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EXHIBIT 4.1
VANDA PHARMACEUTICALS INC.
2004 SECURITYHOLDER AGREEMENT
THIS 2004 SECURITYHOLDER AGREEMENT (the "AGREEMENT") is entered
into
as of September 28, 2004 among VANDA PHARMACEUTICALS INC., a
Delaware
corporation (the "COMPANY"), and each of the other parties
signatory hereto.
RECITALS
A. The
Company, the Care Capital Securityholder and the EDB
Securityholder previously entered into that certain Securityholder
Agreement
dated as of March 12, 2003 (the "ORIGINAL SECURITYHOLDER
AGREEMENT").
B. The
Securityholders are purchasing shares of the Company's
Series B Preferred Stock pursuant to that certain Series B
Preferred Stock
Purchase Agreement dated as of September 28, 2004 (the "2004
PURCHASE
AGREEMENT").
C. The
obligations in the 2004 Purchase Agreement are conditioned
upon the execution and delivery of this Agreement.
D. The
Company and the Securityholders now desire to amend and
restate the Original Securityholder Agreement in its entirety.
NOW, THEREFORE, in consideration of the foregoing and the
mutual
agreements herein contained, the parties hereto agree:
SECTION 1. CERTAIN DEFINITIONS.
1.1 DEFINITIONS.
For the purposes of this Agreement, the following
terms have the following meanings:
"AFFILIATE", with respect to any Person, means any other Person
directly
or indirectly controlling, controlled by or under common
control
with, such
Person. For purposes of this definition, "control" (including
with
correlative meanings, the terms "controlling", "controlled by"
or
"under
common control with"), as used with respect to any Person,
shall
mean the
possession, directly or indirectly, of the power to direct or
cause the
direction of the management and policies of such Person,
whether
through
the ownership of voting securities or by contract or otherwise.
"AFFILIATED GROUP", with respect to any Person, means such
Person
and each
Affiliate and Associate of such Person and each other Person
with
whom such
Person is acting "as a partnership, limited partnership,
syndicate,
or other group for the purpose of acquiring, holding, or
disposing
of" Shares (within the meaning of Section 13(d)(3) of the 1934
Act,
regardless of whether the Company shall at any time be subject to
the
requirements of the 1934 Act).
"ASSOCIATE" has the meaning given such term in Rule 12b-2 under
the
1934
Act.
"BENEFICIAL OWNER" or "BENEFICIALLY OWN" has the meaning given
such
term in
Rule 13d- 3 under the 1934 Act, and, with respect to any
options
or rights
to acquire any Security, shall be determined without regard to
whether
any such Security is "in the money."
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"BOARD OF DIRECTORS" means the Board of Directors of the
Company.
"BUSINESS DAY" means any day other than a Saturday, Sunday or
other
day on
which commercial banks are authorized or obligated to be closed
in
New York
City.
"CARE CAPITAL SECURITYHOLDER" means Care Capital Investments II,
LP,
a Delaware
limited partnership, and Care Capital Offshore Investments II,
LP, a
Cayman Islands exempted limited partnership.
"CAUSE" means, with respect to any individual, (i) any willful
violation
of any federal, state, foreign or other law or regulation
applicable
to the business or affairs of the Company or any of its
subsidiaries or Affiliates, or the commission of any felony or
other crime
involving
moral turpitude, or any willful perpetration of a common law
fraud; or
(ii) any other misconduct that is materially injurious to the
financial
condition or business reputation of, or is otherwise materially
injurious
to, the Company or any of its subsidiaries or Affiliates.
"CERTIFICATE" means the Certificate of Incorporation of the
Company,
as amended
from time to time.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMISSION" means the Securities and Exchange Commission, and
any
successor
commission or agency having similar powers.
"COMMON SHARE" means any share of Common Stock.
"COMMON STOCK" means the Common Stock, par value $.01 per share,
of
the
Company.
"COMPANY" means Vanda Pharmaceuticals Inc., a Delaware
corporation,
and any
successor thereto, whether by merger or otherwise.
"EDB SECURITYHOLDER" means BioMedical Sciences Investment Fund
Pte
Ltd.
"ENCUMBRANCE" means any lien, security interest, pledge, claim,
option,
right of first refusal, marital right or other encumbrance with
respect to
any Share.
"IPO" means the initial Public Offering of Shares after the
date
hereof.
"LAW" means any federal, state, local or foreign statute, law,
ordinance,
regulation, rule, code, order, other requirement or rule of
law.
"MEDI GROUP" shall mean (i) MEDI Ventures, (ii) MedImmune, and
(iii)
any
successors or permitted assignees of any of the foregoing.
"MEDI VENTURES" shall mean MedImmune Ventures, Inc., a Delaware
corporation, including any successor thereto or any permitted
assignee of
the
interest, in whole or in part, of MEDI Ventures under this
Agreement.
"MEDIMMUNE" shall mean MedImmune, Inc., a Delaware corporation,
including
any of its successors or permitted assigns.
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"MEP" means the Management Equity Plan of the Company, as
amended,
from time
to time.
"1933 ACT" means the Securities Act of 1933, as amended, and
the
rules and
regulations thereunder.
"1934 ACT" means the Securities Exchange Act of 1934, as
amended,
and the
rules and regulations thereunder.
"OUTSTANDING," with respect to any Shares, means, as of any date
of
determination, all Shares that have been issued on or prior to such
date,
other than
Shares repurchased or otherwise reacquired by the Company, or
any
controlled Affiliate thereof, on or prior to such date.
"PARTICIPANT" has the meaning assigned in the MEP.
"PERMITTED TRANSFEREE" means: (a) any Securityholder's
Affiliate
(including,
without limitation, in the case of MEDI Ventures, any member
of the
MEDI Group); (b) in the case of any Securityholder who is a
natural
person,
(i) the spouse, parents and lineal descendants (in each case,
whether
natural or adopted) of such Securityholder, (ii) a Person to
whom
Shares are
transferred by such Securityholder by will or the laws of
descent
and distribution, or (iii) a trust administered and controlled
by
such
Securityholder that is established for the exclusive benefit of
such
Securityholder or his or her Permitted Transferees; (c) the Company
or any
subsidiary
thereof; (d) in the case of any Securityholder which is a
grantor
trust, its grantor; or (e) any Person with respect to which the
Board of
Directors shall have adopted a resolution by a vote of 66-2/3%
of
its
members stating that the Board of Directors has no objection if a
Sale
of Shares
is made to such Person.
"PERSON" means an individual, a partnership, a joint venture, a
corporation, an association, a trust, an individual retirement
account or
any other
entity or organization, including a government or any
department
or agency
thereof.
"PREFERRED SECURITYHOLDER" means each Securityholder that owns
shares of
Preferred Stock.
"PREFERRED SECURITYHOLDER RESTRICTED PERSON" means any
Preferred
Securityholder or any Affiliate thereof, or the general partner,
managing
partner,
managing member or investment manager of any thereof, or any
officer,
director or private equity professional thereof.
"PREFERRED SHARE" means any share of Preferred Stock.
"PREFERRED STOCK" means any of the Company's Series A Preferred
Stock or
Series B Preferred Stock.
"PUBLIC COMPANY" means a company as to which the aggregate number
of
Common
Shares that have been sold in Public Offerings shall equal not
less
than 25%
of the Common Shares then outstanding.
"PUBLIC OFFERING" means an underwritten public offering of
equity
securities
of the Company pursuant to an effective registration statement
under the
1933 Act.
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"REGISTRABLE SHARES" means (a) Common Shares issued pursuant to
the
Care
Capital Securityholder and the EDB Securityholder pursuant to
the
2003 Stock
Subscription Agreements; (b) Common Shares issued upon the
conversion
of Preferred Shares; (c) any other Common Shares issued to a
Securityholder after the date hereof, whether or not upon
conversion of
any
Preferred Share, so long as the Board of Directors shall have
determined
prior to such issuance that such Common Shares shall be
"Registrable Shares"; and (d) any Shares issued or issuable in
respect of
Shares
referred to in clauses (a), (b) or (c) above by way of a stock
dividend
or a stock split or in connection with a combination or
subdivision of shares, reclassification, recapitalization,
merger,
consolidation or other reorganization of the Company. As to any
particular
Registrable Shares that have been issued, such securities shall
cease to
be
Registrable Shares when (i) a registration statement with respect
to
the sale
of such securities shall have become effective under the 1933
Act
and such
securities shall have been disposed of under such registration
statement,
(ii) they shall have been distributed to the public pursuant to
Rule 144,
(iii) they shall have been otherwise transferred or disposed
of,
and new
certificates, in the case of certificated shares, therefor not
bearing a
legend to the effect set forth in the first paragraph of the
form of legend
required by Section 4.2(a) restricting further transfer
shall have
been delivered by the Company, and subsequent transfer or
disposition of them shall not require their registration or
qualification
under the
1933 Act or any similar state law then in force or (iv) they
shall have
ceased to be outstanding.
"REGISTRATION EXPENSES" means all out-of-pocket expenses incident
to
the
Company's performance of or compliance with Section 5,
including,
without
limitation, all registration and filing fees (including filing
fees with
respect to the National Association of Securities Dealers,
Inc.), all
fees and expenses of complying with state securities or "blue
sky" laws
(including reasonable fees and disbursements of underwriters'
counsel in
connection with any "blue sky" memorandum or survey), all
printing
expenses, all listing fees, all registrars' and transfer
agents'
fees, all
"road show" expenses of the Company and the underwriters, the
fees and
disbursements of counsel for the Company and of its independent
public
accountants, including the expenses of any special audits
and/or
"cold
comfort" letters required by or incident to such performance
and
compliance, the reasonable fees and disbursements of one outside
counsel
retained
by the holders of Registrable Shares being registered (which
counsel
shall be satisfactory to the holders of a majority of the
shares
of
Registrable Shares being registered), but excluding
underwriting
discounts
and commissions and applicable transfer taxes, if any, which
shall be
borne by the sellers of the Registrable Shares being registered
in all
cases.
"RESTRICTED SHARES" means all Shares other than (a) Shares that
have
been
registered under a registration statement pursuant to the 1933
Act,
(b) Shares
with respect to which a Sale has been made in reliance on and
in
accordance with Rule 144 or other applicable exemption from
registration under the 1933 Act or (c) Shares with respect to which
the
holder
thereof shall have delivered to the Company either (i) an
opinion,
in form
and substance satisfactory to the Company, of counsel, who
shall
be
satisfactory to the Company, or (ii) a "no action" letter from
the
Commission, to the effect that subsequent transfers of such Shares
may be
effected
without registration under the 1933 Act.
"RESTRICTED TRANSFEREE" means any Person described in the most
recent
list, if any, of Persons (which list will be entitled "LIST OF
RESTRICTED
TRANSFEREES") that shall have been approved by the Board of
Directors
and delivered by the Company to a Prospective Seller (as
defined
for
purposes of Section 4.4) not later than ten Business Days after
receipt by
each Other Stockholder (as therein defined) and the Company of
an Offer
Notice (as therein defined).
"RULE 144" means Rule 144 (or any successor provision) under
the
1933
Act.
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"SALE" means (including with correlative meanings, the terms
"SELL"
or "SOLD")
any sale, assignment, transfer, distribution (whether by a
partnership to any of its partners or otherwise) or other
disposition of
Shares or
of a participation therein.
"SECURITYHOLDER" means each Person (other than the Company)
holding
Shares
that is a party to this Agreement, so long as such Person shall
beneficially own any Shares (whether or not any such Person owns
any
Shares on
the date hereof).
"SERIES A PREFERRED STOCK" means Series A Preferred Stock, par
value
$.01 per
share, of the Company.
"SERIES B PREFERRED STOCK" means Series B Preferred Stock, par
value
$.01 per
share, of the Company.
"SERIES B PREFERRED DIRECTOR" means the three members of the
Board
of
Directors designated by holders of the outstanding shares of Series
B
Preferred
Stock, voting together as a class and to the exclusion of all
other
classes of capital stock of the Company.
"SHARE" means any share of Common Stock or Preferred Stock.
"THIRD PARTY" means, with respect to any Securityholder, any
other
Person,
other than the Company and its subsidiaries or any Affiliate of
such
Securityholder.
SECTION 2. CERTAIN GOVERNANCE MATTERS
2.1 Board of
Directors Meetings; Director Compensation. The
Company agrees to use its best efforts to ensure that each
committee of the
Board of Directors shall include at least one designee of the
Series B Preferred
Directors. The Company agrees that the Board of Directors shall
meet at least
quarterly, unless otherwise agreed by the Board of Directors. In
the event that
any non-employee director receives any compensation for serving on
the Board of
Directors, all non-employee directors shall be entitled to receive
compensation
therefor at the same rate and on the same terms. The Company shall
reimburse the
non-employee directors for their customary and reasonable expenses
incurred in
attending meetings of the Board of Directors (or meetings of
committees thereof)
in accordance with the Company's policy on reimbursement of such
expenses.
2.2 Insurance.
The Company shall maintain a directors' and
officers' liability insurance policy upon such terms as may be
determined by the
Board of Directors.
2.3 Employee Stock Options. With respect to any Shares issued
or
options or rights granted to employees and consultants after the
date hereof,
unless otherwise approved by the Board of Directors, the Company
shall cause
each employee and consultant of the Company to enter into an
agreement providing
for vesting of such Shares or options or rights in accordance with
the MEP, as
in effect on the date hereof. No Shares or options or rights shall
vest in the
12 months following the date of commencement of the employee's or
consultant's
services in the case of new hires, or the date of issuance or grant
in the case
of subsequent stock or option grants. Immediately after the Initial
Closing (as
such term is defined in the Purchase Agreement), the Company shall
reserve an
additional 3,337,114 Shares for issuance under the MEP.
2.4 Qualified
Small Business Stock. The Company agrees to use its
Best Efforts (as defined below) to cause its capital stock to be
characterized
as "qualified small business stock" as defined in Section 1202(c)
of the Code
("QUALIFIED SMALL BUSINESS STOCK"), unless the Board of
Directors
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determines that such a characterization is not in the best
interests of the
Company. "Best efforts" shall mean only that the Company: (i)
complies with any
applicable filing or reporting requirements imposed by the Code on
issuers of
Qualified Small Business Stock; (ii) executes and delivers to
each
Securityholder, from time to time, such forms, documents, schedules
and other
instruments as may be reasonably requested thereby to cause the
Securityholder's
Shares of the Company to be characterized as Qualified Small
Business Stock; and
(iii) submits to the Securityholders and to the Internal Revenue
Service any
reports that may be required under Section 1202(d)(l)(C) of the
Code and any
related Treasury Regulations. The Company further agrees that,
within 10 days
after any Securityholder has delivered to the Company a written
request
therefor, the Company shall deliver to such Securityholder a
written statement
informing the Securityholder whether, in the Company's good-faith
judgment after
a reasonable investigation, such Securityholder'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 2.4 shall continue notwithstanding the fact that a class of
the
Company's stock may be traded on an established securities
market.
2.5 Financial
Statements and Reports to Stockholders; Budget. The
Company agrees to deliver to each Preferred Securityholder:
(a) as soon as
practicable after the end of each month, and in any
event within 30 days (45 days in the case of the month ending each
fiscal
quarter) thereafter, consolidated balance sheets of the Company and
its
subsidiaries 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 and
which shall show an analysis of variances from the budget and the
prior month
(with the exception that no notes need be attached to such
statements and
year-end audit adjustments may not have been made);
(b) as soon as
practicable after the end of each fiscal quarter of
the Company, and in any event within 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 for such quarterly period and analyzing
variances from
the budget and the prior fiscal quarter (with the exception that no
notes need
be attached to such statements and year-end audit adjustments may
not have been
made);
(c) as soon as
practicable after the end of each fiscal year of
the Company, and in any event within 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 (i) in reasonable
detail, (ii)
prepared in accordance with generally accepted accounting
principles, and (iii)
accompanied by the opinion of independent public accountants of
recognized
standing selected by the Company; and
(d) within 30
days prior to the end of each fiscal year, an
operating budget and plan respecting the next fiscal year that will
be subject
to the approval of the Board of Directors.
2.6 Right of
First Refusal, Co-Sale and Drag-Along Provisions.
Following the Initial Closing, the Company shall require all
purchasers (other
than purchasers under the 2004 Purchase Agreement) from the Company
of shares of
Common Stock who, following such purchase, shall hold greater than
1 % of Common
Stock (calculated on a fully-diluted basis), to agree to the terms
and
conditions set forth in the attached Exhibit 2.6.
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2.7 Inspection.
The Company shall permit each Preferred
Securityholder, at such Securityholder'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 Securityholder;
provided,
however, that the Company shall not be obligated to provide access
(i) to a
competitor of the Company, any information which it reasonably
considers to be a
trade secret or confidential information; or (ii) to MEDI Ventures,
any trade
secret or confidential information if the Board of Directors
determines in good
faith that it would be contrary the Company's best interests to
share such
information with MEDI Ventures. The rights of a Preferred
Securityholder under
this Section 2.7 may not be assigned as part of such
Securityholder's sale of
any of the Registrable Securities except with the consent of the
Company, which
consent shall not be unreasonably withheld; provided, however,
that
notwithstanding the foregoing, (i) MEDI Ventures may assign these
rights to any
member of the MEDI Group and (ii) any Securityholder which is a
grantor trust
may transfer its rights to its grantor.
2.8 Employee
Confidentiality Agreement. The Company shall require
that each employee and consultant hired or engaged by the Company
following the
date hereof signs an employee confidentiality agreement,
substantially in the
form attached hereto as Exhibit 2.8 (unless such agreement shall be
modified by
the Company upon the approval of the Board of Directors (including
a majority of
the Series B Directors)). Further, within 15 days of the Initial
Closing, the
Company shall require that each of its current employees and
consultants signs
such an employee confidentiality agreement, substantially in the
form attached
hereto as Exhibit 2.8.
2.9 Securityholder Matters.
(a) This
Agreement shall not impose any fiduciary duty on any
Securityholder or its Affiliates in any such Securityholder's
capacity as a
Securityholder. To the maximum extent permitted by Law, each
Securityholder
hereby waives all fiduciary duties that, absent such waiver, may be
implied by
Law, and, in doing so, recognizes, acknowledges and agrees that its
duties and
obligations to each other Securityholder and to the Company are
only as
expressly set forth herein.
(b) Each
Securityholder acknowledges that the other
Securityholders and their Affiliates may own interests in and/or
manage other
businesses, including businesses that may compete with the Company
or the other
Securityholders. Each Securityholder and its Affiliates, and their
respective
officers, directors, Securityholders, partners, members, agents and
employees,
and each member of the Board of Directors (or observer thereon)
designated by
such Securityholder (collectively, a "CORPORATE OPPORTUNITIES
GROUP"), shall not
be prohibited or restricted from engaging or investing in,
independently or with
others, any business opportunity of any type or description,
including, without
limitation, those business opportunities that might be the same or
similar to
the Company's business. None of the Company, any Securityholder or
such
Securityholder's Corporate Opportunities Group shall have any right
in or to
such other business opportunities of any other Securityholder or
such other
Securityholder's Corporate Opportunities Group or to the income or
proceeds
derived therefrom. No Securityholder or its Corporate Opportunities
Group shall
be obligated to present any business opportunity to the Company or
any other
Securityholder or such other Securityholder's Corporate
Opportunities Group,
even if the opportunity is of the character that, if presented to
the Company,
could be undertaken by the Company or, if presented to any other
Securityholder
or other Securityholder Corporate Opportunities Group, could be
undertaken by
such Persons. Each Securityholder and its Corporate Opportunities
Group shall
have the right to hold any such business opportunity for its own
account or to
recommend such opportunity to Persons other than the Company, any
other
Securityholder or any Person in such other Securityholder's
Corporate
Opportunities Group.
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(c)
Notwithstanding the foregoing, nothing in this Section 2.9
shall relieve, limit, alter or otherwise change the fiduciary duty
owed to the
Company by any officer, director or stockholder who is not a
Securityholder.
SECTION 3. PREEMPTIVE RIGHTS
3.1 Offer to
Sell. Except in the case of Excluded Securities, the
Company shall not issue, sell or exchange, or agree to issue, sell
or exchange
(i) any Common Shares, (ii) any Preferred Shares of the Company
that by their
terms are convertible into or exchangeable for Common Shares, or
(iii) any
option, warrant or other right to subscribe for, purchase or
otherwise acquire
any equity security of the Company specified in the foregoing
clause (i) or
(ii), in each such case for the purpose of financing the business
of the Company
(an "EQUITY FINANCING"), unless in each case the Company shall have
first
offered to sell to the Securityholders (for purposes of this
Section 3, each an
"OFFEREE" and, together, the "OFFEREES") such Offeree's Section 3
Proportionate
Percentage of such securities (for purposes of this Section 3, the
"OFFERED
SECURITIES"), at a price and on such other material terms and
conditions as are
generally applicable to such Equity Financing and which shall have
been
specified by the Company in writing and delivered to each Offeree
(for purposes
of this Section 3, the "OFFER"). The Offer shall by its terms
remain open and
irrevocable for a period of 20 Business Days from the date it is
delivered by
the Company to the Offerees. For purposes of this Section 3, the
"SECTION 3
PROPORTIONATE PERCENTAGE" means, as of any date of determination,
the percentage
figure equal to the ratio between the number of Common Shares
beneficially owned
by an Offeree of the Company and the aggregate number of Common
Shares
outstanding (and issuable upon the exercise of all convertible
securities
outstanding).
3.2 Acceptance
of Offer. Each Offeree shall have the right and
option, for a period of 20 Business Days after delivery by the
Company of the
Offer, to accept any or all its Offered Securities on the terms
stated in the
Offer. Acceptance shall be made by delivering, within the 20
Business Day period
of the Offer, a written notice (for purposes of this Section 3, a
"NOTICE OF
ACCEPTANCE") to the Company, which notice shall set forth the
portion of the
Offered Securities that such Offeree elects to purchase. Such
Offer, or any
portion thereof, may be irrevocably rejected at any time within
such 20 Business
Day period by written notice to the Company by the Offeror.
3.3
Overallotment Securities. If any Offeree fails to properly
accept all of its Offered Securities, then such unaccepted Offered
Securities
shall become the "OVERALLOTMENT SECURITIES." Each Offeree that
properly accepts
all of its Offered Securities (a "FULLY-EXERCISING OFFEREE") shall
have the
right, at the time it accepts and for a period of 10 days
thereafter
(collectively, the "OVERALLOTMENT PERIODS"), to purchase a portion
of the
Overallotment Securities on a pro rata basis according to such
Fully-Exercising
Offeree's Section 3 Proportionate Percentage.
3.4 Remaining
Securities. Upon expiration of the Overallotment
Periods, the Company shall have 90 days to sell all or any part of
the remaining
Overallotment Securities (the "REMAINING SECURITIES") to any other
Person or
Persons, upon terms and conditions in all material respects,
including, without
limitation, price, which are not materially more favorable, in the
aggregate, to
such other Person or Persons and not materially less favorable to
the Company
than those set forth in the Offer. Upon the closing of the sale to
such other
Person or Persons of all the Remaining Securities, which closing
shall include
full payment to the Company, (i) the Offerees shall purchase from
the Company,
and the Company shall sell to the Offerees, the Offered Securities
with respect
to which Notices of Acceptance were delivered to the Company by the
Offerees for
the price and at the terms specified in the Offer, and (ii) the
Fully-Exercising
Offerees shall purchase from the Company, and the Company shall
sell to the
Fully-Exercising Offerees, the Overallotment Securities.
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3.5 Excluded
Securities. The rights of the Offerees under this
Section 3 shall not apply to the following securities (the
"EXCLUDED
SECURITIES"):
(a) securities
issued in connection with a Public Offering or
securities issued in a Rule 144A offering;
(b) Common
Shares issued, or stock options granted, or Common
Shares issuable upon exercise of stock options granted, pursuant to
the MEP;
(c) securities
issued as a stock dividend or upon any stock split
or other subdivision or combination of Shares;
(d) the issuance
of any Common Shares upon the exercise,
conversion or exchange of any option, warrant, convertible or
exchangeable
security or other right to subscribe for, purchase or otherwise
acquire any
security of the Company;
(e) securities
issued (i) in connection with any acquisition of
the stock, assets or business of a Person, or (ii) in respect of
the initiation
of a joint venture or strategic alliance with another Person, in
each case,
which has been approved by the Board of Directors; and
(f) any
securities offered or sold after an IPO.
3.4 Board of
Directors Determination. The Board of Directors shall
be entitled to make any determination required or permitted to be
made under
this Section 3, including any determination of compliance with the
provisions
hereof by any Person, and any such determination shall be final and
binding on
the Company and all stockholders.
SECTION 4. RESTRICTIONS ON TRANSFER.
4.1 General
Restriction. Each Securityholder agrees that it will
not, directly or indirectly, offer, sell, assign, transfer, grant
or sell a
participation in, pledge or otherwise dispose of any Shares (or
solicit any
offers to buy or otherwise acquire, or take a pledge of, any
Shares) in any
manner that would conflict with or violate the 1933 Act or this
Agreement.
4.2 Legends.
(a) To the
extent required by, or advisable to comply with, the
1933 Act or other applicable law, the Company shall affix to each
certificate
evidencing outstanding Shares that is issued to any Securityholder
a legend in
substantially the following form:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO REGISTRATION
OF
TRANSFER OF SUCH SECURITIES WILL BE MADE ON THE BOOKS OF THE
ISSUER
UNLESS
SUCH TRANSFER IS MADE IN CONNECTION WITH AN EFFECTIVE
REGISTRATION
STATEMENT
UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM THE
REGISTRATION
REQUIREMENTS OF
SUCH ACT OR SUCH ACT DOES NOT APPLY.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN
RESTRICTIONS ON TRANSFER AS SET FORTH IN A SECURITYHOLDER AGREEMENT
DATED
AS OF
SEPTEMBER 28, 2004, A COPY OF WHICH IS ON FILE AT
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THE
PRINCIPAL EXECUTIVE OFFICES OF THE ISSUER. NO REGISTRATION OF
TRANSFER
OF SUCH
SECURITIES WILL BE MADE ON THE BOOKS OF THE ISSUER UNLESS AND
UNTIL SUCH
RESTRICTIONS SHALL HAVE BEEN COMPLIED WITH."
(b) In the event that any Shares shall cease to be Restricted
Shares, the Company shall, upon the written request of the holder
thereof, issue
to such holder a new certificate evidencing such Shares without the
first
paragraph of the legend required by Section 4.2(a) endorsed
thereon. In the
event that any Shares shall cease to be subject to the restrictions
on transfer
set forth in this Agreement, the Company shall, upon the written
request of the
holder thereof, issue to such holder a new certificate evidencing
such Shares
without the second paragraph of the legend required by Section
4.2(a).
4.3 Certain
Restrictions on Transfer. Each Securityholder agrees
that it will not, directly or indirectly, make any Sale or create,
incur or
assume any consensual Encumbrance with respect to any Shares held
by such
Securityholder, other than: (a) any Sale that is made in compliance
with the
procedures, and subject to the limitations, set forth in Section
4.4; (b) any
Sale that is made in compliance with the procedures, and subject to
the
limitations, set forth in Section 4.5; (c) any Sale pursuant to a
Public
Offering in accordance with Section 5; or (d) any Sale to a
Permitted
Transferee. Notwithstanding the foregoing, except as otherwise
expressly
provided herein, all Sales permitted by the foregoing clauses (a)
through (d)
shall be subject to, and shall not be made other than in compliance
with, the
provisions of Sections 4.1, 4.2, 4.6 and 4.7.
4.4
Right of First
Refusal.
(a) If any
Securityholder receives from or otherwise negotiates
with a Third Party a bona fide financed offer to purchase (for
purposes of
Sections 4.4 and 4.5, an "OFFER") any of the Shares owned or held
by such
Securityholder, and such Securityholder intends to pursue a sale of
such Shares
to such Third Party, such Securityholder (for purposes of Sections
4.4 and 4.5,
the "PROSPECTIVE SELLER") shall provide the Company and each
Securityholder that
owns Shares (for purposes of Sections 4.4 and 4.5, the "OTHER
SECURITYHOLDERS")
written notice of such Offer (for purposes of Sections 4.4 and 4.5,
an "OFFER
NOTICE"). The Offer Notice shall identify the Third Party making
the Offer, the
number of Shares with respect to which the Prospective Seller has
such an Offer
(for purposes of Sections 4.4 and 4.5, the "OFFERED SHARES"), the
price per
Share at which a sale is proposed to be made (for purposes of
Sections 4.4 and
4.5, the "OFFER PRICE"), the form of consideration to be paid and
all the other
material terms and conditions of the Offer.
(b) The receipt
of an Offer Notice by each Other Securityholder
and the Company from a Prospective Seller shall constitute an offer
by such
Prospective Seller to sell to each Other Securityholder (other than
the
Prospective Seller and its Affiliates) and the Company the Offered
Shares at the
Offer Price in cash (in an amount equal to the cash consideration
specified in
such Offer Notice or, if such consideration is not cash, an amount
equal to the
fair market value of such noncash consideration as determined in
good faith by
the Board of Directors). Such offer shall be irrevocable for 20
Business Days
after receipt of such Offer Notice (for purposes of Sections 4.4
and 4.5, the
"NOTICE PERIOD") by each such Other Securityholder and the Company.
During the
Notice Period, each such Other Securityholder and the Company
shall, subject to
the priorities set forth in the next succeeding paragraph, have the
right to
accept such offer as to all or a portion of the Offered Shares by
giving a
written notice of acceptance (for purposes of this Section 4.4, the
"NOTICE OF
ACCEPTANCE") to the Prospective Seller prior to the expiration of
the Notice
Period (for the purposes of this Section 4.4, any such Other
Securityholder or
the Company so accepting such offer, an "ACCEPTING PARTY"). In the
event that
within five Business Days prior to the expiration of the Notice
Period, the
Prospective Seller shall not have received Notices of Acceptance
for all the
Offered Shares, the Prospective Seller shall notify each such
Other
Securityholder
10
<PAGE>
of such fact and shall provide each thereof an opportunity to
submit an
additional Notice of Acceptance of any such Offered Shares.
Each such Other Securityholder and the Company shall be entitled
to
accept such offer from the Prospective Seller in the following
order of
priority: First, the Company shall be entitled to accept such offer
for any or
all of the Offered Shares; second, if the Company shall not have
accepted such
offer for all the Offered Shares, each such Other Securityholder
shall be
entitled to accept such offer for not more than the portion of the
remaining
Offered Shares determined on a pro rata basis based on the ratio of
the number
of Common Shares then beneficially owned by such Other
Securityholder to the
number of Common Shares then beneficially owned by all such
Other
Securityholders; and third, if one or more such Other
Securityholders and the
Company have not accepted such offer for all the Offered Shares,
each such Other
Securityholder shall then be entitled to accept such offer for not
more than the
portion of the remaining Offered Shares determined on a pro rata
basis based on
the ratio of (i) the number of Offered Shares specified in such
Other
Securityholder's Notice of Acceptance in respect of which such
Other
Securityholder shall not be entitled to accept the Prospective
Seller's offer as
a result of the application of clause second above to (ii) the
number of Offered
Shares specified in all such Other Securityholders' Notices of
Acceptance in
respect of which such Other Securityholders shall not be entitled
to accept the
Prospective Seller's offer as a result of the application of clause
second above
(it being understood that each such Other Securityholder shall be
entitled to
indicate its interest in accepting more than its pro rata share of
the remaining
Offered Shares and to accept the Prospective Seller's offer with
respect to such
additional Offered Shares if all the Offered Shares are not
otherwise accepted
pursuant to clause first, second and third). If the Company or any
such Other
Securityholder so accepts the Prospective Seller's offer, such
Person will
purchase for cash from the Prospective Seller, and the Prospective
Seller will
sell to such Accepting Party, such number of Offered Shares as to
which such
Accepting Party shall have accepted the Prospective Seller's offer.
The price
per Share to be paid by such Accepting Party shall be the Offer
Price specified
in the Offer Notice. The Notice of Acceptance shall specify (i)
such Accepting
Party's acceptance of the Prospective Seller's offer and (ii) the
number of
Offered Shares to be purchased by such Accepting Party.
(c) The
consummation of any such purchase by and sale to any
Accepting Party shall take place on such date, not later than 30
Business Days
after receipt of the Notice of Acceptance from such Accepting Party
by the
Prospective Seller, as such Accepting Party and the Prospective
Seller shall
select. Upon the consummation of such purchase and sale, the
Prospective Seller
shall (i) deliver to the Accepting Party certificates (in the case
of
certificated shares) evidencing the Offered Shares purchased and
sold duly
endorsed in blank or accompanied by written instruments of transfer
in form
satisfactory to such Accepting Party duly executed by the
Prospective Seller, or
an instruction (in the case of uncertificated shares) to register
such Offered
Shares purchased and sold in a manner satisfactory to the Accepting
Party, and
(ii) shall assign all its rights under this Agreement with respect
to the
Offered Shares purchased and sold pursuant to an instrument of
assignment
reasonably satisfactory to such Accepting Party.
(d) In the event
that (i) each such Other Securityholder and the
Company shall have received an Offer Notice from a Prospective
Seller but the
Prospective Seller shall not have received from the Company and one
or more
Other Securityholders Notices of Acceptance as to all the Offered
Shares prior
to the expiration of the Notice Period or (ii) an Accepting Party
shall have
given a Notice of Acceptance to the Prospective Seller but shall
have failed to
consummate, other than as a result of the fault of the Prospective
Seller, a
purchase of the Offered Shares with respect to which such Notice of
Acceptance
was given within 45 days after receipt of the Notice of Acceptance
by the
Prospective Seller, such Prospective Seller shall have the right to
reject any
or all Notices of Acceptance theretofore received from the Other
Securityholders
and the Company, and nothing in this Section 4.4 shall limit the
right of the
Prospective Seller to make a sale of the Offered Shares so long as
all the
Offered Shares that are sold
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<PAGE>
or otherwise disposed of by the Prospective Seller (which number of
Offered
Shares shall be not less than the number of Offered Shares
specified in such
Offer Notice) are sold for the consideration specified in such
Offer Notice (A)
within 60 days after the date of receipt of such Offer Notice by
each such Other
Securityholder and the Company, (B) at an amount not less than the
Offer Price
included in such Offer Notice and (C) to the Third Party making the
Offer (so
long as none of such Third Parties is a Restricted Transferee).
(e) In the event
that each such Other Securityholder and the
Company shall have received an Offer Notice from a Prospective
Seller but shall
not have given a Notice of Acceptance for all the Offered Shares to
the
Prospective Seller prior to the expiration of the Notice Period
following
receipt of such Offer Notice and such Prospective Seller shall not
have sold the
remaining Offered Shares before the expiration of the 60 day period
in
accordance with paragraph (d) above, then such Prospective Seller
shall not give
another Offer Notice for a period of 90 days from the last day of
such 60 day
period.
(f) Anything in
this Section 4.4 or in Section 4.3 to the contrary
notwithstanding, the provisions of this Section 4.4 will not be
applicable to
any Sale or Encumbrance described in clauses (b) through (e) of
Section 4.3.
4.5 Right to
Participate in Certain Dispositions.
(a) So long as
any Securityholder (and its Affiliates) shall
beneficially own, in the aggregate, at least 10% of the Common
Shares
outstanding or issuable upon the exercise or conversion of any
outstanding
options or other rights to acquire Common Shares, no such
Securityholder shall
in any transaction or series of related transactions, directly or
indirectly,
sell or otherwise dispose of for value any Shares held by it to any
Third Party
or Parties, unless the terms and conditions of such sale or other
disposition
shall include an offer to include, at the option of each of the
Other
Securityholders, in such sale or other disposition to the Third
Party or Third
Parties, such Other Securityholder's Pro Rata Portion (as
hereinafter defined)
of the Offered Shares on the terms set forth in this Section
4.5.
(b) If, so long
as any Securityholder (and its Affiliates) shall
beneficially own, in the aggregate, at least 10% of the Common
Shares
outstanding or issuable upon the exercise or conversion of any
outstanding
options to acquire Common Share, any such Securityholder receives
from a Third
Party or Parties an Offer to acquire the Offered Shares, thus
becoming a
Prospective Seller in accordance with the definition of Section
4.4, and such
Prospective Seller intends to pursue a sale of such Shares to such
Third Party
or Parties, the Prospective Seller shall send the Offer Notice to
each of the
Other Securityholders not later than the 20th Business Day prior to the
consummation of the sale or other disposition contemplated by the
Offer. The
Offer Notice shall identify the Offered Shares, the price offered
for such
Offered Shares, all other material terms and conditions of the
Offer and, in the
case of an Offer in which the consideration payable for Shares
consists in whole
or in part of consideration other than cash, such information
relating to such
other consideration as the Company may reasonably determine. During
the Notice
Period, each Other Securityholder shall have the right and option
to notify the
Prospective Seller of such Other Securityholder's interest in
selling or
otherwise disposing of up to its Pro Rata Portion of the Offered
Shares pursuant
to the Offer. Each Other Securityholder desiring to exercise such
option shall,
prior to the expiration of the Notice Period, provide the
Prospective Seller
with a written notice specifying the number of Shares as to which
such Other
Securityholder has an interest in selling or otherwise disposing of
pursuant to
the Offer (for purposes of this Section 4.5, a "NOTICE OF
INTEREST"), and shall
deliver to the Prospective Seller (A) the certificate or
certificates (in the
case of certificated shares) evidencing the Shares to be sold or
otherwise
disposed of pursuant to such Offer by such Other Securityholder
duly endorsed in
blank or accompanied by written instruments of transfer in form
satisfactory to
the Prospective Seller executed by such Other Securityholder, or an
instruction
(in the case of uncertificated shares) to register the transfer of
the Shares or
be sold or otherwise disposed of
12
<PAGE>
pursuant to such Offer by such Other Securityholders in a form
satisfactory to
the Prospective Seller executed by such Other Securityholder, (B)
an instrument
of assignment reasonably satisfactory to the Prospective Seller
assigning, as of
the consummation of the sale or other disposition to the Third
Party or Parties,
all such Other Securityholder's rights hereunder with respect to
the Shares to
be sold or otherwise disposed of, and (C) a special irrevocable
power-of-attorney authorizing the Prospective Seller to sell or
otherwise
dispose of such Shares pursuant to the terms of the Offer and to
take all such
actions as shall be necessary or appropriate in order to consummate
such sale or
other disposition. Delivery of such certificate or certificates
evidencing the
Shares to be sold (or such instruction), the instrument of
assignment and the
special irrevocable power-of-attorney authorizing the Prospective
Seller to sell
or otherwise dispose of such Shares shall constitute an irrevocable
election by
such Other Securityholder to authorize and permit the Prospective
Seller to sell
such Shares pursuant to the Offer.
(c) Promptly
after the consummation of the sale or other
disposition of the Shares of the Prospective Seller and the
Other
Securityholders to the Third Party or Parties pursuant to the
Offer, the
Prospective Seller shall remit to each of the Other Securityholders
the total
sales price of the Shares of such Other Securityholders sold or
otherwise
disposed of pursuant thereto.
(d) If at the
end of the Notice Period, any Other Securityholder
shall not have given a Notice of Interest (and delivered all other
required
documents) with respect to some or all of its Pro Rata Portion of
the Offered
Shares,
