Confidential Materials omitted and
filed separately with the
Securities and Exchange Commission. Asterisks denote
omissions.
REGULUS
THERAPEUTICS INC.
FOUNDING INVESTOR RIGHTS
AGREEMENT
REGULUS THERAPEUTICS
INC.
FOUNDING INVESTOR RIGHTS
AGREEMENT
This Founding Investor Rights
Agreement (the “Agreement”) is entered into
as of the 1st day of January 2009, by and among Regulus
Therapeutics Inc. , a Delaware corporation (the
“Company” ) on the one hand, and Isis
Pharmaceuticals, Inc. , a Delaware Corporation (
“Isis” ) and Alnylam Pharmaceuticals,
Inc. , a Delaware corporation (
“Alnylam” ) who are each holders of the
Company’s Series A Preferred Stock (the
“Preferred Stock” ) on the other hand.
Isis and Alnylam may be referred to hereinafter collectively as the
“Founding Investors” and each
individually as a “Founding Investor” .
The Company, Isis and Alnylam may be referred to hereinafter
collectively as the “Parties” and each
individually as a “Party” .
Whereas, the Company was
formerly a Delaware limited liability company with the Founding
Investors as its only members;
Whereas , the Company
converted to a Delaware corporation in
January 2009;
Whereas , in connection with
the Company’s conversion to a Delaware corporation, the
Founding Investors received the Preferred Stock in exchange for
their membership interests in the limited liability company;
and
Whereas , in connection with
the issuance of the Preferred Stock, the parties desire to enter
into this Agreement in order to grant registration, information
rights, buy-out rights and other rights to the Founding Investors
as set forth below.
Now, Therefore, in
consideration of these premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
Capitalized
terms used herein and not defined elsewhere herein have the
meanings set forth in Exhibit A.
SECTION 2.
RESTRICTIONS ON
TRANSFER .
No Founding
Investor may directly or indirectly sell, assign, transfer, pledge,
hypothecate, or otherwise deal with or encumber or dispose of in
any way (each a “Transfer”) such Founding
Investor’s Shares or Registrable Securities, whether in whole
or in part, voluntarily or involuntarily, by operation of law or
otherwise, except in accordance with the terms and conditions set
forth in this Section 2.
2.1
Restrictions on Transfer Before Initial Offering. Except as
provided in this Section 2, before the Company’s Initial
Offering, each Founding Investor agrees that it may not
1.
and will not
Transfer its Shares or Registrable Securities without the prior
written consent of the other Founding Investor.
2.2
Restrictions on Transfer After Initial Offering. Each Holder
agrees not to make any disposition of all or any portion of the
Shares or Registrable Securities unless and until:
(a) 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
(b) (i) The transferee has agreed in writing to be
bound by the terms of this Agreement, (ii) such Holder will
have notified the Company of the proposed disposition and will have
furnished the Company with a detailed statement of the
circumstances surrounding the proposed disposition, and
(iii) if reasonably requested by the Company, such Holder will
have furnished the Company with an opinion of counsel, reasonably
satisfactory to the Company, that such disposition will not require
registration of such shares under the Securities Act. It is agreed
that the Company will not require opinions of counsel for
transactions made pursuant to Rule 144, except in unusual
circumstances. After its Initial Offering, the Company will not
require any transferee pursuant to Rule 144 to be bound by the
terms of this Agreement if the shares so transferred do not remain
Registrable Securities hereunder following such
transfer.
2.3 Exempt
Transfers. Notwithstanding the provisions of Sections 2.1
and 2.2 above, no such restriction will apply to a transfer by a
Founding Investor that is:
(a) a Transfer by a Founding Investor to an Affiliate of
such Founding Investor; provided, however , that
(i) the Affiliate of such transferring Founding Investor must
have the resources, assets, experience, qualifications, permits and
other rights necessary to perform under this Agreement and each of
the Ancillary Agreements and (ii) the transferee will agree in
writing to be subject to the terms of this Agreement to the same
extent as if it were an original Founding Investor
hereunder.
(b) Transfer pursuant to a Change in Control of such
Founding Investor. In the event of a Change in Control of a
Founding Investor, the other Founding Investor may initiate a
Buy-Out pursuant to Section 4.
2.4 Stock
Legends. Each certificate representing Shares or Registrable
Securities will be stamped or otherwise imprinted with legends
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
2.
REGISTRATION IS
NOT REQUIRED.
THE SALE,
PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A
CERTAIN INVESTOR RIGHTS AGREEMENT BY AND BETWEEN THE STOCKHOLDER
AND THE COMPANY. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON
WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY.
(a) The Company will be obligated to promptly reissue
unlegended certificates at the request of any Holder thereof if the
Company has completed its Initial Offering and the Holder has
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 and legend,
provided that the second legend listed above will be removed
only at such time as the Holder of such certificate is no longer
subject to any restrictions hereunder.
(b) Any legend endorsed on an instrument pursuant to
applicable state securities laws and the stop-transfer instructions
with respect to such securities will be removed upon receipt by the
Company of an order of the appropriate blue sky authority
authorizing such removal.
SECTION 3.
COVENANTS OF THE
COMPANY .
3.1 Financial
Information and Reporting.
(a) The Company will cause to be maintained complete books
and records accurately reflecting the accounts, business and
transactions of the Company on a calendar-year basis and with
sufficient detail and completeness customary and usual for
businesses of the type engaged in by the Company. The
Company’s books and records and financial statements will be
kept using the accrual method of accounting and in accordance with
U.S. generally accepted accounting principles. The Company will
maintain a system of internal accounting controls which are
sufficient to provide reasonable assurance that
(w) transactions are executed in accordance with the
Company’s signature authority policy; (x) transactions
are recorded as necessary to permit preparation of the financial
statements of the Company and to maintain accountability for the
Company’s assets; (y) access to the Company’s
assets is permitted only in accordance with management’s
authorization; and (z) the reporting of the Company’s
assets is compared with existing assets at regular intervals. The
Company’s financial statements will be audited annually by an
independent nationally recognized public accounting firm approved
by the Company’s Board of Directors.
(b) During Consolidation Period . For so long as
(1) Isis’ independent auditors advise Isis that Isis
should consolidate Regulus’ financial statements with
Isis’ financial statements or (2) Regulus is using
Isis’ financial systems (the “Consolidation
Period” ) Regulus will do the following:
3.
(i) Commencing with respect to the fiscal year ending
December 31, 2008, and for each fiscal year during the term
hereof, the Company will deliver or mail to each Founding Investor
the audited annual financial statements of the Company at least
[***] ([***]) [***] prior to the earliest date by which either
Founding Investor is required to file its annual report on Form
10-K for such fiscal year (or such earlier time as may be required
by either Founding Investor to satisfy its reporting obligations
under law, including without limitation, the rules and regulations
of the SEC), which financial statements will have been prepared in
accordance with U.S. generally accepted accounting
principles.
(ii) For each fiscal quarter during the term hereof,
the Company will deliver or mail to each Founding Investor an
unaudited balance sheet of the Company as at the end of such
quarter and unaudited statements of income and cash flows of the
Company for such quarter and for the current fiscal year to the end
of such fiscal quarter within [***] ([***]) days after the end of
each fiscal quarter of the Company (or such earlier time as may be
required by a Founding Investor to satisfy its reporting
obligations under law, including without limitation, the rules and
regulations of the SEC).
(iii) Commencing with the month ending on
January 31, 2009, the Company will deliver to each Founding
Investor an unaudited balance sheet of the Company as at the end of
such month and unaudited statements of income and of cash flows of
the Company for such month and for the current fiscal year to the
end of such month promptly following the Company’s completion
of the review of its financial statements for such month (other
than the last month of any fiscal quarter) (or such earlier time as
may be required by a Founding Investor to satisfy its reporting
obligations under law, including without limitation, the rules and
regulations of the SEC).
(iv) The income statements and balance sheets referred
to in this Section 3.1 will be accompanied by the report
thereon, if any, of any independent accountants engaged by the
Company or by the certificate of the President that such financial
statements were prepared without audit from the books and records
of the Company.
(v) The Company will use the same accounting firm as
Isis uses to audit its financial statements.
(vi) The Company’s principal executive officer
and principal financial officer, or persons performing similar
functions, will provide certifications to Isis corresponding to
those required under Sections 302 and 906 of the
Sarbanes-Oxley Act of 2002, and the Company will provide to Isis an
attestation report of its auditors with respect to the
Company’s internal controls, as may be requested by
Isis’ external auditors.
(vii) If after reasonable discussions in good faith,
the Company’s audit committee and Isis’ audit committee
cannot resolve any dispute with respect to accounting policies and
practices for the Company’s financial reporting, the Parties
agree that they will apply the accounting policy or practice
proposed by Isis’ audit committee.
(c) After the Consolidation Period . After the
Consolidation Period and until neither Isis nor Alnylam is required
to record their respective share of Regulus’
profit/loss,
4.
Regulus will
provide Isis and Alnylam the information as specified on
Exhibit E
attached hereto.
(d) Once Isis and Alnylam are no longer required to record
their respective share of Regulus’ income/losses, Regulus
will not be required to provide the information to Isis and Alnylam
outlined in Section 3.1(c) above. However, Regulus will
provide to Isis and/or Alnylam any financial information reasonably
requested by either company so that such company can determine if
an impairment in Regulus exists, and Regulus will make its
management available to Isis and/or Alnylam for reasonable
inquiries regarding its financials.
(a) The Company will prepare or cause to be prepared, at the
Company’s expense, all tax returns and statements, if any,
that must be filed on behalf of the Company with any taxing
authority, and will make timely filing thereof, including filings
pursuant to extensions permitted under applicable federal and state
tax regulations. With respect to the Company’s tax return for
the fiscal year ended December 31, 2008, the Company will
provide a draft of such tax return to each Founding Investor within
a reasonable amount of time prior to filing such return to allow
each Founding Investor an opportunity to review and comment on such
return. In addition, the Company will give due consideration to
each Founding Investor’s comments regarding the tax return
for the year ended December 31, 2008.
(b) Each Founding Investor may request from the Company any
information reasonably necessary for the Founding Investor to
complete any of its tax returns or compute estimated tax payments
and the Company will, within a reasonable period of time following
the request, provide such information to the requesting Founding
Investor.
3.3
Confidentiality of Records. Each Founding Investor agrees to
use the same degree of care as such Founding Investor uses to
protect its own confidential information to keep confidential and
not disclose to any party any information furnished to such
Founding Investor pursuant to Section 3.1 and 3.2 hereof that
the Company identifies as being confidential or proprietary (so
long as such information is not in the public domain), except that
such Founding Investor may disclose such proprietary or
confidential information (i) to any partner, subsidiary or
parent of such Founding Investor as long as such partner,
subsidiary or parent is advised of and agrees or has agreed to be
bound by the confidentiality provisions of this Section 3.3 or
comparable restrictions; (ii) at such time as it enters the
public domain through no fault of such Founding Investor;
(iii) that is communicated to it free of any obligation of
confidentiality; (iv) that is developed by Founding Investor
or their respective agents independently of and without reference
to any confidential information communicated by the Company; or
(v) as required by applicable law. Upon request by the
Company, each Founding Investor agrees to enter into a separate
confidentiality agreement with the Company.
3.4
Reservation of Common Stock. The Company will at all times
reserve and keep available, solely for issuance and delivery upon
the conversion of the Preferred Stock, all Common Stock issuable
from time to time upon such conversion.
5.
3.5 Board of
Directors. The Board will consist of up to [***] ([***])
directors (each, a “Director” ). Alnylam
will have the right to designate [***] ([***]) Directors who need
not be Independent Directors (the “Alnylam
Directors” ). Isis will have the right to designate
[***] ([***]) Directors who need not be Independent Directors (the
“Isis Directors” ). The President of the
Company will, at all times while in office, be a Director. The
remaining two members will be independent industry representatives
approved by the other Directors then serving on the Board. Other
than the President, each Director will serve at the pleasure of the
Founding Investor designating such Director until such
Director’s removal by the designating Founding Investor or
such Director’s resignation. If there is a vacancy on the
Board, the vacancy will be filled by the Founding Investor, if any,
who initially designated the Director, except if the vacancy is
caused by the termination of the President, such vacancy will be
filled when the then existing Board appoints the new President. Any
Founding Investor may remove, at any time and for any reason, any
or all of the Directors designated by such Founding Investor and,
subject to the Independent Director requirements, designate in lieu
thereof any individual(s) to serve the remainder of the relevant
term.
(a) Observers . The right to attend all or particular
meetings of the Board ( “Observer Rights”
) may be granted to any Person designated by a Founding Investor
upon the approval of the other Founding Investor (such approval not
to be unreasonably withheld or delayed); provided, however,
that any Person granted Observer Rights, and/or any representative
of such Person attending meetings of the Board, will agree in
writing to be subject to appropriate confidentiality obligations if
requested by a Director; provided, further, that such holder
of Observer Rights may be excluded from any meeting or any portion
of a meeting for which any Director believes (i) such meeting
or portion will involve a discussion of information that the
Company or the Founding Investor designating such Director
considers to be a trade secret or of a confidential or proprietary
nature, (ii) exclusion of such holder of Observer Rights is
desirable in order to preserve the attorney client-privilege or
(iii) exclusion is otherwise merited.
(b) Other Attendees . Any Director may invite a
subject matter expert to attend any meeting of the Board;
provided, however, that any Person granted attendance rights
will agree in writing to be subject to appropriate confidentiality
obligations if requested by a Director and provided further that no
other Director objects to such expert’s presence. Upon such
objection, the expert will be excluded from any meeting or any
portion of a meeting.
(c) The Directors designated as of the Effective Date are
set forth on Exhibit B
hereto.
3.6
Directors’ Liability and Indemnification. The
Company’s Certificate of Incorporation and Bylaws will
provide (a) for elimination of the liability of a Director to
the maximum extent permitted by law and (b) for
indemnification of Directors for acts on behalf of the Company to
the maximum extent permitted by law. In addition, the Company will
enter into and use its best efforts to at all times maintain
reasonable and customary indemnification agreements with each of
its Directors to indemnify such directors to the maximum extent
permissible under applicable law.
3.7 Operating
Plan. The Company will use commercially reasonable efforts to
operate the Company in accordance with the Approved Operating Plan
(as defined below). The
6.
initial
Operating Plan, dated April 30, 2008 attached hereto as
Exhibit C
(the “Initial Operating Plan” ), will be
deemed the “Approved Operating Plan” for
the period beginning on September 6, 2007 and ending on
December 31, 2009 (such period, the “Initial
Commitment Period” ).
(a) No later than September 30, 2009, and no later than
September 30 in each fiscal year thereafter, Regulus’
management will prepare and submit to the Board a proposal for
revising the Approved Operating Plan then in effect (
“Proposed Operating Plan” ), which will
include a proposed Development Plan ( “Proposed
Development Plan” ), proposed Operating Budget (
“Proposed Operating Budget” ).
(b) Each Proposed Operating Plan that has been prepared and
submitted by Regulus’ management in accordance with
Section 3.7(a) will be considered at the first meeting of the
Board following its submission and will be subject to the approval
of the Board. The Chairperson will call a special meeting of the
Board for this purpose at the request of any Director if the next
scheduled regular meeting is later than December 31 of the
year in which submission is made. Any such Proposed Operating Plan
(or any amendment thereto) that is approved by the Board will be
considered the “ Approved Operating Plan
” for all purposes of this Agreement until amended or
replaced.
(c) If, after the Initial Commitment Period, the Board is
unable to approve a Proposed Operating Plan that has been prepared
and submitted by Regulus’ management in accordance with
Section 3.7(a) within three months following the date such
Proposed Operating Plan is submitted for approval (a
“Stalemate” ), either Founding Investor
may initiate a Buy-Out in accordance with Section 4;
provided, however, that in the event sufficient funding is
available to the Company to continue to carry out the Development
Plan after the Initial Commitment Period, a Stalemate will not be
deemed to have occurred, and neither Founding Investor may initiate
a Buy-Out, until a date [***] ([***]) days prior to the date on
which all of the Company’s funds are expected to be depleted
as determined based on the Approved Operating Plan then in
effect.
3.8 Scientific
Advisory Board. The Company will maintain a Scientific Advisory
Board ( “SAB” ) consisting of at least
three (3) members. The initial members and chairperson of the
SAB will be as set forth on Exhibit B . Any changes
to the composition of the Scientific Advisory Board, including the
removal or appointment of the chairperson, will be approved by the
Board. The SAB will meet at least at least three time a year until
December 31, 2009 and will initially be responsible for
(i) advising the Company as to research goals and plans,
(ii) reviewing research data and advising the Company with
respect to interpretation of such research data, as requested by
the Board, President or Chief Scientific Officer; and
(iii) advising the Company with respect to research and
development decisions, as requested by the Board, President or
Chief Scientific Officer.
3.9
Termination of Covenants. All covenants of the Company
contained in Section 3 of this Agreement (other than the
provisions of Section 3.1 and 3.3) will expire and terminate
as to each Founding Investor upon the earlier of (i) the
effective date of the registration statement pertaining to an
Initial Offering or (ii) upon a Liquidation Event, Acquisition
or Asset Transfer
7.
(in each case
as defined in the Company’s Certificate of Incorporation as
such may be amended from time to time).
4.1 Right to
Initiate Buy-Out. Within (a) solely in the event of a
Stalemate occurring after the end of the Initial Commitment Period
(as further described in Section 3.7(c), the [***] ([***]) day
period following such Stalemate, (b) at any time, whether
before or after the end of the Initial Commitment Period, during
the [***] ([***]) day period following notice from a Founding
Investor that it has entered into a binding agreement providing for
a Change of Control of such Founding Investor (such [***] ([***])
or [***] ([***]) day period, a “Buy-Out Notice
Period” ), or (c) as provided for in the License
Agreement, either Founding Investor (in the case of (a)), the
Founding Investor receiving the notice of a Change in Control (in
the case of (b)), or the Founding Investor or Founding Investors as
specified in the License Agreement (in the case of (c) (in each
case, the “Initiating Founding Investor”
) has the right, exercisable upon written notice to the Company and
the other Founding Investor (the “Buy-Out
Notice” ), to initiate the sale of the Company or the
distribution the Company’s assets, including the Company
Intellectual Property and Company’s rights in Licensed IP, in
accordance with the terms set forth on Exhibit D (the
“Buy-Out” ).
4.2 Voting
Agreement; Cooperation. If any Founding Investor initiates a
Buy-Out under Section 4.1, each Founding Investor agrees to vote or
act with respect to their Shares, Registrable Securities and
designated members of the Board so as to authorize and approve the
Buyout unless Exhibit D expressly allows a Founding Investor
to withhold such vote or action. Each Party further agrees to
assist the other Parties in every proper way to consummate the
Buy-Out, effect the Buy-Out, including but not limited to executing
and delivering such documents and performing such other acts as a
Party may reasonably request in connection with effecting the
Buy-Out.
4.3
Preservation of Intent. If any term, covenant or condition of
this Section 4 or Exhibit D or the application thereof to
any Party or circumstance, to any extent, is invalid or
unenforceable, then (a) the remainder of this Section 4
and Exhibit D, or the application of such term, covenant or
condition to Parties or circumstances other than those as to which
it is invalid or unenforceable, will not be affected thereby and
each term, covenant or condition of this Section 4 and
Exhibit D will be valid and be enforced to the fullest extent
permitted by law; and (b) the Parties hereto covenant and
agree to renegotiate any such term, covenant or application thereof
in good faith in order to provide a reasonably acceptable
alternative to the term, covenant or condition of this
Section 4 and Exhibit D or the application thereof that
is invalid or unenforceable, it being the intent of the Parties
that the basic purposes of this Section 4 and Exhibit D
are to be effectuated.
4.4
Termination of Buy-Out . The provisions set forth in this
Section 4 will expire and terminate upon the effective date of
the registration statement pertaining to an Initial
Offering.
8.
SECTION 5.
RIGHTS OF FIRST
REFUSAL
5.1 Subsequent
Offerings. Subject to applicable securities laws, each Founding
Investor will have a right of first refusal to purchase its pro
rata share of all Equity Securities, as defined below, that the
Company may, from time to time, propose to sell and issue after the
date of this Agreement, other than the Equity Securities excluded
by Section 5.6 hereof. Each Founding Investor’s pro
rata share is equal to the ratio of (a) the number of
shares of the Company’s Common Stock (including all shares of
Common Stock issuable or issued upon conversion of the Shares or
upon the exercise of outstanding warrants or options) of which such
Founding Investor is deemed to be a holder immediately prior to the
issuance of such Equity Securities to (b) the total number of
shares of the Company’s outstanding Common Stock (including
all shares of Common Stock issued or issuable upon conversion of
the Shares or upon the exercise of any outstanding warrants or
options) immediately prior to the issuance of the Equity
Securities. The term “ Equity Securities
” will mean (i) any Common Stock, Preferred Stock or
other security of the Company, (ii) any security convertible
into or exercisable or exchangeable for, with or without
consideration, any Common Stock, Preferred Stock, or other security
(including any option to purchase such a convertible security),
(iii) any security carrying any warrant or right to subscribe
to or purchase any Common Stock, Preferred Stock or other security
or (iv) any such warrant or right.
5.2 Exercise
of Rights. If the Company proposes to issue any Equity
Securities, it will give each Founding Investor written notice of
its intention, describing the Equity Securities, the price and the
terms and conditions upon which the Company proposes to issue the
same. Each Founding Investor will have [***] ([***]) days from the
giving of such notice to agree to purchase its pro rata
share of the Equity Securities for the price and upon the terms and
conditions specified in the notice by giving written notice to the
Company and stating therein the quantity of Equity Securities to be
purchased. Notwithstanding the foregoing, the Company will not be
required to offer or sell such Equity Securities to any Founding
Investor who would cause the Company to be in violation of
applicable federal securities laws by virtue of such offer or
sale.
5.3 Issuance
of Equity Securities to Other Persons . The Company will have
[***] ([***]) days thereafter to sell the Equity Securities in
respect of which the Founding Investor’s rights were not
exercised, at a price not lower and upon general terms and
conditions not materially more favorable to the purchasers thereof
than specified in the Company’s notice to the Founding
Investors pursuant to Section 5.2 hereof. If the Company has
not sold such Equity Securities within [***] ([***]) days of the
notice provided pursuant to Section 5.2, the Company will not
thereafter issue or sell any Equity Securities, without first
offering such securities to the Founding Investors in the manner
provided above.
5.4
Termination and Waiver of Rights of First Refusal. The rights
of first refusal established by this Section 5 will not apply
to, and will terminate upon the earlier of (i) the effective
date of the registration statement pertaining to the
Company’s Initial Offering or (ii) an Acquisition.
Notwithstanding Section 7.5 hereof, the rights of first
refusal established by this Section 5 may be amended, or any
provision waived with and only with the written consent of the
Company and the Founding Investors holding a majority of the
Registrable Securities held by all Founding Investors.
9.
5.5 Assignment
of Rights of First Refusal. The rights of first refusal of each
Founding Investor under this Section 5 may be assigned to the
same parties, subject to the same restrictions as any transfer of
registration rights pursuant to Section 6.7.
5.6 Excluded
Securities. The rights of first refusal established by this
Section 5 will have no application to any of the following
Equity Securities:
(a) shares of Common Stock and/or options, warrants or other
Common Stock purchase rights and the Common Stock issued pursuant
to such options, warrants or other rights issued to employees,
officers or directors of, or consultants or advisors to, the
Company or any subsidiary pursuant to stock purchase or stock
option plans or other arrangements that are approved by the Board
of Directors;
(b) stock issued or issuable pursuant to any rights or
agreements, options, warrants or convertible securities outstanding
as of the date of this Agreement; and stock issued pursuant to any
such rights or agreements granted after the date of this Agreement,
so long as the rights of first refusal established by this
Section 5 were complied with, waived, or were inapplicable
pursuant to any provision of this Section 5.6 with respect to
the initial sale or grant by the Company of such rights or
agreements;
(c) any Equity Securities issued for consideration other
than cash pursuant to a merger, consolidation, acquisition or
similar business combination approved by the Board of
Directors;
(d) any Equity Securities issued in connection with any
stock split, stock dividend or recapitalization by the
Company;
(e) any Equity Securities issued pursuant to any equipment
loan or leasing arrangement, real property leasing arrangement, or
debt financing from a bank or similar financial or lending
institution approved by the Board of Directors;
(f) any Equity Securities that are issued by the Company
pursuant to a registration statement filed under the Securities
Act;
(g) any Equity Securities that are issued by the Company in
connection with any underwritten public offering;
(h) any Equity Securities issued in connection with
strategic transactions involving the Company and other entities,
including, without limitation (i) joint ventures,
manufacturing, marketing or distribution arrangements or
(ii) technology transfer or development arrangements;
provided that the issuance of shares therein has been
approved by the Company’s Board of Directors; and
(i) Any Equity Securities issued to third-party service
providers in exchange for or as partial consideration for services
rendered to the Company.
10.
SECTION 6.
REGISTRATION RIGHTS; MARKET
STAND-OFF .
6.1 Piggyback
Registrations. The Company will notify all Holders of
Registrable Securities in writing at least fifteen (15) days
prior to the filing of any registration statement under the
Securities Act for purposes of a public offering of securities of
the Company (including, but not limited to, registration statements
relating to secondary offerings of securities of the Company, but
excluding Special Registration Statements) and will afford each
such Holder an opportunity to include in such registration
statement all or part of such Registrable Securities held by such
Holder. Each Holder desiring to include in any such registration
statement all or any part of the Registrable Securities held by it
will, within fifteen (15) days after the above-described
notice from the Company, so notify the Company in writing. Such
notice will state the intended method of disposition of the
Registrable Securities by such Holder. If a Holder decides not to
include all of its Registrable Securities in any registration
statement thereafter filed by the Company, such Holder will
nevertheless continue to have the right to include any Registrable
Securities in any subsequent registration statement or registration
statements as may be filed by the Company with respect to offerings
of its securities, all upon the terms and conditions set forth
herein.
(a) Underwriting. If the registration statement of
which the Company gives notice under this Section 6.3 is for
an underwritten offering, the Company will so advise the Holders of
Registrable Securities. In such event, the right of any such Holder
to include Registrable Securities in a registration pursuant to
this Section 6.3 will be conditioned upon such Holder’s
participation in such underwriting and the inclusion of such
Holder’s Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute their
Registrable Securities through such underwriting will 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 will be
allocated, first, to the Company; and second, to the Holders on a
pro rata basis based on the total number of Registrable
Securities held by the Holders; provided, however, that such
reduction will not be permitted unless such registration does not
include shares of any other selling stockholders. If any Holder
disapproves of the terms of any such underwriting, such Holder may
elect to withdraw therefrom by written notice to the Company and
the underwriter, delivered at least ten (10) business days
prior to the effective date of the registration statement. Any
Registrable Securities excluded or withdrawn from such underwriting
will be excluded and withdrawn from the registration. For any
Holder which is a partnership, limited liability company or
corporation, the partners, retired partners, members, retired
members and stockholders of such Holder, or the estates and family
members of any such partners, retired partners, members and retired
members and any trusts for the benefit of any of the foregoing
persons will be deemed to be a single “Holder,” and any
pro rata reduction with respect to such “Holder”
will be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included
in such “Holder,” as defined in this
sentence.
(b) Right to Terminate Registration. The Company will
have the right to terminate or withdraw any registration initiated
by it under this Section 6.1 whether or not any
11.
Holder has
elected to include securities in such registration. The
Registration Expenses of such withdrawn registration will be borne
by the Company in accordance with Section 6.3
hereof.
6.2 Form S-3
Registration. In case the Company receives from any Holder or
Holders of Registrable Securities a written request or requests
that the Company effect a registration on Form S-3 (or any
successor to Form S-3) or any similar short-form registration
statement and any related qualification or compliance with respect
to all or a part of the Registrable Securities owned by such Holder
or Holders, the Company will:
(a) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all
other Holders of Registrable Securities; and
(b) as soon as practicable, effect such registration and all
such qualifications and compliances as may be so requested and as
would permit or facilitate the sale and distribution of all or such
portion of such Holder’s or Holders’ Registrable
Securities as are specified in such request, together with all or
such portion of the Registrable Securities of any other Holder or
Holders joining in such request as are specified in a written
request given within fifteen (15) days after receipt of such
written notice from the Company; provided, however , that
the Company will not be obligated to effect any such registration,
qualification or compliance pursuant to this
Section 6.2:
(i) if Form S-3 is not available for such offering by
the Holders;
(ii) if the Holders, together with the holders of any
other securities of the Company entitled to inclusion in such
registration, propose to sell Registrable Securities and such other
securities (if any) at an aggregate price to the public of less
than fifteen million dollars ($15,000,000);
(iii) if within thirty (30) days of receipt of a
written request from any Holder or Holders pursuant to this
Section 6.2, the Company gives notice to such Holder or
Holders of the Company’s intention to make a public offering
within ninety (90) days, other than pursuant to a Special
Registration Statement;
(iv) if the Company will furnish to the Holders a
certificate signed by the Chairman of the Board of Directors of the
Company stating that in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the
Company and its stockholders for such Form S-3 registration to be
effected at such time, in which event the Company will have the
right to defer the filing of the Form S-3 registration statement
for a period of not more than one hundred twenty (120) days
after receipt of the request of the Holder or Holders under this
Section 6.2; provided , that such right to delay a
request will be exercised by the Company not more than twice in any
twelve (12) month period;
(v) if the Company has, within the twelve
(12) month period preceding the date of such request, already
effected one (1) registration on Form S-3 for the Holders
pursuant to this Section 6.2, or
12.
(vi) in any particular jurisdiction in which the
Company would be required to qualify to do business or to execute a
general consent to service of process in effecting such
registration, qualification or compliance.
(c) Subject to the foregoing, the Company will file a Form
S-3 registration statement covering the Registrable Securities and
other securities so requested to be registered as soon as
practicable after receipt of the requests of the
Holders.
6.3 Expenses
of Registration. Except as specifically provided herein, all
Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 6.1 or 6.2
herein will be borne by the Company. All Selling Expenses incurred
in connection with any registrations hereunder, will be borne by
the holders of the securities so registered pro rata on the
basis of the number of shares so registered. The Company will not,
however, be required to pay for expenses of any registration
proceeding begun pursuant to Section 6.2, the request of which
has been subsequently withdrawn by the Initiating Holders unless
(a) the withdrawal is based upon material adverse information
concerning the Company of which the Initiating Holders were not
aware at the time of such request or (b) the Holders of a
majority of Registrable Securities agree to deem such registration
to have been effected as of the date of such withdrawal for
purposes of determining whether the Company will be obligated
pursuant to Section 6.2(b)(v), as applicable, to undertake any
subsequent registration, in which event such right will be
forfeited by all Holders). If the Holders are required to pay the
Registration Expenses, such expenses will be borne by the holders
of securities (including Registrable Securities) requesting such
registration in proportion to the number of shares for which
registration was requested. If the Company is required to pay the
Registration Expenses of a withdrawn offering pursuant to clause
(a) above, then such registration will not be deemed to have
been effected for purposes of determining whether the Company will
be obligated pursuant to Section 6.2(b)(v) to undertake any
subsequent registration.
6.4
Obligations of the Company. Whenever required to effect the
registration of any Registrable Securities, the Company will, as
expeditiously as reasonably possible:
(a) prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use all
commercially reasonable efforts to cause such registration
statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder,
keep such registration statement effective for up to thirty
(30) days or, if earlier, until the Holders have completed the
distribution related thereto; provided, however, that at any time,
upon written notice to the participating Holders and for a period
not to exceed sixty (60) days thereafter (the
“Suspension Period”), the Company may delay the filing
or effectiveness of any registration statement or suspend the use
of any registration statement (and the Initiating Holders hereby
agree not to offer or sell any Registrable Securities pursuant to
such registration statement during the Suspension Period) if the
Company reasonably believes that there is or may be in existence
material nonpublic information or events involving the Company, the
failure of which to be disclosed in the prospectus included in the
registration statement could result in a Violation (as defined
below). In the event that the Company will exercise its right to
delay the filing or effectiveness or suspend the use of a
registration hereunder, the applicable time period during which
the
13.
registration
statement is to remain effective will be extended by a period of
time equal to the duration of the Suspension Period. The Company
may extend the Suspension Period for an additional consecutive
sixty (60) days with the consent of the Holders of a majority
of the Registrable Securities registered under the applicable
registration statement, which consent will not be unreasonably
withheld. If so directed by the Company, all Holders registering
shares under such registration statement will (i) not offer to
sell any Registrable Securities pursuant to the registration
statement during the period in which the delay or suspension is in
effect after receiving notice of such delay or suspension; and
(ii) use their commercially reasonable efforts to deliver to
the Company (at the Company’s expense) all copies, other than
permanent file copies then in such Holders’ possession, of
the prospectus relating to such Registrable Securities current at
the time of receipt of such notice. Notwithstanding the foregoing,
the Company will not be required to file, cause to become effective
or maintain the effectiveness of any registration statement other
than a registration statement on Form S-3 that contemplates a
distribution of securities on a delayed or continuous basis
pursuant to Rule 415 under the Securities Act.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used
in connection with such registration statement as may be necessary
to comply with the provisions of the Securities Act with respect to
the disposition of all securities covered by such registration
statement for the period set forth in subsection (a)
above.
(c) Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with
the requirements of the Securities Act, and such other documents as
they may reasonably request in order to facilitate the disposition
of Registrable Securities owned by them.
(d) Use its commercially reasonable efforts to register and
qualify the securities covered by such registration statement under
such other securities or Blue Sky laws of such jurisdictions as
will be reasonably requested by the Holders; provided that
the Company will not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general
consent to service of process in any such states or
jurisdictions.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under
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