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EXHIBIT 4.2
SOMAXON PHARMACEUTICALS, INC.
AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
JUNE 2, 2005
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TABLE OF CONTENTS
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SECTION 1.
CERTAIN
DEFINITIONS.............................................................................1
SECTION 2.
COVENANTS OF THE
COMPANY........................................................................3
2.1 Financial
Statements and Reports to Stockholders;
Budget........................................3
2.2
Inspection......................................................................................4
2.3
Confidentiality.................................................................................4
2.4
Proprietary Information and Inventions
Agreements...............................................4
2.5
Restriction on Sales by
Employees...............................................................4
2.6 Qualified
Small
Business........................................................................5
2.7 Employee
Stock..................................................................................5
2.8 Board
Meeting; Compensation of
Directors........................................................5
2.9
Compensation
Committee..........................................................................5
2.10
Board Approval.
................................................................................6
2.11
Termination of
Covenants........................................................................6
SECTION 3.
REGISTRATION
RIGHTS.............................................................................7
3.1 Demand
Registration.............................................................................7
3.2 Piggyback
Registration.........................................................................10
3.3 Expenses
of
Registration.......................................................................11
3.4
Registration
Procedures........................................................................11
3.5
Information Furnished by
Holder................................................................13
3.6
Indemnification................................................................................13
3.7
Limitations on Registration Rights Granted to Other
Securities.................................15
3.8
Transfer
of
Rights.............................................................................15
3.9 Market
Stand-off...............................................................................16
3.10
No-Action Letter or Opinion of Counsel in Lieu of Registration;
Conversion of Convertible
Securities...........................................................16
3.11
Sale of Convertible Securities to
Underwriter..................................................17
3.12
Rule 144
Requirements..........................................................................17
3.13
Termination of Company
Agreements..............................................................17
SECTION 4.
RIGHT OF FIRST REFUSAL; RIGHT TO PURCHASE
SHARES...............................................17
4.1 Right of
First
Refusal.........................................................................17
4.2 Right to
Purchase in Connection with Initial Public
Offering...................................19
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4.3 Rights of
Affiliated
Investors.................................................................20
4.4
Assignment.....................................................................................20
4.5
Termination....................................................................................21
SECTION 5.
TRANSFERS OF SECURITIES BY
INVESTORS...........................................................21
5.1
Notices........................................................................................21
5.2 Acceptance
of
Offer............................................................................21
5.3 Allocation
of Securities and
Payment...........................................................21
5.4 Failure to
Exercise............................................................................21
5.5
Assignment.....................................................................................22
5.6 Permitted
Transfers............................................................................22
5.7
Termination....................................................................................22
SECTION 6.
MISCELLANEOUS..................................................................................22
6.1 Entire
Agreement; Successors and
Assigns.......................................................22
6.2
Aggregation of
Stock...........................................................................22
6.3 Governing
Law..................................................................................23
6.4
Counterparts...................................................................................23
6.5
Headings.......................................................................................23
6.6
Notices........................................................................................23
6.7 Amendment
of Agreement;
Waivers................................................................23
6.8 Amendment
and Termination of Prior Rights
Agreement............................................23
6.9 Additional
Investors...........................................................................23
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SOMAXON PHARMACEUTICALS, INC.
AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
THIS
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT (this "AGREEMENT")
is
made as of June 2, 2005, by and among
SOMAXON PHARMACEUTICALS, INC., a Delaware
corporation (the "COMPANY"), and each of
the entities and persons listed on
Schedule A hereto (collectively, the
"INVESTORS").
RECITALS
A. The
Company and certain of the Investors are parties to that
certain
Amended and Restated Investor Rights
Agreement dated as of June 10, 2004 (the
"PRIOR RIGHTS AGREEMENT").
B. Certain
of the Investors are purchasing shares of the Company's Series
C Preferred Stock, par value $0.0001 per
share (the "SERIES C PREFERRED STOCK"),
and may purchase shares of the Company's
Series C-1 Preferred Stock, par value
$0.0001 per share (the "SERIES C-1
PREFERRED STOCK"), pursuant to that certain
Series C Preferred Stock Purchase Agreement
of even date herewith (the "PURCHASE
AGREEMENT").
B. The
obligations in the Purchase Agreement are conditioned upon the
execution and delivery of this Agreement,
and the parties to the Prior Rights
Agreement desire to hereby amend and
restate the Prior Rights Agreement in its
entirety.
THE
PARTIES AGREE AS FOLLOWS:
SECTION 1. CERTAIN DEFINITIONS.
As used in
this Agreement, the following terms shall have the following
respective meanings:
(a)
"AFFILIATE" shall mean with respect to any Person, any Person
which
directly or indirectly through one or more
intermediaries, controls, is
controlled by or is under common control
with such Person.
(b)
"BOARD" shall mean the Board of Directors of the Company.
(c)
"COMMISSION" shall mean the Securities and Exchange Commission or
any
other federal agency at the time
administering the Securities Act.
(d)
"CONVERTIBLE SECURITIES" shall mean the Series A Preferred Stock,
the
Series B Preferred Stock, the Series C
Preferred Stock and the Series C-1
Preferred Stock.
(e) "FORM
S-3" shall mean Form S-3 issued by the Commission or any
substantially similar form then in
effect.
(f)
"HOLDER" shall mean any Person entering into this Agreement and
any
holder of outstanding Registrable
Securities or an assignee or transferee of
Registration rights as permitted by Section
3.8.
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(g)
"INITIATING HOLDERS" shall mean Holders who in the aggregate hold
at
least twenty percent (20%) of the then
outstanding Registrable Securities.
(h) "MAJOR INVESTOR" shall mean
any Holder who holds at least One Million
(1,000,000) shares of Series A Preferred
Stock, Series B Preferred Stock, Series
C Preferred Stock or Series C-1 Preferred
Stock, or any combination thereof.
(i)
"MATERIAL ADVERSE EVENT" shall mean an occurrence having a
consequence
that either (i) is materially adverse as to
the business, properties, prospects
or financial condition of the Company or
(ii) is reasonably foreseeable, has a
reasonable likelihood of occurring, and if
it were to occur would reasonably be
expected to materially adversely affect the
business, properties, prospects or
financial condition of the Company.
(j)
"PERSON" shall mean an individual, a corporation, a partnership,
a
trust or unincorporated organization or any
other entity or organization.
(k)
"PREFERRED DIRECTORS" shall have the meaning set forth in the
Company's Restated Certificate of
Incorporation.
(l)
"QUALIFIED PUBLIC OFFERING" shall mean a firmly underwritten
public
offering of the Company's Common Stock
Registered on the Nasdaq National Market
or the New York Stock Exchange under the
Securities Act and involving gross
proceeds to the Company of at least Thirty
Million Dollars ($30,000,000) (prior
to deduction for underwriters' discounts
and other expenses relating to such
public offering, including, without
limitation, fees of the Company's counsel)
and the price to the public is at least
Three Dollars and Thirty-Seven and
One-Half Cents ($3.375) per share
(equitably adjusted for all stock splits,
sub-divisions, stock dividends,
combinations and the like).
(m) The
terms "REGISTER," "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and
filing a registration statement in
compliance with the Securities Act
("REGISTRATION STATEMENT"), and the
declaration or ordering of the
effectiveness of such Registration Statement.
(n)
"REGISTRABLE SECURITIES" shall mean (i) all Common Stock not
previously sold to the public issued or
issuable upon conversion of any of the
Convertible Securities purchased by or
issued to the Investors, (ii) all shares
of Common Stock owned by the Investors,
(iii) any shares of Common Stock issued
or issuable upon conversion of any
Convertible Securities granted registration
rights pursuant to Section 3.7 of this
Agreement, and (iv) any Common Stock of
the Company issued as (or issuable upon the
conversion or exercise of any
warrant, right or other security that is
issued as) a dividend or other
distribution with respect to, or in
exchange for, or in replacement of, the
Common Stock described in clauses (i)
through (iii) of this definition.
(o)
"REGISTRATION EXPENSES" shall mean all expenses incurred by the
Company in complying with Sections 3.1 or
3.2 of this Agreement, including,
without limitation, all federal and state
registration, qualification and filing
fees, printing expenses, fees and
disbursements of counsel for the Company and
fees and disbursements of not more than one
(1) special counsel for the Holders
(if different from the Company) not to
exceed Twenty-Five Thousand Dollars
($25,000), blue sky fees and expenses, and
the expense of any special audits
incident to or required by any such
Registration.
(p)
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended,
or
any similar federal statute, and the rules
and regulations of the Commission
thereunder, all as the same shall be in
effect at the time.
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(q)
"SELLING EXPENSES" shall mean all underwriting discounts and
selling
commissions applicable to the sale of
Registrable Securities pursuant to this
Agreement.
(r)
"SERIES A PREFERRED STOCK" shall mean the Company's Series A
Preferred
Stock, par value $0.0001 per share.
(s) "SERIES B PREFERRED
STOCK" shall mean the Company's Series B Preferred
Stock, par value $0.0001 per share.
(t)
"SERIES C DIRECTOR" shall have the meaning set forth in the
Company's
Restated Certificate of Incorporation.
(u)
"SPECIAL REGISTRATION STATEMENT" shall mean (i) a registration
statement relating to any employee benefit
plan, (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. COVENANTS OF THE COMPANY
2.1
Financial Statements and Reports to Stockholders; Budget. The
Company
shall deliver to each Investor:
(a) As soon as practicable after the end of each fiscal year of
the
Company, and in any event within one
hundred twenty (120) days thereafter, an
audited consolidated balance sheet of the
Company as of the end of such year and
audited consolidated statements of income,
stockholders' equity and cash flows
for such year, which year-end financial
reports shall be in reasonable detail
and shall be accompanied by the opinion of
independent public accountants of
recognized standing selected by the
Company.
(b) For so long as an Investor or subsequent holder of
Convertible
Securities holds or is deemed to hold at
least One Hundred Fifty Thousand
(150,000) shares of Registrable Securities
(equitably adjusted for all stock
splits, subdivisions, stock dividends,
combinations and the like), as soon as
practicable after the end of each fiscal
quarter of the Company, and in any
event within forty-five (45) days
thereafter, unaudited financial statements of
the Company on a quarterly basis prepared
in accordance with generally accepted
accounting principles and fairly reflecting
the fiscal affairs of the Company to
the date thereof (with the exception that
no notes need be attached to such
statements and year-end audit adjustments
may not have been made).
(c) For so long as an Investor or subsequent holder of
Convertible
Securities holds or is deemed to hold at
least One Hundred Fifty Thousand
(150,000) shares of Registrable Securities
(equitably adjusted for all stock
splits, subdivisions, stock dividends,
combinations and the like), as soon as
practicable after the end of each month,
and in any event within thirty (30)
days thereafter, consolidated balance
sheets of the Company and its
subsidiaries, if any, as of the end of each
such month and consolidated
statements of income and cash flow for such
month and for the current fiscal
year to date.
(d) For so long as an Investor or subsequent holder of
Convertible
Securities holds or is deemed to hold at
least One Hundred Fifty Thousand
(150,000) shares of Registrable Securities
(equitably adjusted for all stock
splits, subdivisions, stock dividends,
combinations and the like) within sixty
(60) days prior to the end of each fiscal
year, a Board-approved operating
budget and plan forecasting the Company's
monthly revenues, expenses and cash
position respecting the next fiscal
year.
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(e) Contemporaneously with delivery to holders of Common Stock, a
copy
of each report of the Company delivered to
holders of Common Stock.
2.2
Inspection. For so long as an Investor or subsequent holder of
Convertible Securities holds or is deemed
to hold at least One Hundred Fifty
Thousand (150,000) shares of Registrable
Securities (equitably adjusted for all
stock splits, subdivisions, stock
dividends, combinations and the like), the
Company shall permit each Investor, at such
Investor's expense, to visit and
inspect the Company's properties, to
examine its books of account and records
and to discuss the Company's affairs,
finances and accounts with its officers,
all at such reasonable times as may be
requested by each such Investor;
provided, however, that the Company shall
not be obligated pursuant to this
Section 2.2 with respect to a competitor of
the Company or with respect to any
information which it reasonably considers
to be a trade secret or confidential
information. The rights of an Investor
under this Section 2.2 may not be
assigned as part of such Investor's sale of
any of the Registrable Securities or
Convertible Securities except with the
consent of the Company, which consent
shall not be unreasonably withheld.
2.3
Confidentiality. Each Investor agrees and will cause any
representative of the Investor to hold in
confidence and trust and not use or
disclose any information provided to or
learned by it in connection with its
rights under this Section 2, except that
such Investor may disclose such
information to any general partner, limited
partner, member, subsidiary or
parent (and their respective
representatives) of such Investor for the purpose
of evaluating its investment in the Company
as long as (a) such general partner,
limited partner, member, subsidiary or
parent is advised of the confidentiality
provisions of this Section 2.3 and (b) such
Investor uses its commercially
reasonable efforts to ensure that such
general partner, limited partner, member,
subsidiary or parent holds such information
in confidence and trust and will not
use or disclose any information provided to
or learned by it except as required
by law. Notwithstanding the foregoing,
however, the obligation of each Investor
to hold information confidential as
provided herein or any other document or
agreement relating thereto shall not
prohibit such Investor from disclosing such
information: (i) to its board of directors,
investment advisers, attorneys,
accountants, consultants and other
professionals to the extent necessary to
obtain their services in connection with
its investment in the Company, provided
that such persons agree to hold such
information confidential as provided herein
and in such provisions (as modified by this
paragraph); (ii) to any prospective
purchaser of any shares of the Company
owned by such Investor as long as such
prospective purchaser agrees in writing to
be bound by the confidentiality
provisions as provided herein or in such
provisions (as modified by this
paragraph); (iii) to such Investor's
investment advisor or any investment
companies managed by such Investor's
investment advisor, provided that such
persons agree to hold such information
confidential as provided herein or in
such provisions (as modified by this
paragraph); or (iv) as required by
applicable law or regulation, regulatory
body, stock exchange, court or
administrative order, or any listing or
trading agreement concerning such
Investor or the Company. Furthermore,
nothing in this Section 2.3 shall restrict
any Investor's ability to disclose the
existence or nature of its relationship
with the Company, the nature or amount of
its investment in securities of the
Company or to provide its affiliates with
quarterly, annual or other reports and
such other information about the Company
prepared by such Investor in the
ordinary course of its business, provided
that said Investor takes commercially
reasonable measures to ensure that any such
affiliates protect the confidential
nature of such confidential
information.
2.4
Proprietary Information and Inventions Agreements. The Company
agrees
to require each employee and officer of the
Company to execute employment and
proprietary information and inventions
agreements and each consultant and
advisor of the Company to execute an
agreement that provides for confidential
treatment of the Company's proprietary
information as a condition of employment
or continued employment or engagement, as
the case may be, unless otherwise
approved by the Board.
2.5
Restriction on Sales by Employees. The Company and Holders agree
that,
until the time of a Qualified Public
Offering, first, the Company, and second,
the Investors will have a right of
first
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refusal on all transfers of Common Stock by
employees of the Company, subject to
transfers to family members or trusts for
the benefit of family members and
other limited exceptions as determined by
the Board. The Company agrees to
include appropriate language to this effect
in its Bylaws or in future
employment agreements, stock option and/or
restricted stock grants, or other
similar agreements with employees.
2.6
Qualified Small Business. The Company covenants that so long as
any
Convertible Securities, or the Common Stock
into which such shares are
converted, are held by a Holder in whose
hands such shares of Common Stock are
eligible to qualify as "qualified small
business stock" as defined in Section
1202(c) of the of the Internal Revenue Code
of 1986, as amended (the "CODE")
("QUALIFIED SMALL BUSINESS STOCK"), it will
(i) comply with any applicable
filing or reporting requirements imposed by
the Code on issuers of Qualified
Small Business Stock and (ii) execute and
deliver to each Holder, from time to
time, such forms, documents, schedules and
other instruments as may be
reasonably requested thereby to cause the
Convertible Securities, or the Common
Stock into which such shares are converted,
to qualify as Qualified Small
Business Stock. The Company shall submit to
the Investors and to the Internal
Revenue Service any reports that may be
required under Section 1202(d)(1)(C) of
the Code and any related Treasury
Regulations. In addition, within ten (10) days
after any Investor has delivered to the
Company a written request therefor, the
Company shall deliver to such Investor a
written statement informing the
Investor whether, in the Company's
good-faith judgment after a reasonable
investigation, such Investor's interest in
the Company constitutes "qualified
small business stock" as defined in Section
1202(c) of the Code, or would
constitute "qualified small business
stock," if determination of whether stock
constitutes "qualified small business
stock" were made by taking into account
the modifications set forth in Section
1045(b)(4) of the Code. The Company's
obligation to furnish a written statement
pursuant to this Section 2.6 shall
continue notwithstanding the fact that a
class of the Company's stock may be
traded on an established securities
market.
2.7
Employee Stock. With respect to any shares issued or options or
rights
granted to employees, consultants and
directors after the date hereof, unless
otherwise approved by the Board (including
at least two (2) of the Preferred
Directors), the Company shall cause each
employee, consultant, and director of
the Company to enter into an agreement
providing for vesting of such shares or
options or rights over forty-eight (48)
months, with no shares or options or
rights being vested for twelve (12) months
from the date of commencement of
services in the case of stock or option
grants for new hires, or the date of
issuance or grant in the case of subsequent
stock or option grants, at which
time 1/4th of the shares or options or
rights shall be vested and 1/48th of such
shares, options or rights shall be vested
monthly thereafter. Any options
providing for early exercise and any grant
of restricted stock shall provide for
a repurchase option so that upon
termination of the employment or consulting
relationship of the stockholder, the
Company or its assignee (to the extent
permissible under applicable securities law
qualification) retains the option to
repurchase at cost any unvested shares held
by such stockholder.
2.8 Board
Meeting; Compensation of Directors. The Company hereby
covenants
that so long as the holders of the
Convertible Securities are entitled to
appoint any members of the Board pursuant
to the Company's Restated Certificate
of Incorporation, the Board shall not meet
less frequently than quarterly. All
non-employee directors will be compensated
by the Company identically; provided
however, that additional compensation may
be provided to the Chairman of the
Board or the Chairman of any Committee of
the Board provided that such
compensation is approved by the Board,
including the approval of at least two
(2) of the Preferred Directors. All
out-of-pocket and travel expenses of the
directors incurred in attending Board
meetings (or meetings of committees
thereof) or in connection with the
performance of their duties as directors
shall be paid or reimbursed promptly by the
Company.
2.9
Compensation Committee. The Company hereby covenants to establish
and
maintain a Compensation Committee of the
Board of Directors, which shall include
at least one (1) Series C Director.
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2.10 Board
Approval. So long as at least Three Million Three Hundred
Thirty-Three Thousand Three Hundred
Thirty-Four (3,333,334) shares of Series C
Preferred Stock remain outstanding (as
adjusted for all stock splits, stock
dividends, consolidations,
recapitalizations and reorganizations), the Company
shall not (by amendment, merger,
consolidation or otherwise), unless otherwise
approved by the Board (including at least
two (2) of the Preferred Directors):
(a) make any
loan or advance to, or own any stock or other
securities of, any subsidiary or other corporation,
partnership, or other entity unless it is wholly owned by the
Company;
(b) make any
loan or advance to any Person, including any employee
or director, except advances and similar expenditures in the
ordinary course of business or under the terms of a employee
stock or option plan approved by the Board;
(c) guarantee
any indebtedness except for trade accounts of the
Company or any subsidiary arising in the ordinary course of
business;
(d) make any
investment other than as set forth in the Company's
investment policy or investments in prime commercial paper,
money market funds, certificates of deposit in any United
States bank having a net worth in excess of One Hundred
Million Dollars ($100,000,000.00) or obligations issued or
guaranteed by the United States of America, in each case
having a maturity not in excess of two (2) years;
(e) incur any
aggregate indebtedness in excess of Five Hundred
Thousand Dollars ($500,000.00) that is not already included in
a budget approved by the Board, other than trade credit
incurred in the ordinary course of business;
(f) enter into
or be a party to any transaction with any director,
officer or employee of the Company or any "associate" (as
defined in Rule 12b-2 promulgated under the Exchange Act of
1934, as amended) of any such person, except for arms-length
transactions;
(g) hire, fire,
or change in any material respect the compensation
of the executive officers, including approving any option
plans;
(h) change the
principal business of the Company, enter new lines
of business, or exit the current line of business;
(i) sell,
transfer, license, pledge or encumber technology or
intellectual property, other than licenses granted in the
ordinary course of business; or
(j) make any
material investments, joint ventures, or
acquisitions.
2.11
Termination of Covenants. The covenants of the Company set forth
in
this Section 2 shall be terminated and be
of no further force or effect upon the
earlier of (a) the effective date of the
Company's Registration Statement filed
in connection with the Company's first
Qualified Public Offering and (b) the
date when no shares of Registrable
Securities or Convertible Securities shall be
outstanding.
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SECTION 3. REGISTRATION RIGHTS
3.1 Demand
Registration.
3.1.1.
Request for Registration on Form other than Form S-3. Subject
to
the terms of this Agreement, in the event
that the Company shall receive from
the Initiating Holders at any time after
six (6) months after the effective date
of the Company's initial public offering of
shares of Common Stock under a
Registration Statement, a written request
that the Company effect any
Registration with respect to all or a part
of the Registrable Securities on a
form other than Form S-3 for an offering of
at least twenty percent (20%) of the
then outstanding Registrable Securities,
the reasonably anticipated aggregate
offering price to the public of which would
exceed Five Million Dollars
($5,000,000), the Company shall (i)
promptly give written notice of the proposed
Registration to all other Holders and shall
(ii) as soon as practicable, use its
reasonable best efforts to effect
Registration of the Registrable Securities
specified in such request, together with
any Registrable Securities of any
Holder joining in such request as are
specified in a written request given
within twenty (20) days after written
notice from the Company. The Company shall
not be obligated to take any action to
effect any such Registration pursuant to
this Section 3.1.1:
(i) after the
Company has effected two (2) such Registrations
pursuant
to this Section 3.1.1 and such Registrations have
been declared effective;
(ii) during the period
starting with the date of filing of, and
ending on the date one hundred eighty (180) days following the
effective date of the registration statement pertaining to any
public offering, other than pursuant to a Special Registration
Statement; provided that the Company makes reasonable good
faith efforts to cause such registration statement to become
effective;
(iii) if within thirty (30) days of receipt of a written
request
from the Initiating Holders pursuant to Section 3.1.1, the
Company gives notice to the Holders of the Company's intention
to file a registration statement for a public offering, other
than pursuant to a Special Registration Statement, within
ninety (90) days; or
(iv) if the Initiating
Holders propose to dispose of shares of
Registrable Securities that may be immediately registered on
Form S-3 pursuant to a request made pursuant to Section 3.1.3
below.
3.1.2.
Right of Deferral of Registration on Form other Than Form S-3.
If
the Company shall furnish to all such
Holders who joined in the request a
certificate signed by the President of the
Company stating that, in the good
faith judgment of the Board, it would be
seriously detrimental to the Company
for any Registration to be effected as
requested under Section 3.1.1, the
Company shall have the right to defer the
filing of a Registration Statement
with respect to such offering for a period
of not more than one hundred eighty
(180) days from delivery of the request of
the Initiating Holders; provided,
however, that the Company may not utilize
this right more than once in any
twelve (12)-month period.
3.1.3.
Request for Registration on Form S-3. Subject to the terms of
this
Agreement, in the event that the Company
receives from a Holder or Holders a
written request that the Company effect any
Registration on Form S-3 (or any
successor form to Form S-3 regardless of
its designation) at a time when the
Company is eligible to Register securities
on Form S-3 (or any successor form to
Form S-3 regardless of its designation) for
an offering of Registrable
Securities which such Holders in their good
faith discretion determine would
have an anticipated offering price of at
least One Million Dollars
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($1,000,000), the Company will promptly
give written notice of the proposed
Registration to all the Holders and will as
soon as practicable use its best
efforts to effect Registration of the
Registrable Securities specified in such
request, together with all or such portion
of the Registrable Securities of any
Holder joining in such request as are
specified in a written request delivered
to the Company within thirty (30) days
after written notice from the Company of
the proposed Registration. There shall be
no limit to the number of occasions on
which the Company shall be obligated to
effect Registration under this Section
3.1.3, but the Company shall not be
required to effect more than two (2) such
Registrations in any twelve (12)-month
period. Notwithstanding the foregoing,
the Company shall not be obligated to
effect any Registration pursuant to this
Section 3.1.3:
(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 One Million Dollars
($1,000,000);
(iii) if within thirty (30) days of receipt of a written
request from any Holder(s) pursuant to this Section
3.1.3, the Company gives notice to such Holder(s) of the
Company's intention to make a public offering within
ninety (90) days, other than pursuant to a Special
Registration Statement; or
(iv) if the Company
shall furnish to the Holders a
certificate signed by the President of the Company
stating that, in the good faith judgment of the Board,
it would be seriously detrimental to the Company for any
Registration to be effected as requested under Section
3.1.3, the Company shall have the right to defer the
filing of a Registration Statement with respect to such
offering for a period of not more than one hundred
eighty (180) days from delivery of the request of the
Holders requesting such Registration; provided, however,
that the Company may not utilize this right more than
once in any twelve (12)-month period.
3.1.4.
Registration of Other Securities in Demand Registration. Any
Registration Statement filed pursuant to
the request of the Initiating Holders
under this Section 3 may, subject to the
provisions of Section 3.1.5, include
securities of the Company other than
Registrable Securities.
3.1.5.
Underwriting in Demand Registration.
a. Notice
of Underwriting.
If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by
means of an underwriting, they shall so
advise the Company, as a part of their
request made pursuant to this Section
3.1.1, and the Company shall include such
information in the written notice
referred to in Section 3.1.1 or 3.1.3. The
right of any Holder to Registration
pursuant to Section 3 shall be conditioned
upon such Holder's agreement to
participate in such underwriting and the
inclusion of such Holder's Registrable
Securities in the underwriting.
b.
Inclusion of other Holders in Demand Registration.
If the Company, officers or directors of the Company holding
Common Stock other than Registrable
Securities or holders of securities issued
by the Company other than
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Registrable Securities, request inclusion
in such Registration, the Initiating
Holders, to the extent they deem advisable
and consistent with the goals of such
Registration, shall, on behalf of all
Holders, offer to any or all of the
Company, such officers or directors and
such holders of securities other than
Registrable Securities that such securities
other than Registrable Securities be
included in the underwriting and may
condition such offer on the acceptance by
such persons of the terms of this Section
3.1.
c.
Selection of Underwriter in Demand Registration.
The Company shall (together with all Holders proposing to
distribute their securities through such
underwriting) enter into an
underwriting agreement with the
representative ("UNDERWRITER'S REPRESENTATIVE")
of the underwriter or underwriters selected
for such underwriting by the Holders
of a majority of the Registrable Securities
being Registered by the Initiating
Holders and agreed to by the Company.
d.
Marketing Limitation in Demand Registration.
In the event the Underwriter's Representative advises the
Initiating Holders in writing that market
factors (including, without
limitation, the aggregate number of shares
of Common Stock requested to be
Registered, the general condition of the
market, and the status of the persons
proposing to sell securities pursuant to
the Registration) require a limitation
of the number of shares to be underwritten,
then (i) first the securities other
than Registrable Securities and (ii) next
the securities requested to be
registered by the Company, shall be
excluded from such Registration to the
extent required by such limitation. If a
limitation of the number of shares is
still required, the Initiating Holders
shall so advise all Holders and the
number of shares of Registrable Securities
that may be included in the
Registration and underwriting shall be
allocated among all Holders in
proportion, as nearly as practicable, to
the respective amounts of Registrable
Securities entitled to inclusion in such
Registration held by such Holders at
the time of filing the Registration
Statement. No Registrable Securities or
other securities excluded from the
underwriting by reason of this Section
3.1.5(d) shall be included in such
Registration Statement. To facilitate the
allocation of shares in accordance with the
above provisions, the Company or the
Underwriter's Representative may round the
number of shares allocated to any
Holder to the nearest one hundred (100)
shares.
e. Right
of Withdrawal in Demand Registration.
If any Holder of Registrable Securities, or a holder of other
securities entitled (upon request) to be
included in such Registration,
disapproves of the terms of the
underwriting, such person may elect to withdraw
therefrom by written notice to the Company,
the underwriter and the Initiating
Holders delivered at least seven (7)
business days prior to the effective date
of the Registration Statement. The
securities so withdrawn shall also be
withdrawn from the Registration
Statement.
3.1.6.
Blue Sky in Demand Registration. In the event of any
Registration
pursuant to Section 3.1, the Company will
exercise its reasonable best efforts
to Register and qualify the securities
covered by the Registration Statement
under such other securities or Blue Sky
laws of such jurisdictions (not
exceeding twenty (20) at the expense of the
Company) as shall be reasonably
appropriate for the distribution of such
securities; provided, however, that (i)
the Company shall not be required to
qualify to do business or to file a general
consent to service of process in any such
states or jurisdictions, and (ii)
notwithstanding anything in this Agreement
to the contrary, in the event any
jurisdiction in which the securities shall
be qualified imposes a non-waivable
requirement that expenses incurred in
connection with the qualification of the
securities be borne by selling
stockholders, such expenses shall be payable pro
rata by selling stockholders.
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3.2
Piggyback
Registration.
3.2.1. Notice of Piggyback Registration and Inclusion of
Registrable
Securities. Subject to the terms of this
Agreement, in the event the Company
decides to Register any of its Common Stock
(either for its own account or the
account of a security holder or holders
exercising their respective demand
Registration rights) on a form that would
be suitable for a Registration
involving solely Registrable Securities,
the Company will: (i) promptly give
each Holder written notice thereof (which
shall include a list of the
jurisdictions in which the Company intends
to attempt to qualify such securities
under the applicable Blue Sky or other
state securities laws) and (ii) include
in such Registration (and any related
qualification under Blue Sky laws or other
compliance), and in any underwriting
involved therein, all the Registrable
Securities specified in a written request
delivered to the Company by any Holder
within fifteen (15) days after delivery of
such written notice from the Company.
3.2.2. Underwriting in Piggyback Registration.
a. Notice
of Underwriting in Piggyback Registration.
If the Registration of which the Company gives notice pursuant
to Section 3.2.1 is for a Registered public
offering involving an underwriting,
the Company shall so advise the Holders as
a part of the written notice given
pursuant to Section 3.2.1. In such event
the right of any Holder to Registration
shall be conditioned upon such underwriting
and the inclusion of such Holder's
Registrable Securities in such underwriting
to the extent provided in this
Section 3. All Holders proposing to
distribute their securities through such
underwriting shall (together with the
Company and the other holders distributing
their securities through such underwriting)
enter into an underwriting agreement
with the Underwriter's Representative for
such offering. The Holders shall have
no right to participate in the selection of
the underwriters for an offering
pursuant to this Section 3.2.
b.
Marketing Limitation in Piggyback Registration.
In the event the Underwriter's Representative advises the
Holders seeking Registration of Registrable
Securities pursuant to Section 3.2
in writing that market factors (including,
without limitation, the aggregate
number of shares of Common Stock requested
to be Registered, the general
condition of the market, and the status of
the persons proposing to sell
securities pursuant to the Registration)
require a limitation of the number of
shares to be underwritten, the
Underwriter's Representative (subject to the
allocation priority set forth in Section
3.2.2(b)) may:
i. in the case of the Company's initial Registered
public offering, exclude some or all
Registrable Securities from such
Registration and underwriting; and
ii. in the case of any subsequent registered public
offering, limit the number of shares of
Registrable Securities to be included in
such Registration and underwriting to not
less than thirty percent (30%) of the
securities included in such Registration
(based on aggregate market values).
c.
Allocation of Shares in Piggyback Registration.
In the event that the Underwriter's Representative limits the
number of shares to be included in a
Registration pursuant to Section 3.2.2(b),
the number of shares to be included in such
Registration shall be allocated
(subject to Section 3.2.2(b)) in the
following manner: The number of shares, if
any, that may be included in the
Registration and underwriting by selling
stockholders shall first be allocated among
all the requesting Holders pro rata
according to the respective amounts of
Registrable Securities entitled to be
included in such offering by such
requesting Holders and then among all other
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<PAGE>
holders of securities other than
Registrable Securities requesting and legally
entitled to include shares in such
Registration, in proportion, as nearly as
practicable, to the respective amounts of
securities (including Registrable
Securities) which such Holders and such
other holders would otherwise be
entitled to include in such Registration.
No Registrable Securities or other
securities excluded from the underwriting
by reason of this Section 3.2.2(c)
shall be included in the Registration
Statement. To facilitate the allocation of
shares in accordance with the above
provisions, the Company or the Underwriter's
Representative may round the number of
shares allocated to any Holder to the
nearest one hundred (100) shares.
d. Withdrawal in Piggyback Registration.
If any Holder disapproves of the terms of any such
underwriting, he may elect to withdraw
therefrom by written notice to the
Company and the underwriter delivered at
least seven (7) business days prior to
the effective date of the Registration
Statement. Any Registrable Securities or
other securities excluded or withdrawn from
such underwriting shall be withdrawn
from such Registration.
3.2.3. Blue Sky in Piggyback Registration. In the event of any
Registration of Registrable Securities
pursuant to Section 3.2, the Company will
exercise its best efforts to Register and
qualify the securities covered by the
Registration Statement under such other
securities or Blue Sky laws of such
jurisdictions (not exceeding twenty (20)
unless otherwise agreed to by the
Company) as shall be reasonably appropriate
for the distribution of such
securities; provided, however, that (i) the
Company shall not be required to
qualify to do business or to file a general
consent to service of process in any
such states or jurisdictions, and (ii)
notwithstanding anything in this
Agreement to
