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[DRAFT -
01/11/2005
FOR DISCUSSION PURPOSES
ONLY]
EXHIBIT 4.5
RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT
THIS RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT (the
"Agreement")
is made as of the 28th day of January, 2005 by and among PacificHealth
Laboratories, Inc., a Delaware corporation (the
"Company"), the stockholders of
the Company listed on Schedule A hereto (together with any transferee who
becomes subject to the provisions hereof pursuant to Section 4, the "Key
Holders") and the investors listed on Schedule B hereto and
each other person
who hereafter may become a
party hereto pursuant to Sections 5(k) or 5(i) hereof
(each, an "Investor" and,
collectively, the "Investors").
WHEREAS, the Key
Holders are the beneficial owners of the number of
shares of Common Stock of the
Company set forth opposite their respective names
on Schedule A
hereto;
WHEREAS, the Company
and certain of the
Investors (the
"Series A
Investors") are parties to
the Series A Preferred Stock Purchase Agreement, of
even date herewith (the
"Purchase Agreement"), pursuant to which the Series
A
Investors have agreed to purchase
shares of the
Company's Series A Preferred
Stock; and
WHEREAS, the Key
Holders and the Company desire to further induce
the Series A Investors to
purchase the Series A Preferred Stock;
NOW, THEREFORE,
in consideration of
the mutual covenants set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are acknowledged, the Company, the Key Holders and the
Investors agree as
follows:
1. Definitions.
(a) "Capital Stock"
means (i) shares of Common Stock (whether
now outstanding or hereafter
issued in any context), (ii) shares of Common Stock
issued or issuable upon
conversion of Preferred Stock and (iii) shares of Common
Stock issued or issuable upon
exercise or conversion, as applicable, of stock
options, warrants or other convertible
securities of the
Company, in each case
now owned or subsequently acquired by any Key Holder,
any Investor,
or their
respective successors or
permitted transferees or assigns.
(b) "Common
Stock" means shares of Common Stock of the
Company.
(c) "Company Notice"
means written notice from the Company
notifying the selling Key
Holders that it intends to exercise its Right of First
Refusal as to some or all of
the Transfer Stock with respect to any Proposed Key
Holder Transfer.
(d) "Investor Notice"
means written
notice from an
Investor
notifying the Company and the
selling Key Holder that such Investor intends to
exercise its Secondary
Refusal Right as to a
portion of the Transfer Stock with
respect to any Proposed Key
Holder Transfer.
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(e) "Investors" means
the persons named on Schedule B hereto,
each person to whom the
rights of an Investor are assigned pursuant to Section
5(k) and each person who hereafter becomes a signatory to this Agreement
pursuant to Section 5(i) and
"Investor"
means any one of them,
as the
context
requires.
(f) "Key Holder
Stock" means any Common Stock now owned or
subsequently acquired by any
Key Holder or his permitted transferees or assigns.
(g) "Key Holders" means the persons named on Schedule A
hereto
and the respective transferees of such persons' Key Holder Stock
pursuant to
Section 4(a)
hereof.
(h) "Preferred Stock"
means shares of Preferred Stock of the
Company.
(i) "Proposed
Key Holder Transfer" means any proposed
assignment, sale, offer to
sell, pledge, mortgage, hypothecation, encumbrance,
disposition of or any other like transfer or
encumbering
of any Capital
Stock
(or any interest therein) proposed by any of the Key
Holders; provided
that
Proposed Key Holder Transfer
shall not include any merger, consolidation or like
transfer effected pursuant to a vote of the holders of Capital Stock of the
Company.
(j) "Proposed Transfer Notice" means written notice from a
Key
Holder setting forth the
terms and conditions of a Proposed Key Holder Transfer.
(k) "Prospective
Transferee"
means any person to
whom a Key
Holder proposes to make a
Proposed Key Holder Transfer.
(l) "Right of Co-Sale" means the right, but not an
obligation,
of an Investor to participate
in a Proposed Key Holder Transfer on the terms and
conditions specified in the
Proposed Transfer Notice.
(m) "Right
of First Refusal" means the right, but not an
obligation, of the Company,
or its permitted transferees or assigns, to purchase
some or all of the Transfer Stock with respect to a Proposed Key Holder
Transfer, on the terms and
conditions specified in the Proposed Transfer Notice.
(n) "Secondary
Notice" means written
notice from the Company
notifying the Investors and the Key Holders
that the Company does not intend to
exercise its Right of First Refusal as to all shares of Transfer Stock with
respect to any Proposed Key
Holder Transfer.
(o)
"Secondary
Refusal Right" means the right, but not an
obligation, of each Investor to purchase up to
its pro rata portion (based upon
the total number of shares of
Capital Stock then
held by all Investors)
of any
Transfer Stock not purchased pursuant to the Right of First
Refusal, on the
terms and conditions
specified in the Proposed Transfer Notice.
(p) "Transfer Stock"
means shares of Capital Stock subject to
a Proposed Key Holder
Transfer.
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(q)
"Undersubscription
Notice" means written
notice from
an
Investor notifying the Company and the selling Key Holder that
such
Investor
intends to exercise its
option to purchase a portion of the Transfer Stock not
purchased pursuant to the
Right of First Refusal or the Secondary Refusal Right.
2. Agreement Among the Company, the Investors and the Key
Holders.
(a) Right of First Refusal.
(1) Grant. Each Key
Holder hereby
unconditionally
and
irrevocably grants to the Company a Right of
First Refusal to
purchase all
or
any portion of Transfer
Stock that such Key
Holder may propose to transfer in a
Proposed Key Holder Transfer, at the same price and on the same terms and
conditions as those offered
to the Prospective Transferee.
(2) Notice. Each Key Holder proposing to make a Proposed
Key Holder Transfer must deliver a Proposed
Transfer Notice to the
Company and
each Investor not later than
fifteen (15) days prior to the consummation of such
Proposed Key Holder
Transfer. Such Proposed Transfer Notice shall contain
the
material terms and conditions of the Proposed Key Holder Transfer and the
identity of the Prospective
Transferee.
The Company must
exercise its Right of
First Refusal under this
Section 2 by giving a Company Notice to the selling Key
Holder within fifteen (15)
days after delivery of the Proposed Transfer Notice.
In the event of a conflict
between this Agreement
and any other
agreement that
may have been entered into by a Key Holder with the Company that contains a
preexisting right of first refusal,
the terms of this
Agreement shall
control
and the preexisting right of first refusal shall be deemed satisfied by
compliance with this Section
2(a)(1) and (2).
Notwithstanding the foregoing, in
the event of a contemplated private sale which would be within the volume
limitations of Rule 144(e) if
it were a public sale, the fifteen (15) day period
shall be reduced to two (2) business days and the name of the Prospective
Transferee need not be
provided.
(3) Grant of Secondary Refusal Right to Investors. Each
Key Holder hereby unconditionally and irrevocably grants to the Investors
a
Secondary Refusal Right to
purchase all or any portion of the Transfer Stock not
purchased by the Company
pursuant to the Right of First Refusal, as provided in
this subparagraph (3). If the Company does not
intend to exercise its Right of
Refusal with respect to all Transfer Stock subject to a Proposed Key
Holder
Transfer, the Company must deliver a
Secondary Notice to
each Investor to that
effect no later than fifteen
(15) days after the selling Key Holder delivers the
Proposed Transfer Notice to the Company. To exercise its Secondary Refusal
Right, an Investor must
deliver an Investor Notice to the selling Key Holder and
the Company within ten (10) days after the deadline for delivery of the
Secondary Notice.
Notwithstanding the
foregoing, in the event of a contemplated
private sale which would be
within the volume
limitations of Rule
144(e) if it
were a public sale, the fifteen (15) day period shall be reduced to two
(2)
business days and the name of
the Prospective Transferee need not be provided.
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(4) Forfeiture of Rights. Notwithstanding the foregoing,
if the total number of shares of Transfer Stock that the Company and the
Investors indicate an interest in
purchasing in the
Company Notice,
Investor
Notices and Undersubscription
Notices is less than the total number of shares of
Transfer Stock, then the Company and the Investors shall be deemed to have
forfeited any right to
purchase the Transfer
Stock, and the selling
Key Holder
shall be free to sell all,
but not less than all, of the Transfer Stock to the
Prospective Transferee (subject to the other terms and
restrictions
of this
Agreement, including without limitation the provisions of Section 2(b)),
provided, that such sale shall be
consummated
within 45 days after
receipt of
the Proposed Transfer Notice
by the Company.
(5)
Consideration;
Closing. If
the consideration
proposed to be paid for the
Transfer Stock is in property, services or other
non-cash consideration, the fair market value of the consideration shall be
determined in good faith by
the Company's Board of Directors. If the Company or
any Investor cannot for any reason pay for the
Transfer Stock in the
same form
of non-cash consideration, the Company or such Investor may
pay the cash value
equivalent thereof, as
determined by the Board of Directors. The closing of the
purchase of Transfer
Stock by the Company
and the Investors
shall take
place,
and all payments from the
Company and the Investors shall have been delivered to
the selling Key Holder,
by the later of (i)
the date specified in
the Proposed
Transfer Notice as the intended
date of the
Proposed Key Holder
Transfer
and
(ii) forty-five (45) days
after delivery of the Proposed Transfer Notice.
(b) Right of Co-Sale.
(1) If any Transfer
Stock subject to a Proposed Key
Holder Transfer is not purchased
pursuant to Section
2(a) above and thereafter
is to be sold to a
Prospective Transferee, each respective Investor may elect
to
exercise its Right of Co-Sale and participate on a pro-rata basis in the
Proposed Key Holder
Transfer on the same
terms and conditions
specified in the
Proposed Transfer Notice. Each Investor who desires to exercise
its Right of
Co-Sale must give the selling
Key Holder written
notice to that effect
within
five (5) days after the
deadline for delivery of the Investor Notice described
above, and upon giving such notice such Investor shall be deemed to have
effectively exercised the
Right of Co-Sale.
(2) Each Investor who timely exercises his, her or its
Right of Co-Sale by
delivering the written notice provided for above in
Section
2(b)(1) may include in the
Proposed Key Holder
Transfer all or any part of his,
her or its Capital Stock
equal to the product
obtained by
multiplying (i)
the
aggregate number of shares of Key
Holder Stock subject to the Proposed Key
Holder Transfer (excluding shares purchased by the Company or the
Investors
pursuant to the Right of
First Refusal or the Secondary Refusal Right) by (ii) a
fraction, the numerator of which is the
number of shares of Capital Stock owned
by such Investor immediately before consummation of the Proposed Key
Holder
Transfer (including any shares purchased by
such time pursuant to the Secondary
Refusal Right) and the denominator of which is the total number of shares of
Capital Stock owned, in the
aggregate, by all Investors immediately prior to the
consummation of the Proposed
Key Holder Transfer (including any shares purchased
by such time pursuant to the
Secondary Refusal
Right) plus the number of shares
of Capital Stock held by the selling
Key Holder.
To the extent one or
more of
the Investors exercise such right of
participation in accordance with the terms
and conditions set
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forth herein, the number of shares of Capital
Stock that the selling Key Holder
may sell in the Proposed Key
Holder Transfer shall be correspondingly reduced.
(3) Each Investor shall effect its participation in the
Proposed Key Holder Transfer
by delivering to the
transferring Key
Holder, no
later than fifteen (15) days after such Investor's exercise of the Right of
Co-Sale, one or more stock certificates,
properly endorsed for
transfer to the
Prospective Transferee,
representing:
(i) the number of shares of Common Stock that such
Investor
elects to include in the Proposed Key Holder Transfer;
or
(ii) the number of shares of Preferred Stock that
is at such
time convertible into the number of shares of Common Stock
that
such
Investor elects to include in the Proposed Key Holder Transfer;
provided,
however, that if the Prospective Transferee objects to the
delivery
of convertible
Preferred Stock in lieu of Common
Stock, such
Investor
shall first
convert the
Preferred Stock into Common Stock
and
deliver
Common Stock as
provided above.
The Company
agrees to make
any
such
conversion concurrent with and contingent upon the actual transfer
of
such
shares to the Prospective Transferee.
(4) The terms and
conditions of any sale
pursuant to
this Section 2(b) will be
memorialized in, and
governed by, a written
purchase
and sale agreement with
customary terms and provisions for such a transaction.
(5) Each stock
certificate an Investor delivers to the
selling Key Holder pursuant
to subparagraph (3) above will be transferred to the
Prospective Transferee against payment therefor in
c
