR RIGHTS AGREEMENT (the "Agreement") is entered into as
of
this 28th day of October 2004, by and among
ALGORX PHARMACEUTICALS, INC., a
Delaware corporation (the "Company") and
BRIDGE PHARMA, INC. ("Bridge" or the
"Holder").
WITNESSETH
WHEREAS,
the Company and Bridge have executed that certain
Collaboration,
Development and License Agreement dated
October 28, 2004 (the "CD&L Agreement")
pursuant to which among other things,
Bridge will license to the Company certain
proprietary technology for consideration
which includes a total of 1,600,000
shares of the Company's Common Stock (the
"Equity Consideration").
WHEREAS,
the Company and Bridge have agreed to enter into a Common Stock
Agreement to document the issuance of the
Equity Consideration
WHEREAS,
the obligations in the Common Stock Agreement are conditioned
upon the execution and delivery of this
Agreement for the purpose of setting
forth the terms and conditions pursuant to
which Bridge shall be granted
piggy-back registration rights; and
WHEREAS,
in connection with the consummation of the transaction
contemplated under the Common Stock
Agreement the Company and Bridge desire to
facilitate the investor rights set forth in
this Agreement by agreeing to the
terms and conditions set forth herein.
NOW,
THEREFORE, in consideration of the mutual promises and covenants
set
forth herein, and for other consideration,
the receipt and adequacy of which are
hereby acknowledged, the parties hereby
further agree as follows:
SECTION 1. GENERAL.
1.1
DEFINITIONS. As used in this Agreement the following terms shall
have
the following respective meanings:
(a) "Exchange Act" means the Securities Exchange Act of 1934,
as
amended.
(b) "Holder" means Bridge or any permitted assignee of the
Shares.
(c) "Initial Offering" means the Company's first firm
commitment
underwritten public offering of its Common
Stock registered under the Securities
Act.
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(d) "Institutional Holders" means the holders of the Company's
preferred stock, or Common Stock which the
preferred stock is convertible into.
(e) "Register," "registered," and "registration" refer to a
registration effected by preparing and
filing a registration statement in
compliance with the Securities Act, and the
declaration or ordering of
effectiveness of such registration
statement or document.
(f) "Registrable Securities" means the Shares.
(g) "Registration Expenses" shall mean all Company expenses
incurred
in complying with Sections 2.2 hereof,
including, without limitation, all
registration and filing fees, printing
expenses, fees and disbursements of
counsel for the Company, blue sky fees and
expenses and the expense of any
special audits incident to or required by
any such registration (but excluding
the compensation of regular employees of
the Company which shall be paid in any
event by the Company).
(h) "SEC" or "Commission" means the Securities and Exchange
Commission.
(i)
"Securities Act" shall mean the Securities Act of 1933, as
amended.
(j) "Selling Expenses" shall mean all underwriting discounts
and
selling commissions applicable to the
sale.
(k) "Shares" shall mean the Company's Common Stock issued
pursuant
to the Common Stock Agreement dated October
__, 2004 by and between the Company
and Bridge.
(l) "Special Registration Statement" shall mean (i) a
registration
statement relating to any employee benefit
plan or (ii) with respect to any
corporate reorganization or transaction
under Rule 145 of the Securities Act,
including any registration statements
related to the resale of securities issued
in such a transaction or (iii) a
registration related to stock issued upon
conversion of debt securities.
SECTION 2. REGISTRATION; RESTRICTIONS ON
TRANSFER.
2.1
RESTRICTIONS ON TRANSFER
(a) Holder agrees not to make any disposition of all or any
portion
of the Shares unless and until:
(i) There is then in effect a registration statement under the
Securities Act covering such proposed
disposition and such disposition is made
in accordance with such registration
statement; or
(ii) (A) The transferee has agreed in writing to be bound by
the terms of this Agreement, (B) such
Holder shall have notified the Company of
the proposed disposition and shall have
furnished the Company with a detailed
statement of the circumstances surrounding
the proposed disposition, and (C) if
reasonably requested by the Company, such
Holder shall have furnished the
Company with an opinion of counsel,
reasonably satisfactory to
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the Company, that such disposition will not
require registration of such shares
under the Securities Act. It is agreed that
the Company will not require
opinions of counsel for transactions made
pursuant to Rule 144, except in
unusual circumstances. After its Initial
Offering, the Company will not require
the transferee to be bound by the terms of
this Agreement.
(b) Each certificate representing Shares shall (unless
otherwise
permitted by the provisions of the
Agreement) be stamped or otherwise imprinted
with a legend substantially similar to the
following (in addition to any legend
required under applicable state securities
laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR
UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED.
(c) The Company shall be obligated to reissue promptly
unlegended
certificates at the request of any Holder
thereof if the Holder shall have
obtained an opinion of counsel (which
counsel may be counsel to the Company)
reasonably acceptable to the Company to the
effect that the securities proposed
to be disposed of may lawfully be so
disposed of without registration,
qualification or legend.
(d) Any legend endorsed on an instrument pursuant to applicable
state securities laws and the stop-transfer
instructions with respect to such
securities shall be removed upon receipt by
the Company of an order of the
appropriate blue sky authority authorizing
such removal.
2.2
PIGGYBACK REGISTRATIONS. The Company shall notify the Holder of
Shares
in writing at least five (5) days prior to
the filing of any registration
statement under the Securities Act for
purposes of a public offering of
securities of the Company (including, but
not limited to, registration
statements relating to secondary offerings
of securities of the Company, but
excluding Special Registration Statements)
and will afford such Holder an
opportunity to include in such registration
statement all or part of the Shares
held by such Holder. Each Holder desiring
to include in any such registration
statement all or any part of the Shares
held by it shall, within fifteen (15)
days after the above-described notice from
the Company, so notify the Company in
writing. Such notice shall state the
intended method of disposition of the
Shares by such Holder. If a Holder decides
not to include all of its Shares in
any registration statement thereafter filed
by the Company, such Holder shall
nevertheless continue to have the right to
include any Shares in any subsequent
registration statement or registration
statements as may be filed by the Company
with respect to offerings of its
securities, all upon the terns and conditions
set forth herein.
(a) UNDERWRITING. If the registration statement under which the
Company gives notice under this Section 2.2
is for an underwritten offering, the
Company shall so advise
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the Holders of Shares. In such event, the
right of any such Holder to be
included in a registration pursuant to this
Section 2.2 shall be conditioned
upon such Holder's participation in such
underwriting and the inclusion of such
Holder's Shares in the underwriting to the
extent provided herein. All Holders
proposing to distribute their Registrable
Securities through such underwriting
shall enter into an underwriting agreement
in customary form with the
underwriter or underwriters selected for
such underwriting by the Company.
Notwithstanding any other provision of this
Agreement, if the underwriter
determines in good faith that marketing
factors require a limitation of the
number of shares to be underwritten, the
number of shares that may be included
in the underwriting shall be allocated,
first, to the Company; second, to the
Institutional Holders; third, to the
Holders on a pro rata basis based on the
total number of Shares held by the Holders;
and fourth, to any stockholder of
the Company (other than a Holder or
Institutional Holder) on a pro rata basis.
If any Holder disapproves of the terms of
any such underwriting, such Holder may
elect to withdraw therefrom by written
notice to the Company and the
underwriter, delivered at least ten (10)
business days prior to the effective
date of the registration statement. Any
Shares excluded or withdrawn from such
underwriting shall be excluded and
withdrawn from the registration.
(b) RIGHT TO TERMINATE REGISTRATION. The Company shall have the
right to terminate or withdraw any
registration initiated by it under this
Section 2.2 prior to the effectiveness of
such registration whether or not any
Holder has elected to include securities in
such registration. The Registration
Expenses of su
