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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
9
<PAGE>
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
11
<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 ha
