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EXHIBIT 10.1
FOURTH AMENDED AND RESTATED
STOCKHOLDERS' AGREEMENT
CELL PATHWAYS, INC.
DATED AS OF APRIL ___, 1998
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TABLE OF CONTENTS
PAGE
SECTION 1. DEFINITIONS.................................................1
SECTION 2. VOTING AGREEMENT............................................5
2.1 Charter Documents...........................................5
2.2 Board Size; Voting Agreement................................5
2.3 Director Designation Rights.................................6
2.3.1 Technology Partners................................6
2.3.2 Quest II...........................................6
2.3.3 Northwood Ventures.................................6
2.3.4 FGN................................................6
2.4 Termination of Designation Rights...........................7
2.4.1 FGN................................................7
2.4.2 Technology Partners................................7
2.4.3 Quest II...........................................7
2.4.4 Northwood Ventures.................................7
2.5 Failure to Designate........................................7
2.6 Record of Vote..............................................8
2.7 Removal and Resignation.....................................8
2.7.1 Right of Designation...............................8
2.7.2 Removal............................................8
2.8 Best Efforts................................................9
2.9 FGN Preferred Stock Voting..................................9
2.10 Observer....................................................9
2.11 Termination and Amendment of Voting Agreement...............9
SECTION 3. REGISTRATION RIGHTS........................................10
3.1 Requested Registrations....................................10
3.1.1 Requests for Registration.........................10
3.1.2 Notice of Registration............................10
3.1.3 Refusal of Request................................10
3.1.4 Deferral of Registration..........................11
3.1.5 Underwriting......................................12
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TABLE OF CONTENTS
(CONTINUED)
PAGE
3.1.6 Registration Procedures...........................12
3.1.7 Marketing Restrictions............................12
3.2 Incidental Registration....................................13
3.2.1 Notice of Registration............................13
3.2.2 No Registration Rights............................13
3.2.3 Underwriting......................................13
3.2.4 Marketing Restrictions............................14
3.3 Registration Procedures....................................14
3.3.1 Registration Statement............................14
3.3.2 Amendments........................................14
3.3.3 Copies............................................14
3.3.4 State Registration................................15
3.3.5 Listing...........................................15
3.3.6 Transfer Agent/Registrar..........................15
3.3.7 Underwriting......................................15
3.4 Expenses of Registration...................................15
3.5 Registration on Form S-3...................................16
3.5.1 Requested Registrations...........................16
3.5.2 Incorporation by Reference........................16
3.6 Indemnification............................................16
3.6.1 Company Indemnification...........................16
3.6.2 Eligible Holder Indemnification...................17
3.6.3 Procedures........................................17
3.6.4 Contribution......................................18
3.6.5 Conflicting Provisions............................18
3.6.6 Survival..........................................18
3.7 Eligible Holder Information................................19
3.8 Other Agreements...........................................19
3.9 Rule 144...................................................19
3.10 Market Stand-Off Agreement.................................19
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TABLE OF CONTENTS
(CONTINUED)
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3.11 Allocation of Registration Opportunities...................19
3.11.1 Requested Registrations...........................19
3.11.2 Incidental Registrations..........................20
3.12 Delay of Registration......................................21
3.13 Sales to Underwriter.......................................21
3.14 Transfer of Registration Rights............................21
3.15 Termination of Registration Rights.........................21
SECTION 4. RIGHT OF FIRST REFUSAL.....................................21
4.1 Grant of Right.............................................21
4.2 New Securities Defined.....................................22
4.3 Exercise of Right..........................................22
4.4 Refusal of Offer...........................................22
4.5 Failure to Exercise........................................23
4.6 Expiration.................................................23
4.7 Transfer of Right..........................................23
SECTION 5. RIGHT OF CO-SALE...........................................23
5.1 Sales by FGN...............................................23
5.2 Right of Co-Sale...........................................24
5.3 Delivery of Certificates...................................24
5.4 Future Rights..............................................25
5.5 Exempt Transfers...........................................25
5.6 Prohibited Transfers.......................................25
5.7 Termination of Co-Sale Rights..............................25
SECTION 6. COMPANY COVENANTS..........................................26
6.1 Financial Statements and Information.......................26
6.1.1 Annual Reports....................................26
6.1.2 Quarterly Reports.................................26
6.1.3 Commission Reports................................26
6.1.4 Additional Information............................27
6.1.5 Inspection Rights.................................27
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TABLE OF CONTENTS
(CONTINUED)
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6.1.6 Confidentiality...................................27
6.2 Key Man Insurance..........................................27
6.3 Underwriting Public Offering...............................27
SECTION 7. TRANSFER OF SECURITIES.....................................28
7.1 Restrictions on Transfer...................................28
7.2 Restrictive Legends........................................28
7.3 Notice of Proposed Transfer................................28
7.4 Termination of Restrictions................................29
7.4.1 Securities Law Restrictions.......................29
7.4.2 Co-Sale Restrictions..............................29
7.5 Elimination of Legend......................................29
SECTION 8. MISCELLANEOUS..............................................30
8.1 Severability...............................................30
8.2 Descriptive Headings.......................................30
8.3 Notices....................................................30
8.4 Counterparts...............................................30
8.5 Entire Agreement...........................................30
8.6 Amendments.................................................31
8.7 Governing Law..............................................31
8.8 Intended Beneficiaries.....................................31
8.9 GS Group Assignment........................................31
8.10 No Inconsistent Agreements.................................31
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FOURTH AMENDED AND RESTATED
STOCKHOLDERS' AGREEMENT
FOURTH AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT dated as of April
__, 1998 (the "Agreement") by and among CELL PATHWAYS, INC., a Delaware
corporation (the "Company"), FGN, INC., an Illinois corporation ("FGN") that is
a Holder of the Company's Common Stock, and Series A, Series B and Series E
Convertible Preferred Stock, NORTHWOOD VENTURES, a New York limited partnership
("Northwood Ventures") that is a Holder of the Company's Series A, Series B and
Series E Convertible Preferred Stock, TECHNOLOGY PARTNERS WEST FUND IV, L.P., a
California limited partnership ("Technology Partners") that is a Holder of the
Company's Series B, Series C and Series E Convertible Preferred Stock, QUEST
VENTURES II, a California limited partnership ("Quest II") that is a Holder of
the Company's Series B, Series C and Series E Convertible Preferred Stock, QUEST
VENTURES INTERNATIONAL, also a California limited partnership ("Quest
International") that is a Holder of the Company's Series B, Series C and Series
E Convertible Preferred Stock, and The ▇▇▇▇▇▇▇ ▇▇▇▇▇ Group, L.P., a Delaware
limited partnership ("GS Group") that is a Holder of Series F Convertible
Preferred Stock.
W I T N E S S E T H:
WHEREAS, the parties hereto entered into a Stockholders' Agreement
dated as of December 10, 1992 pursuant to which the parties entered into a
voting agreement, and for the benefit of themselves and the other Company
stockholders entered into agreements regarding registration rights, rights of
first refusal, rights of co-sale, Company covenants and transfers of Company
securities; and
WHEREAS, in connection with the issuance by the Company of its Series G
Convertible Preferred Stock the parties hereto desire to amend and restate the
Stockholders' Agreement in the form of this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS.
1.1 "BOARD OF DIRECTORS" shall mean the Board of Directors of the
Company.
1.2 "CAUSE" shall mean, with respect to any Director, any of the
following: (i) the commission by such Director of any felony, (ii) the inability
of such Director to perform his or her duties due to abuse of alcohol or drugs,
(iii) serious misconduct by such Director in the course of performing such
Director's duties involving fraud or dishonesty, or (iv) habitual neglect by
such of his or her duties.
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1.3 "COMMISSION" shall mean the United States Securities and Exchange
Commission or any successor to the functions of such agency.
1.4 "COMMON STOCK" shall mean the Company's Common Stock, $.01 par
value.
1.5 "COMPANY" shall mean Cell Pathways, Inc., a Delaware corporation,
and all successor corporations thereto.
1.6 "CO-SALE NOTICE" shall have the meaning given such term in
Subsection 5.1 hereof.
1.7 "DESIGNATED PREFERRED STOCK" shall mean the Series A, B, C, D, E, F
and G Convertible Preferred Stock.
1.8 "DESIGNATING HOLDER" shall mean, at any time, any Person who shall
have the right at such time pursuant to Section 2.3 hereof to designate one or
more individuals for election to the Board of Directors.
1.9 "DESIGNEES" shall mean any individual designated for election to
the Board of Directors pursuant to Section 2 of this Agreement.
1.10 "ELIGIBLE HOLDER" shall mean, at any time, any Original Holder who
is then a Holder of Registrable Securities and any Holder of Registrable
Securities to whom the registration rights conferred by Section 3 of this
Agreement have been transferred in compliance with Subsection 3.14 hereof.
1.11 "FOUNDING HOLDER" shall mean each of FGN, Northwood Ventures,
Technology Partners and Quest II and Quest International.
1.12 "HOLDER" shall mean, at any time, any Person who then owns of
record any Securities.
1.13 "INITIATING HOLDERS" shall mean any Eligible Holder(s) who hold,
in the aggregate, not less than 40% of either (i) the Common Stock issued and
issuable upon conversion of the Series C, Series D, Series E, Series F and
Series G Convertible Preferred Stock, or (ii) the Common Stock issued and
issuable upon conversion of the Series A and Series B Convertible Preferred
Stock.
1.14 "JUNIOR PREFERRED STOCK" shall mean the Series A and B Convertible
Preferred Stock, treated as one class.
1.15 "NEW SECURITIES" shall have the meaning given such term in
Subsection 4.2 hereof.
1.16 "ORIGINAL HOLDER" shall mean each Holder on the date of this
Agreement of Stock and each original Holder of any Series G Convertible
Preferred Stock issued by the Company in the course of the Company's offering of
such Stock during the period April, 10 1998 to June 30, 1998.
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1.17 "OTHER SHARES" shall mean (i) all issued Common Stock, (ii) all
Common Stock issuable pursuant to options, rights, warrants, convertible
securities or other instruments or agreements, and (iii) all Common Stock issued
as a dividend or other distribution with respect to or in exchange for or in
replacement of the Securities referenced in clauses (i) and (ii) above, but in
each case excluding Registrable Securities held by Eligible Holders. For
purposes of Section 3 of this Agreement, shares of Common Stock issuable
pursuant to the conversion, exercise or exchange of Securities other than
Registrable Securities shall be deemed outstanding Other Shares.
1.18 "OTHER STOCKHOLDERS" shall mean Persons other than Eligible
Holders who, by virtue of agreements with the Company, are entitled to include
their Securities in certain registrations hereunder.
1.19 "ORIGINAL PREFERRED HOLDER" shall have the meaning given such term
in Subsection 5.1 hereof.
1.20 "PERSON" shall mean an individual, a corporation, a partnership, a
trust, an unincorporated organization or a governmental organization or any
agency or political subdivision thereof.
1.21 "PREFERRED STOCK" shall mean the Company's Preferred Stock, $.01
par value.
1.22 "PUBLIC OFFERING" shall mean an offering of Securities registered
under the Securities Act.
1.23 The terms "REGISTER", "REGISTERED" and "REGISTRATION" shall refer
to a registration of Securities effected by preparing and filing a Registration
Statement in compliance with the Securities Act and applicable rules and
regulations thereunder, and the declaration or ordering of the effectiveness of
such Registration Statement.
1.24 "REGISTRABLE SECURITIES" shall mean (i) Common Stock outstanding
on the date hereof, (ii) Common Stock issued pursuant to the conversion of
Designated Preferred Stock, (iii) Common Stock issuable pursuant to the
conversion of Designated Preferred Stock (including any Designated Preferred
Stock issued upon exercise of warrants) or the exercise of warrants, (iv) other
securities issued or issuable with respect to the Common Stock in connection
with a reclassification, recapitalization, merger, consolidation or other
reorganization, and (v) any Common Stock issued as a dividend or other
distribution with respect to or in exchange for or in replacement of the
Securities referenced in clauses (i), (ii), (iii) and (iv) above; provided,
however, that Registrable Securities shall not include any shares of Common
Stock after such shares have been sold pursuant to (a) a Registration Statement
declared effective under the Securities Act, (b) Rule 144, or (c) any other
exemption from registration to a Person who is free to resell such shares
without registration or restriction under the Securities Act; and provided,
further, that at any time subsequent to the completion of the first Public
Offering, Registrable Securities shall not include any Securities which are
eligible to be sold without registration under the Securities Act in compliance
with Subsection (k) of Rule 144. No Registrable Securities shall be deemed to
exist from and after such time as there are outstanding less than 15,000
Registrable Securities (as appropriately adjusted for any stock dividends,
combinations or splits with respect to the Common Stock). For purposes of
Section 3 of this Agreement, shares of
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Common Stock issuable upon the conversion, exercise or exchange of Registrable
Securities shall be deemed outstanding Registrable Securities.
1.25 "REGISTRATION EXPENSES" shall mean all expenses incurred in
effecting any registration pursuant to this Agreement, including, without
limitation, all registration, qualification, and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel for the Company, blue sky fees
and expenses, and expenses of any regular or special audits incident to or
required by any such registration, but shall not include (i) Selling Expenses,
(ii) fees and disbursements of counsel for any Eligible Holder(s) or (iii) the
compensation of regular employees of the Company (which shall be paid in any
event by the Company).
1.26 "REGISTRATION STATEMENT" shall mean any registration statement
filed with the Commission in accordance with the Securities Act, together with
all amendments or supplements thereto.
1.27 "RULE 144" shall mean Rule 144 promulgated by the Commission under
the Securities Act, as such rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.
1.28 "RULE 145" shall mean Rule 145 as promulgated by the Commission
under the Securities Act, as such rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.
1.29 "SECURITIES" shall mean any debt or equity securities of the
Company, whether now or hereafter authorized, and any instrument convertible
into or exchangeable or exercisable for one or more debt or equity securities of
the Company.
1.30 "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, or any federal statute or statutes which shall be enacted to take the
place of such Act, together with all rules and regulations promulgated
thereunder.
1.31 "SECURITIES EXCHANGE ACT" shall mean the Securities Exchange Act
of 1934, as amended, or any federal statute or statutes which shall be enacted
to take the place of such Act, together with all rules and regulations
promulgated thereunder.
1.32 "SELLING EXPENSES" shall mean all underwriting discounts and
selling commissions applicable to the sale of Securities and all fees and
disbursements of counsel for any Holder in connection with such sale (other than
the fees and disbursements of any such counsel to be paid by the Company
pursuant to Subsection 3.4 hereof).
1.33 "SENIOR PREFERRED STOCK" shall mean the Series C, D, E, F and G
Convertible Preferred Stock, treated as one class.
1.34 "SERIES A CONVERTIBLE PREFERRED STOCK" shall mean the Company's
Series A Convertible Preferred Stock, $.01 par value, and any Stock into which
such Stock may hereafter be changed, other than by exercise of the conversion
right of such Stock.
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1.35 "SERIES B CONVERTIBLE PREFERRED STOCK" shall mean the Company's
Series B Convertible Preferred Stock, $.01 par value, and any Stock into which
such Stock may hereafter be changed, other than by exercise of the conversion
right of such Stock.
1.36 "SERIES C CONVERTIBLE PREFERRED STOCK" shall mean the Company's
Series C Convertible Preferred Stock, $.01 par value, and any Stock into which
such Stock may hereafter be changed, other than by exercise of the conversion
right of such Stock.
1.37 "SERIES D CONVERTIBLE PREFERRED STOCK" shall mean the Company's
Series D Convertible Preferred Stock, $.01 par value, and any Stock into which
such Stock may hereafter be changed, other than by exercise of the conversion
right of such Stock.
1.38 "SERIES E CONVERTIBLE PREFERRED STOCK" shall mean the Company's
Series E Convertible Preferred Stock, $.01 par value, and any Stock into which
such Stock may hereafter be changed, other than by exercise of the conversion
right of such Stock.
1.39 "SERIES F CONVERTIBLE PREFERRED STOCK" shall mean the Company's
Series F Convertible Preferred Stock, $.01 par value, and any Stock into which
such Stock may hereafter be changed, other than by exercise of the conversion
right of such Stock.
1.40 "SERIES G CONVERTIBLE PREFERRED STOCK" shall mean the Company's
Series G Convertible Preferred Stock, $.01 par value, and any Stock into which
such Stock may hereafter be changed, other than by exercise of the conversion
right of such Stock.
1.41 "STOCK" shall include any and all shares of capital stock of the
Company, however designated.
1.42 "STOCKHOLDERS" shall mean the Holders of Company Stock.
1.43 "VOTING STOCK" shall mean Stock the Holders of which are entitled,
in the absence of contingencies, to participate generally in the election of the
members of the Board of Directors.
SECTION 2. VOTING AGREEMENT.
2.1 CHARTER DOCUMENTS. The Company has previously furnished to the
Founding Holders copies of its Certificate of Incorporation and Bylaws, in each
case as in effect on the date of this Agreement (the "Charter Documents"). From
and after the date of this Agreement each Founding Holder shall vote all shares
of Voting Stock now or hereafter owned or controlled by such Founding Holder
(including shares of Voting Stock hereafter acquired by such Founding Holder
pursuant to exercise of the Conversion Option or otherwise) at any regular or
special meeting of Stockholders, or, to the extent permitted by the Charter
Documents, in any written consent executed in lieu of such a meeting, and shall
take all action necessary, to ensure that the Charter Documents do not, at any
time, conflict with the provisions of this Agreement.
2.2 BOARD SIZE; VOTING AGREEMENT. The Board of Directors of the Company
shall consist of eight Directors. At any regular or special meeting of
Stockholders called for the purpose of electing members to serve on the Board of
Directors, or, to the extent permitted by
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the Charter Documents, in any written consent electing members to serve on the
Board of Directors executed in lieu of such a meeting, the Founding Holders
shall vote their shares of Voting Stock (including any shares of Voting Stock
hereafter acquired), and shall take all action necessary, to ensure that the
Board of Directors of the Company consists of the Designees.
2.3 DIRECTOR DESIGNATION RIGHTS. The following Holders shall have the
following rights to designate individuals as Designees to serve as members of
the Company's Board of Directors:
2.3.1 TECHNOLOGY PARTNERS. Technology Partners shall have the
right so long as it is the Holder of not less than 291,000 shares of Series C
Convertible Preferred Stock (as adjusted for any stock dividends, combinations
or splits with respect to such Stock after the date hereof), to designate in
writing to the Secretary of the Company one individual for election to the Board
of Directors; provided, however, in the case of a classified Board of Directors,
that if the term of office of such Designee does not expire at such meeting then
Technology Partners may not designate any such individual.
2.3.2 QUEST II. Quest II shall have the right so long as Quest
II and Quest International are the Holders of not less than 164,000 shares of
Series C Convertible Preferred Stock (as adjusted for any stock dividends,
combinations or splits with respect to such Stock after the date hereof), to
designate in writing to the Secretary of the Company one individual for election
to the Board of Directors; provided, however, in the case of a classified Board
of Directors, that if the term of office of such Designee does not expire at
such meeting then Quest II may not designate any such individual.
2.3.3 NORTHWOOD VENTURES. Northwood Ventures shall have the
right so long as it is the Holder of not less than 276,250 shares of Series A
Convertible Preferred Stock and/or Series B Convertible Preferred Stock (as
adjusted for any stock dividends, combinations or splits with respect to such
Stock after the date hereof), to designate in writing to the Secretary of the
Company one individual for election to the Board of Directors; provided,
however, in the case of a classified Board of Directors, that if the term of
office of such Designee does not expire at such meeting then Northwood Ventures
may not designate any such individual.
2.3.4 FGN. FGN shall have the right so long as it is the
Holder (including as trustee) of not less than 1,464,150 shares of Common Stock
(as adjusted for any stock dividends, combinations or splits with respect to
such Stock after the date hereof):
(i) to designate in writing to the Secretary of the
Company two individuals for election to the Board of Directors; provided,
however, in the case of a classified Board of Directors, that if the term of
office of either such Designee does not expire at such meeting, then FGN shall
have the right to designate only one such individual for election to the Board
of Directors pursuant to this clause (i); and provided, further, that if the
term of office of neither such Designee expires at such meeting, then FGN may
not designate any such individual pursuant to this clause (i); and
(ii) to designate in writing to the Secretary of the
Company two individuals for election to the Board of Directors, with the
approval in writing of the Holders of not less than 50% of the outstanding
shares of Series A Convertible Preferred Stock and Series B
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Convertible Preferred Stock, voting as one class, and of the Holders of not less
than 50% of the outstanding shares of Series C, Series D, Series E and Series F
Convertible Preferred Stock, voting as one class; provided, however, in the case
of a classified Board of Directors, that if the term of office of either such
Designee does not expire at such meeting, then FGN shall have the right to
designate only one individual for election to the Board of Directors pursuant to
this clause (ii); and provided, further, that if the term of office of neither
such Designee expires at such meeting, then FGN may not designate any such
individual pursuant to this clause (ii).
2.4 TERMINATION OF DESIGNATION RIGHTS. The right of certain Holders to
designate individuals for election to the Board of Directors pursuant to
Subsection 2.3 hereof shall be subject to termination as follows:
2.4.1 FGN. At any time as FGN shall be a Holder (including as
trustee) of less than 1,464,150 shares of Common Stock (as adjusted for any
stock dividends, combinations or splits with respect to such Stock), then the
right of FGN to designate individuals for election to the Board of Directors
shall immediately cease.
2.4.2 TECHNOLOGY PARTNERS. At any time as Technology Partners
shall be a Holder of less than 291,000 shares of Series C Convertible Preferred
Stock (as adjusted for any stock dividends, combinations or splits with respect
to such Stock), then the right of Technology Partners to designate an individual
for election to the Board of Directors shall immediately cease.
2.4.3 QUEST II. At any time as Quest II and Quest
International shall be Holders of less than 164,000 shares of Series C
Convertible Preferred Stock (as adjusted for any stock dividends, combinations
or splits with respect to such Stock), then the right of Quest II to designate
an individual for election to the Board of Directors shall immediately cease.
2.4.4 NORTHWOOD VENTURES. At any time as Northwood Ventures
shall be a Holder of less than 276,250 shares of Series A and/or Series B
Convertible Preferred Stock (as adjusted for any stock dividends, combinations
or splits with respect to such Stock), then the right of Northwood Ventures to
designate an individual for election to the Board of Directors shall immediately
cease.
2.5 FAILURE TO DESIGNATE. Any Designating Holder having the right to
make any designation pursuant to this Section 2 in connection with any annual or
special meeting of Stockholders at which Directors are to be elected, or in
connection with a Stockholders' written consent to elect Directors, and who
shall fail to deliver such designation in writing to the Secretary of the
Company by 5:00 p.m. E.S.T. on the fifth business day preceding the date of the
Stockholders' meeting, shall be deemed to have designated the individual
previously designated by such Designating Holder for election to such position
on the Board of Directors. If the number of Directors to be elected at any
annual or special meeting, or pursuant to any written consent, of Stockholders
exceeds the number of Designees designated in connection with such meeting or
written consent, then such excess number of Directors shall be elected by the
Holders of all Voting Stock voting as a single class.
2.6 RECORD OF VOTE. To effectuate the provisions of this Section 2, the
Secretary of the Company, or if there be no Secretary such other officer of the
Company as the Board of Directors may appoint to fulfill the duties of
Secretary, shall not record any vote or consent (to
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the extent action by consent is permitted by the Charter Documents) contrary to
the terms of this Section 2, and each Founding Holder hereby agrees that any
vote or consent given in connection with an election of Directors contrary to
the agreement of such Founding Holder in this Section 2 shall be null and void
and of no force or effect.
2.7 REMOVAL AND RESIGNATION.
2.7.1 RIGHT OF DESIGNATION. If, prior to his or her election
to the Board of Directors pursuant to this Section 2, any Designee shall be
unable or unwilling to serve, or is removed, as a Director of the Company, then
the Holder(s) who designated such Designee shall be entitled to designate a
replacement who shall then be a Designee (and who shall serve in the Director
class (if any) in which such removed Director served) for purposes of this
Section 2. If, following election to the Board of Directors pursuant to this
Section 2, any Designee shall resign or be removed or be unable to serve for any
reason prior to the expiration of his or her term as a Director, then the
Holder(s) who designated such Designee shall within 30 days of such event notify
the Board of Directors in writing of a replacement Designee, and the Founding
Holders shall vote their shares of Voting Stock (including shares of Voting
Stock acquired), at any annual or special meeting called for the purpose of
filling positions on the Board of Directors or, to the extent permitted by the
Charter Documents, in any written consent executed in lieu of such a meeting,
and shall take all action necessary, to ensure the election to the Board of
Directors of such replacement Designee to fill the unexpired term of the
Designee whom such replacement Designee is replacing. If a Holder or Holders
shall fail to so notify the Board of Directors, the Board of Directors, in its
discretion, may nominate any other individual to fill the vacancy, and the
Founding Holders shall vote their shares of Voting Stock (including shares of
Voting Stock hereafter acquired) for such individual as provided in this
Subsection 2.7.1.
2.7.2 REMOVAL. Each Founding Holder agrees to use such
Founding Holder's best efforts to call, or cause the appropriate officers and
Directors of the Company to call, a special or annual meeting of Stockholders
and to vote all of the shares of Voting Stock (including shares of Voting Stock
hereafter acquired) held by such Founding Holder for, or, to the extent
permitted by the Charter Documents, to take all actions by written consent in
lieu of any such meeting necessary to cause, the removal of:
(I) any Director designated pursuant to this
Section 2 if the designation rights of the Holder who designated such Director
shall have lapsed;
(II) any Director if the Holder who
designated such Director requests such Director's removal for any reason; or
(III) any Director where a majority of the
remaining Directors determine that such Director should be removed for Cause.
Each Founding Holder agrees that no Director shall be removed without
Cause except as set forth in clauses (i) and (ii) of this Subsection 2.7.2.
Notwithstanding the foregoing, any Director may be removed for Cause if the
Holders of Voting Stock entitling them to cast a majority of the votes at an
election of Directors consent to such removal in a writing specifying the Cause
for which such removal is being made.
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2.8 BEST EFFORTS. In order to effectuate the provisions of this
Agreement, each Founding Holder agrees that when any action or vote is required
to be taken by such Founding Holder pursuant to this Agreement, such Founding
Holder shall use such Founding Holder's best efforts to call, or to cause the
appropriate Company officers and Directors to call, a special or annual meeting
of Stockholders, as the case may be, or, to the extent permitted by the Charter
Documents, to execute or cause to be executed a consent in writing in lieu of
any such meeting, in order to effectuate such Stockholder action.
2.9 FGN PREFERRED STOCK VOTING. In connection with any vote of
Stockholders, FGN hereby agrees that, at its election, it will either (i) vote
all of the shares of Designated Preferred Stock of any Series held by it on the
date hereof at the direction of the Holders of a majority of the outstanding
shares of such series, or (ii) abstain from voting shares of Stock of such
Series in connection with such vote of Stockholders.
2.10 OBSERVER. The parties hereto agree that GS Group shall have the
right to designate a representative (the "Representative") to attend and observe
each meeting of the Board of the Directors of the Company (the "Board") (or, if
a meeting is held by telephone conference, to participate therein for the
purpose of listening thereto), who shall be entitled to fully participate (other
than the right to vote) in such meeting as if he were a member of the Board. The
Company shall provide the Representative the same notice of the time and place
of any proposed meeting (or action by written consent) of the Board as is
provided to the other members of the Board. Such notice shall include true and
complete copies of all documents furnished to any director in connection with
such meeting or consent. The observer status provided in this Section 2.10 shall
also apply with respect to any matter material (or which is reasonably likely to
be material) to the Company that is dealt with by a committee of the Board of
Directors. The provisions of this Section 2.10 shall terminate upon the earliest
to occur of (i) the events set forth in clauses (i) and (iii) of Section 2.11 or
(ii) the written consent of GS Group. Before participating in his first Board
meeting, the Representative shall sign the form of confidentiality and
proprietary information agreement, required by the Company of its directors.
2.11 TERMINATION AND AMENDMENT OF VOTING AGREEMENT. The provisions of
this Section 2 shall terminate upon the earliest to occur of (i) the 10th
anniversary of the date of this Agreement, (ii) the written consent of all of
the Designating Holders (except with respect to Section 2.10), or (iii) the sale
of Common Stock in a firm commitment, underwritten Public Offering at a public
offering price (prior to deduction of underwriter's discounts and expenses)
equal to or exceeding $6.60 per share of Common Stock (as adjusted for any stock
dividends, combinations or splits with respect to such shares) and resulting in
aggregate proceeds to the Company and/or selling Stockholders (prior to
deduction of underwriter's discounts and expenses and other expenses of the
offering) of not less than $10,000,000. Notwithstanding any other provision of
this Agreement, the provisions of this Section 2) may be amended, modified or
supplemented by, and only by, a written instrument executed by each of the
Designating Holders, except that Section 2.10 may be amended, modified or
supplemented only if the GS Group gives its written consent.
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SECTION 3. REGISTRATION RIGHTS.
3.1 REQUESTED REGISTRATIONS.
3.1.1 REQUESTS FOR REGISTRATION. If the Company shall receive
from Initiating Holders at any time or times a written request that the Company
effect any registration under the Securities Act with respect to all or any part
of the Registrable Securities having an offering price to the public, net of
underwriting discounts and expenses, equal to or exceeding $6.60 per share of
Common Stock (as adjusted for any stock dividends, combinations or splits with
respect to such Stock) and the aggregate proceeds of which (after deduction for
underwriter's discounts and expenses related to the issuance) exceed
$10,000,000, then the Company will, subject to the limitations set forth in this
Section 3, use its best efforts to effect the registration of Registrable
Securities under the Securities Act and the registration or qualification
thereof under all applicable state securities laws. To be effective, any request
pursuant to this Subsection 3.1 shall state to the reasonable satisfaction of
the Company the intended method of disposition of the Registrable Securities
sought to be registered under the Securities Act.
3.1.2 NOTICE OF REGISTRATION. Whenever the Company shall,
pursuant to this Subsection 3.1, be requested by Initiating Holders to effect
the registration of any Registrable Securities under the Securities Act, the
Company shall promptly give written notice of such proposed registration (the
"Registration Notice") to each other Eligible Holder stating that such Eligible
Holders have the right to request that any or all of the Registrable Securities
held by them be included in such registration. To be effective, any Eligible
Holder's request for inclusion in the registration must be received by the
Company in writing not later than 20 days following the date of mailing, first
class postage prepaid, of the Company's Registration Notice. Subject to the
limitations contained in Subsections 3.1.3, 3.1.4 and 3.11 hereof, the Company
shall, as soon as reasonably practicable, use its best efforts to effect the
registration under the Securities Act and applicable state securities laws of
all Registrable Securities with respect to which the Company has received timely
written requests pursuant to the preceding sentence from the Eligible Holders
thereof for inclusion therein so as to permit the sale or other disposition of
such Registrable Securities in accordance with the intended method of
disposition thereof described in the requests of such Eligible Holders.
3.1.3 REFUSAL OF REQUEST. The Company shall not be obligated
to effect, or to take any action to effect, any registration pursuant to this
Subsection 3.1:
(A) Before the earlier of (i) December 10, 1995 or
(ii) one year after the effective date of the first Registration Statement filed
by the Company covering a firm commitment underwritten offering of any of its
Securities to the general public;
(B) In any particular jurisdiction in which the
Company would be required to execute a general consent to service of process in
effecting such registration, unless the Company is already subject to service of
process in such jurisdiction and except as may be required by the Securities
Act;
(C) For Initiating Holders holding Common Stock
issued or issuable upon conversion of the Series C, Series D, Series E, Series F
and Series G Convertible Preferred Stock after the Company has initiated one
such registration for such Initiating Holders pursuant
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to this Subsection 3.1 (counting for this purpose only Registration Statements
which have been declared or ordered effective and pursuant to which Securities
have been sold, and Registration Statements which have been withdrawn by the
requesting Eligible Holders as to which such Eligible Holders have not elected
to bear the Registration Expenses pursuant to Subsection 3.4 hereof);
(D) For Initiating Holders holding Common Stock
issued or issuable upon conversion of the Series A and Series B Convertible
Preferred Stock after the Company has initiated one such registration for such
Initiating Holders pursuant to this Subsection 3.1 (counting for this purpose
only Registration Statements which have been declared or ordered effective and
pursuant to which Securities have been sold, and Registration Statements which
have been withdrawn by the requesting Eligible Holders as to which such Eligible
Holders have not elected to bear the Registration Expenses pursuant to
Subsection 3.4 hereof);
(E) During the period starting with the date 60 days
prior to the Company's good faith estimate of the date of filing of, and ending
on a date 180 days after the effective date of, a Company initiated
registration, provided that the Company is actively employing in good faith all
reasonable efforts to cause such Registration Statement to become effective;
(F) If the Initiating Holders propose to dispose
of shares of Registrable Securities which may be immediately registered on Form
S-3 pursuant to a request made under Subsection 3.5 hereof;
(G) If the Initiating Holders do not request that
such offering be firmly underwritten by underwriters selected by the Initiating
Holders and reasonably acceptable to the Company, subject to the right of the
Company pursuant to Subsection 3.1.5 hereof to select such underwriters; or
(H) If the Company and the Initiating Holders are
unable to obtain the commitment of the underwriter described in clause (G) above
to firmly underwrite the offering.
3.1.4 DEFERRAL OF REGISTRATION. If in the good faith judgment
of the Board of Directors any registration would be seriously detrimental to the
Company and the Board of Directors concludes, as a result, that it is essential
at such time to defer the filing of any Registration Statement, and if the
Company shall furnish to the Initiating Holders a certificate signed by the
President of the Company stating that, in the good faith judgment of the Board
of Directors of the Company, it would be seriously detrimental to the Company
for such Registration Statement to be filed in the near future and that it is,
therefore, essential to defer the filing of such Registration Statement, then
the Company shall have the right to defer such filing for the period during
which the disclosure required by such registration would be seriously
detrimental, provided that (except as provided in Subsection 3.1.3(E) above) the
Company may not defer the filing for a period of more than 180 days after
receipt of the request of the Initiating Holders, and provided, further, that
the Company shall not defer its obligation in this manner more than once in any
twelve month period.
The Registration Statement filed pursuant to the request of the
Initiating Holders may, subject to the provisions of this Subsection 3.1.4 and
Subsection 3.11 hereof, include other
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Securities with respect to which registration rights have been granted, and may
include Securities being sold for the account of the Company.
3.1.5 UNDERWRITING. The registration rights of any Eligible
Holder pursuant to Subsection 3.1 shall be conditioned upon such Eligible
Holder's participation in such underwriting and the inclusion of such Eligible
Holder's Registrable Securities in the underwriting (unless otherwise mutually
agreed by such Eligible Holder and Initiating Holders holding a majority of the
Registrable Securities requested by all Initiating Holders to be included in
such registration with respect to such participation and inclusion) to the
extent provided herein. An Eligible Holder may elect to include in such
underwriting all or a part of the Registrable Securities held by such Eligible
Holder. Subject to Section 6.3, the Holders of at least 51% of the Registrable
Securities included in any Registration Statement filed pursuant to this
Subsection 3.1 shall have the right to select the underwriter or underwriters
who shall serve as the manager and/or co-managers for the offering of
Registrable Securities covered by the Registration Statement, except that if the
requested registration is the initial registration under the Securities Act by
the Company of an underwritten public offering of Common Stock, then the Company
shall have the right to select such underwriter or underwriters, but only with
the consent of the Eligible Holders of not less than a majority of the
Registrable Securities requested to be included therein.
3.1.6 REGISTRATION PROCEDURES. If the Company shall request
inclusion in any registration pursuant to Subsection 3.1 of Securities being
sold for its own account, or if other Persons shall request inclusion in any
registration pursuant to Subsection 3.1, then the Initiating Holders shall, on
behalf of all Eligible Holders, offer to include such Securities in the
underwriting and may condition such offer to such other Persons on their
acceptance of the further applicable provisions of this Section 3 (including
Subsection 3.10). Subject to Section 6.3, the Company shall (together with all
Eligible Holders and other Persons proposing to distribute their Securities
through such underwriting) enter into an underwriting agreement in customary
form with the representative of the underwriter or underwriters selected for
such underwriting by Initiating Holders holding a majority of the Registrable
Securities held by all Initiating Holders (subject to the right of the Company
under Subsection 3.1.5 to select such underwriter(s)), which underwriters shall
be reasonably acceptable to the Company.
3.1.7 MARKETING RESTRICTIONS. Notwithstanding any other
provision of this Subsection 3.1, if the representative of the underwriters
advises the Initiating Holders in writing that marketing factors require a
limitation on the number of shares to be underwritten, the number of shares to
be included in the registration shall be allocated as set forth in Subsection
3.11 hereof. If a Person who has requested inclusion in such registration as
provided above does not agree to the terms of any such underwriting, such Person
shall be excluded therefrom by written notice from the Company, the underwriter
or Initiating Holders holding a majority of the Registrable Securities requested
by all Initiating Holders to be included in such registration. The Securities
(including any Registrable Securities) so excluded shall also be withdrawn from
registration. If shares are so withdrawn from the registration and if the number
of shares to be included in such registration was previously reduced as a result
of marketing factors pursuant to Subsection 3.11, then the Company shall offer
to all Holders (including Eligible Holders) who have retained rights to include
Securities in the registration the right to include additional Securities in
such registration in an aggregate amount equal to the number of shares so
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withdrawn, with such shares to be allocated among such Holders requesting
additional inclusion in accordance with Subsection 3.11.
3.2 INCIDENTAL REGISTRATION.
3.2.1 NOTICE OF REGISTRATION. If the Company shall determine
at any time to register any of its Common Stock under the Securities Act and any
applicable state securities laws, either for its own account or for the account
of any Holder or Holders exercising his or their respective registration rights
(other than pursuant to Subsections 3.1 or 3.5 hereof), on a form which permits
inclusion of Registrable Securities, then the Company shall each such time give
written notice to all Eligible Holders of its intention to effect such a
registration. Upon the written request of any Eligible Holder or Holders given
within 20 days after receipt of any such notice, the Company shall, subject to
the limitations contained in Subsections 3.2.2 and 3.11 hereof, use its best
efforts to cause all Registrable Securities which Eligible Holders shall have
requested be registered, to be registered under the Securities Act and any
applicable state securities laws, all to the extent requisite to permit the sale
or other disposition by such Eligible Holders of the Registrable Securities so
registered. No registrations of Registrable Securities under this Subsection 3.2
shall relieve the Company of its obligation to effect registrations under
Subsection 3.1 hereof, or shall constitute a registration request by any
Eligible Holder thereunder. Subject to Section 6.3, the Company shall have the
right to select the underwriter or underwriters who shall serve as the manager
and/or co-managers for all registrations of Securities under this Subsection
3.2.
3.2.2 NO REGISTRATION RIGHTS. Eligible Holders shall have no
right to participate in any registration initiated by the Company, whether for
its own account or for the account of any other Holders, where such
registration:
(A) relates solely to a Rule 145 transaction;
(B) relates solely to employee benefit plans; or
(C) is on any registration form that does not permit
secondary sales.
3.2.3 UNDERWRITING. If the registration of which the Company
has given notice pursuant to Subsection 3.2.1 is for a Public Offering involving
an underwriting, the Company shall so advise the Eligible Holders as a part of
the written notice given pursuant to Subsection 3.2.1. In such event, the right
of any Eligible Holder to registration pursuant to this Subsection 3.2 shall be
conditioned upon such Eligible Holder's participation in such underwriting and
the inclusion of such Eligible Holder's Registrable Securities in the
underwriting to the extent provided herein. All Eligible Holders proposing to
distribute their Securities through such underwriting shall (together with the
Company and the other Holders with registration rights to participate therein
distributing their Securities through such underwriting) enter into an
underwriting agreement in customary form with the representative of the
underwriter or underwriters selected by the Company. If any Holder does not
agree to the terms of any such underwriting, such Holder shall be excluded
therefrom by written notice from the Company or the underwriter. Any Registrable
Securities or other Securities excluded or withdrawn from such underwriting
shall be withdrawn from such registration.
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3.2.4 MARKETING RESTRICTIONS. Notwithstanding any other
provision of this Subsection 3.2, if the representative of the underwriters
advises the Company in writing that marketing factors require a limitation on
the number of shares to be underwritten, the number of shares to be included in
the registration shall be allocated as set forth in Subsection 3.11 hereof. If
shares are withdrawn from the registration pursuant to Subsection 3.2.3 hereof
and if the number of shares of Registrable Securities to be included in such
registration was previously reduced as a result of marketing factors, the
Company shall then offer to all Holders who have retained the right to include
Securities in the registration the right to include additional Securities in the
registration in an aggregate amount equal to the number of shares so withdrawn,
with such shares to be allocated among the Holders requesting additional
inclusion in accordance with Subsection 3.11 hereof.
3.3 REGISTRATION PROCEDURES. Whenever the Company is required by the
provisions of this Agreement to use its best efforts to effect the registration
of any Registrable Securities, the Company will use its best efforts to, as
expeditiously as possible:
3.3.1 REGISTRATION STATEMENT. Prepare and file with the
Commission a Registration Statement with respect to such Registrable Securities
and use its best efforts to cause such Registration Statement to become and
remain effective; provided, however, that before so filing a Registration
Statement or any amendments or supplements thereto, the Company will furnish to
one counsel selected by the Holders of not less than a majority of the
Securities included in such Registration Statement copies of all such documents
proposed to be filed, which documents shall be subject to the review of such
counsel;
3.3.2 AMENDMENTS. Prepare and file with the Commission such
amendments and supplements to such Registration Statement as may be necessary to
keep such Registration Statement effective for a period of not less than one
year and to comply with the provisions of the Securities Act with respect to the
sale or other disposition of all Registrable Securities covered by such
Registration Statement during such period in accordance with the intended method
or methods of disposition by the Eligible Holders thereof set forth in such
Registration Statement;
3.3.3 COPIES. Furnish to each Eligible Holder of Registrable
Securities included in the Registration Statement such number of copies of such
Registration Statement, each amendment and supplement thereto, the prospectus
included therein (including each preliminary prospectus), and such other
documents, as such Eligible Holder may reasonably request in order to facilitate
the public sale or other disposition of the Securities owned by such Eligible
Holder and included in such Registration Statement;
3.3.4 STATE REGISTRATION. Use every reasonable effort to
register or qualify all the Registrable Securities covered by such Registration
Statement under the securities laws of such jurisdictions as each Eligible
Holder including Registrable Securities therein shall reasonably request, and do
any and all other acts and things which may be necessary under such securities
laws to enable each such Eligible Holder to consummate the public sale or other
disposition in such jurisdiction of the Registrable Securities owned by such
Eligible Holder and included in such Registration Statement; provided, however,
that the Company shall not be required to (i) qualify to do business as a
foreign corporation in any jurisdiction wherein it would
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not otherwise be required to qualify but for this subsection, (ii) subject
itself to taxation in any such jurisdiction, or (iii) consent to general service
of process in any such jurisdiction;
3.3.5 LISTING. Cause all Registrable Securities covered
by such Registration Statement to be listed on each securities exchange on which
the Common Stock is then listed;
3.3.6 TRANSFER AGENT/REGISTRAR. Provide a transfer agent
and registrar for the Common Stock not later than the effective date of such
Registration Statement; and
3.3.7 UNDERWRITING. In connection with any underwritten public
offering pursuant to a Registration Statement filed pursuant to Subsection 3.1
or 3.2 hereof, enter into an underwriting agreement reasonably necessary to
effect the offer and sale of Registrable Securities, provided such underwriting
agreement contains customary underwriting provisions and, if the underwriter so
requests, contains customary contribution provisions.
3.4 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Subsections 3.1 and 3.2 hereof, and the reasonable fees of one counsel for the
selling Stockholders in the case of registrations pursuant to Subsection 3.1
hereof, shall be borne by the Company. All Selling Expenses incurred in
connection with any such registration, qualification or compliance shall be
borne by the Holders of Securities included therein pro rata on the basis of the
number of such Securities held by each. Notwithstanding the foregoing, the
Eligible Holders participating in any registration may elect to bear the
Registration Expenses for any registration proceeding begun pursuant to
Subsection 3.1 hereof and subsequently withdrawn by the Eligible Holders
registering shares therein, in which case such registration proceeding shall not
be counted as a request for registration pursuant to Subsection 3.1 hereof. All
Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Subsection 3.5 hereof and all Selling
Expenses relating to any such registration, qualification or compliance shall be
borne by the Holders of Securities included therein pro rata on the basis of the
number of such Securities held by each.
3.5 REGISTRATION ON FORM S-3.
3.5.1 REQUESTED REGISTRATIONS. Following its initial Public
Offering on a firm commitment, underwritten basis, the Company shall use its
best efforts to qualify for registration on Form S-3 promulgated under the
Securities Act or any comparable or successor form or forms. After the Company
has qualified for the use of Form S-3, in addition to the rights contained in
the foregoing provisions of this Section 3, the Eligible Holders of Registrable
Securities shall have the right to request registrations on Form S-3 (such
requests to be in writing and to state the number of shares of Registrable
Securities to be disposed of and the intended methods of disposition of such
shares by such Eligible Holder or Holders); provided, however, that the Company
shall not be obligated to effect any such registration (i) if the Eligible
Holders, together with the Holders of any other Securities entitled to inclusion
in such registration, propose to sell Registrable Securities and such other
Securities (if any) on Form S-3 at an aggregate price to the public of less than
$10,000,000, (ii) in the event that the Company shall furnish the certification
described in Subsection 3.1.4 hereof (but subject to the limitations set forth
therein), (iii) if the Company has effected a registration of its Securities
within 12 months immediately preceding such registration, (iv) with respect to
any Securities that may be sold by
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the Holder thereof under Rule 144, or (v) if it is to be effected more than five
(5) years after the Company's initial Public Offering.
3.5.2 INCORPORATION BY REFERENCE. If a request complying with
the requirements of Subsection 3.5.1 hereof is delivered to the Company, the
provisions of Subsections 3.1.1 through 3.1.4 hereof shall apply to such
registration to the extent not inconsistent with this Subsection 3.5. If the
registration is for an underwritten offering, the provisions of Subsections
3.1.5 through 3.1.7 hereof shall also apply to such registration.
3.6 INDEMNIFICATION.
3.6.1 COMPANY INDEMNIFICATION. The Company shall indemnify
each Eligible Holder participating in a registration, each of such Eligible
Holder's officers, directors and partners, its legal counsel and accountants and
each Person controlling such Eligible Holder within the meaning of Section 15 of
the Securities Act, with respect to whom registration, qualification, or
compliance has been effected pursuant to this Section 3, and each underwriter,
if any, and each Person who controls within the meaning of Section 15 of the
Securities Act any underwriter, against all expenses, claims, losses, damages
and liabilities (or actions, proceedings, or settlements in respect thereof)
arising out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in any Registration Statement, prospectus, offering
circular, or other document incident to any such registration, qualification, or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or any violation by the Company of the Securities Act or
of any rule or regulation promulgated thereunder applicable to the Company and
relating to action or inaction required of the Company in connection with any
such registration, qualification, or compliance, and will reimburse each such
Eligible Holder, each of such Eligible Holder's officers, directors, partners,
legal counsel and accountants, and each Person so controlling such Eligible
Holder, as well as each such underwriter, and each Person who so controls any
such underwriter, for any legal and any other expenses reasonably incurred by
them in connection with investigating and defending or settling any such claim,
loss, damage, liability or action; provided, however, that the Company shall not
be liable in any such case to the extent that any such claim, loss, damage,
liability or action arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company by or on behalf
of such Eligible Holder or underwriter and stated to be specifically for use
therein. Notwithstanding the foregoing, the Company's obligations under this
Subsection 3.6.1 shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld).
3.6.2 ELIGIBLE HOLDER INDEMNIFICATION. Each Eligible Holder
including Registrable Securities in any registration, qualification, or
compliance effected pursuant to this Section 3 shall, severally and not jointly,
indemnify the Company, each of the Company's directors, officers, partners,
legal counsel, and accountants and each underwriter, if any, of the Securities
covered by such a registration statement, each Person who controls the Company
or such underwriter within the meaning of Section 15 of the Securities Act, each
other Eligible Holder and each Other Stockholder including Securities in such
registration, and each of their respective officers, directors and partners, and
each Person controlling such other Eligible Holder or Other Stockholder, against
all claims, losses, damages and liabilities (or actions in respect
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thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any Registration Statement,
prospectus, offering circular, or other document incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse the
Company and such other Eligible Holders, Other Stockholders, directors,
officers, partners, legal counsel, and accountants, underwriters, and control
Persons for any legal or any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such Registration Statement, prospectus, offering circular, or other
document in reliance upon and in conformity with written information furnished
to the Company by such Eligible Holder and stated to be specifically for use
therein. Notwithstanding the foregoing, the obligation of any Eligible Holder
under this Subsection 3.6.2 shall not apply to amounts paid in settlement of any
such claims, losses, damages, or liabilities (or actions in respect thereof) if
such settlement is effected without the consent of such Eligible Holder (which
consent shall not be unreasonably withheld).
3.6.3 PROCEDURES. Each party entitled to indemnification under
this Subsection 3.6 (the "Indemnified Party") shall give written notice to the
party required to provide indemnification hereunder (the "Indemnifying Party")
promptly after such Indemnified Party has actual knowledge of any claim as to
which indemnity may be sought, and shall permit the Indemnifying Party to assume
the defense of such claim or any litigation resulting therefrom; provided,
however, that counsel for the Indemnifying Party who shall conduct the defense
of such claim or any litigation resulting therefrom shall be approved by the
Indemnified Party (whose approval shall not be unreasonably withheld); and
provided however, that (i) if the Indemnifying Party fails to take reasonable
steps necessary to defend diligently the action or proceeding within 20 days
after receiving notice from such Indemnified Party that the Indemnified Party
believes it has failed to do so; or (ii) if such Indemnified Party who is a
defendant in any action or proceeding which is also brought against the
Indemnifying Party reasonably shall have concluded that there may be one or more
legal defenses available to such Indemnified Party which are not available to
the Indemnifying Party; or (iii) if representation of both parties by the same
counsel is otherwise inappropriate under applicable standards of professional
conduct, then, in any such case, the Indemnified Party shall have the right to
assume or continue its own defense as set forth above (but with no more than one
firm of counsel for all indemnified parties in each jurisdiction who shall be
approved by the majority of the Eligible Holders of the registration in respect
of which such indemnification is sought), and the Indemnifying Party shall be
liable for any expenses therefor; and provided further, that the Indemnified
Party may participate in such defense at such Indemnified Party's expense. The
failure of any Indemnified Party to give written notice as provided herein shall
not relieve any Indemnifying Party of its obligations under this Subsection 3.6
to the extent such failure is not materially prejudicial. No Indemnifying Party
in the defense of any such claim or litigation shall, except with the consent of
each Indemnified Party, consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the giving by
the claimant or plaintiff to each Indemnified Party in connection therewith of a
release from all liability in respect to such claim or litigation. Each
Indemnified Party shall furnish such information regarding itself or the claim
in question as any Indemnifying Party may reasonably
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request in writing and as shall be reasonably required in connection with the
defense of such claim and any litigation resulting therefrom.
3.6.4 CONTRIBUTION. If the indemnification provided for in
this Subsection 3.6 is held by a court of competent jurisdiction to be
unavailable to an Indemnified Party with respect to any loss, liability, claim,
damage or expense referred to herein, then the Indemnifying Party, in lieu of
indemnifying such Indemnified Party hereunder, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such loss, liability,
claim, damage or expense in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party, on the one hand, and of the
Indemnified Party, on the other, in connection with the statements or omissions
that resulted in such loss, liability, claim, damage or expense as well as any
other relevant equitable considerations. The relative fault of the Indemnifying
Party and of the Indemnified Party shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of material fact or
the omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party, as well as the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
3.6.5 CONFLICTING PROVISIONS. Notwithstanding the foregoing,
to the extent that the provisions on indemnification and contribution contained
in any underwriting agreement entered into in connection with an underwritten
public offering of Securities are in conflict with the foregoing provisions, the
provisions contained in such underwriting agreement shall control.
3.6.6 SURVIVAL. The obligations of the parties set forth in
this Subsection 3.6 for the benefit of any Indemnified Party shall not be waived
or otherwise affected by reason of any investigation or inquiry made by or on
behalf of such Indemnified Party.
3.7 ELIGIBLE HOLDER INFORMATION. Each Eligible Holder shall furnish to
the Company such information regarding such Eligible Holder and the distribution
of Securities proposed by such Eligible Holder as the Company may reasonably
request in writing and as shall be reasonably required in connection with any
registration, qualification, or compliance referred to in this Section 3.
3.8 OTHER AGREEMENTS. From and after the date of this Agreement the
Company shall not, without the prior written consent of Eligible Holders holding
a majority of the then outstanding Registrable Securities, enter into any
agreement with any Holder or prospective Holder of any Securities giving such
Holder or prospective Holder any registration rights the terms of which are more
favorable than the registration rights granted to the Eligible Holders
hereunder.
3.9 RULE 144. If the Company shall have filed a registration statement
pursuant to the requirements of Section 12 of the Exchange Act or a registration
statement pursuant to the requirements of the Securities Act in respect of the
Common Stock or securities of the Company convertible into or exchangeable or
exercisable for Common Stock, the Company convenants that (I) so long as it
remains subject to the reporting provisions of the Exchange Act, it will timely
file the reports required to be filed by it under the Securities Act or the
Exchange Act (including, but not limited to, the reports under Sections 13 and
15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144 under
the Securities Act), and (ii) will take such
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further action as any Holder of Registrable Securities may reasonably request,
all to the extent required from time to time to enable such Holder to sell
Registrable securities without registration under the Securities Act within the
limitation of the exemptions provided by (A) Rule 144 under the Securities Act,
as such Rule may be amended form time to time, or (B) any similar rule or
regulation hereafter adopted by the Commission.
3.10 MARKET STAND-OFF AGREEMENT. If requested by the Company and any
underwriter of Common Stock (or other Securities) with respect to any
registration or prospective registration of Securities, a Holder shall not sell
or otherwise transfer or dispose of any Common Stock (or other Securities) of
the Company held by such Holder (other than those included in the registration)
during the time reasonably requested by the underwriter, not to exceed 180 days,
following the effective date of a Registration Statement of the Company filed
under the Securities Act with respect to such registration. The obligations
described in this Subsection 3.10 shall not apply to any registration relating
solely to employee benefit plans on Form S-1 or Form S-8 or similar forms that
may in the future be promulgated under the Securities Act, or any registration
relating solely to a Rule 145 transaction on Form S-4 or similar forms that may
in the future be promulgated under the Securities Act. The Company may impose
stop transfer instructions with respect to the Securities subject to the
foregoing restriction until the end of such 180 day or other market stand-off
period.
3.11 ALLOCATION OF REGISTRATION OPPORTUNITIES.
3.11.1 REQUESTED REGISTRATIONS. In any case where a
registration is to be effected pursuant to Subsection 3.1 hereof and all of the
Registrable Securities and Other Shares (including shares of Common Stock issued
or issuable upon conversion of shares of any currently unissued Series of
Preferred Stock of the Company) requested to be included in a registration on
behalf of Eligible Holders or Other Stockholders cannot be so included as a
result of limitations on the aggregate number of shares of Registrable
Securities and Other Shares that may be so included, then the number of shares
of Registrable Securities and Other Shares that may be so included shall be
allocated among the Eligible Holders and Other Stockholders requesting inclusion
of shares as follows:
(A) First, (i) if Eligible Holders of Common Stock
issued or issuable upon conversion of Senior Preferred Stock shall have
initiated the registration, then Eligible Holders of Common Stock issued and
issuable upon conversion of the Senior Preferred Stock shall be entitled to
participate in the registration pro rata on the basis of the number of
Registrable Securities which each such Holder shall have requested be
registered, and then Eligible Holders of Common Stock issued and issuable upon
conversion of the Junior Preferred Stock shall be entitled to participate in the
registration pro rata on the basis of the number of Registrable Securities which
each such Holder shall have requested be registered; or (ii) if Eligible Holders
of Common Stock issued or issuable upon conversion of Junior Preferred Stock
shall have initiated the registration, then Eligible Holders of Common Stock
issued and issuable upon conversion of the Junior Preferred Stock shall be
entitled to participate in the registration pro rata on the basis of the number
of Registrable Securities which each such Holder shall have requested be
registered, and then Eligible Holders of Common Stock issued and issuable upon
conversion of the Senior Preferred Stock shall be entitled to participate in the
registration pro rata on the basis of the number of Registrable Securities which
each such Holder shall have requested be registered;
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(B) Second, all such Other Stockholders and the
other such Eligible Holders shall be entitled to participate in the registration
in accordance with the relative priorities, if any, as shall exist among them;
and
(C) Third, the Company shall be entitled to
participate in the registration.
3.11.2 INCIDENTAL REGISTRATIONS. In any case where a
registration is to be effected pursuant to Subsection 3.2 hereof and all of the
Registrable Securities and Other Shares (including shares of Common Stock issued
or issuable upon conversion of shares of any currently unissued Series of
Preferred Stock) requested to be included in such registration on behalf of
Eligible Holders and Other Stockholders cannot be so included as a result of
limitations on the aggregate number of shares of Registrable Securities and
Other Shares that may be so included, then the number of shares of Registrable
Securities and Other Shares that may be so included shall be allocated among the
Eligible Holders and Other Stockholders requesting inclusion of shares as
follows:
(A) First, the Person(s) (including the Company
in the case of an offering initiated by the Company) initiating such
registration shall be entitled to participate in the registration in accordance
with the relative priorities, if any, as shall exist among them;
(B) Second, the Eligible Holders and Other
Stockholders shall be entitled to participate in the registration pro rata on
the basis of the number of Registrable Securities and Other Shares which each
such Holder shall have requested be registered; and
(C) Third, if such registration shall have been
initiated other than by the Company, then the Company shall be entitled to
include Securities in such registration.
3.12 DELAY OF REGISTRATION. No Holder shall have any right to take any
action to restrain, enjoin, or otherwise delay any registration as the result of
any controversy that might arise with respect to the interpretation or
implementation of this Section 3.
3.13 SALES TO UNDERWRITER. Notwithstanding anything in this Agreement
to the contrary, in lieu of converting any Designated Preferred Stock prior to
or simultaneously with the filing or the effectiveness of any Registration
Statement filed pursuant to this Agreement, the Holder of such Designated
Preferred Stock may sell such Designated Preferred Stock to the underwriter of
the offering being registered if such underwriter consents thereto and if such
underwriter undertakes to convert such Designated Preferred Stock before making
any distribution pursuant to such Registration Statement and to include the
resulting Common Stock among the Securities being offered pursuant to such
Registration Statement.
3.14 TRANSFER OF REGISTRATION RIGHTS. The rights of an Eligible Holder
under this Section 3 to require the Company to register Securities may be
transferred or assigned by such Eligible Holder only to a transferee or assignee
of not less than 150,000 shares of Registrable Securities (as presently
constituted and subject to subsequent adjustments for stock splits, stock
dividends, reverse stock splits, and the like); provided, however, that the
Company is given written notice at the time of, or within a reasonable time
after, said transfer or assignment stating the name and address of the
transferee or assignee and identifying the Securities with respect to
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which such registration rights are being transferred or assigned; and provided
further, that the transferee or assignee of such rights assumes in writing (a
copy of which shall be delivered to the Company) the obligations of such
Eligible Holder under this Section 3.
3.15 TERMINATION OF REGISTRATION RIGHTS. The rights of any Eligible
Holder to request registration or inclusion of Registrable Securities in any
registration pursuant to Subsection 3.1, 3.2 or 3.5 of this Agreement shall
terminate on the earlier of (i) the closing of the first Company initiated
Public Offering of Common Stock, provided that all shares of Registrable
Securities held by such Eligible Holder may immediately be sold under Rule 144
during any 90 day period, or (ii) on such date after the closing of the first
Company initiated Public Offering of Common Stock as all shares of Registrable
Securities held by such Holder may immediately be sold under Rule 144 during any
90 day period.
SECTION 4. RIGHT OF FIRST REFUSAL.
4.1 GRANT OF RIGHT. The Company hereby grants to each Original Holder
who owns any shares of Designated Preferred Stock or any shares of Common Stock
issued upon the conversion of shares of Designated Preferred Stock (each such
Original Holder an "Offeree Holder") a right of first refusal to purchase such
Offeree Holder's pro rata share of New Securities which the Company may, from
time to time, propose to sell and issue. An Offeree Holder's pro rata share of
New Securities for purposes of this Section 4 shall be the ratio immediately
prior to the issuance of the New Securities of (i) the sum of the number of
shares of Common Stock owned by such Offeree Holder plus the number of shares of
Common Stock into which such Offeree Holder's Designated Preferred Stock is then
convertible, to (ii) the sum of the number of shares of Common Stock owned by
all Offeree Holders plus the number of shares of Common Stock into which the
Designated Preferred Stock of all Offeree Holders is then convertible.
4.2 NEW SECURITIES DEFINED. "New Securities" shall mean any Stock
(including Common Stock and/or Preferred Stock) whether now or hereafter
authorized, and rights, options or warrants to purchase Stock, and Securities of
any type whatsoever that are, or may become, convertible into Stock; provided,
however, that the term "New Securities" shall not include: (i) any shares of
Designated Preferred Stock; (ii) any Securities issued upon conversion of the
Designated Preferred Stock; (iii) any Securities issued pursuant to the
acquisition of another business entity or business segment of any such entity by
the Company by merger, purchase of substantially all the assets or other
reorganization whereby the Company will own more than 50 percent of the voting
power of such business entity or business segment of any such entity; (iv) any
Securities issued to employees, consultants, officers or directors of the
Company pursuant to the Company's 1993 Stock Option Plan or any other stock
option, stock purchase or stock bonus plan, agreement or arrangement approved by
the Board of Directors; (v) any Securities issued in connection with lease
financing arrangements or strategic partnerships approved by the Board of
Directors; (vi) any Securities issued in a Public Offering; (vii) any Securities
issued in connection with any stock split, stock dividend or recapitalization of
the Company; and (viii) any right, option or warrant to acquire any Security
excluded from the definition of New Securities pursuant to clauses (i) through
(vii) above.
4.3 EXERCISE OF RIGHT. In the event the Company proposes to undertake
an issuance of New Securities, it shall give to each Offeree Holder written
notice ("Offer Notice") of its
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intention, describing the type of New Securities to be offered, their price and
the general terms upon which the Company proposes to issue such New Securities,
and offering to each Offeree Holder the right to purchase such Offeree Holder's
pro rata share of the New Securities. Each Offeree Holder shall have 20 days
after any such Offer Notice is given by the Company within which to give to the
Company written notice of such Offeree Holder's acceptance of such offer and
agreement to purchase such Offeree Holder's entire pro rata share of such New
Securities for the price and upon the terms specified in the Offer Notice.
Failure by any Offeree Holder to timely tender such Offeree Holder's acceptance
and agreement to the Company pursuant to any Offer Notice shall be deemed a
rejection of the offer contained in such Offer Notice and a waiver of such
Offeree Holder's right of first refusal with respect to the proposed issuance of
New Securities described therein.
4.4 REFUSAL OF OFFER. If any Offeree Holder (a "Declining Holder")
fails to exercise such Offeree Holder's right to purchase New Securities
pursuant to Subsection 4.3 hereof, then the Company shall give written notice of
such fact to the remaining Offeree Holders who shall have exercised their right
of first refusal pursuant to Subsection 4.3 hereof ("Exercising Holders") and
offer to each Exercising Holder the right to purchase such portion of the
Declining Holder's pro rata share of the New Securities (the "Refused
Securities") as such Exercising Holder's pro rata share of the New Securities
bears to the sum of the pro rata shares of the New Securities of all Exercising
Holders. Each Exercising Holder shall have 15 days after any such notice is
given by the Company within which to give to the Company written notice of such
Exercising Holder's acceptance of such offer and agreement to purchase such
Exercising Holder's share of the Refused Securities so offered. Failure by any
Exercising Holder to timely tender such Exercising Holder's acceptance to the
Company in connection with any offer made pursuant to this Subsection 4.4 shall
be deemed a rejection of such offer and a waiver of such Exercising Holder's
right of refusal with respect to the proposed issuance of New Securities
described therein.
4.5 FAILURE TO EXERCISE. In the event the Offeree Holders fail to
exercise their right of first refusal with respect to all of the New Securities
by the end of the 15-day offer period provided in Subsection 4.4 hereof, or if
the Offeree Holders waive their right of first refusal with respect to the
issuance of New Securities pursuant to Subsection 4.6 hereof, then the Company
shall have 120 days thereafter within which to sell or enter into an agreement
(pursuant to which the sale of New Securities covered thereby shall be closed,
if at all, within 120 days from the date of said agreement) to sell the New
Securities not being sold to the Offeree Holders at a price and upon terms no
more favorable to the purchasers thereof than specified in the Company's Offer
Notice. In the event the Company has not within such 120-day period either sold
or entered into an agreement to sell the New Securities in accordance with the
preceding sentence, the Company shall not thereafter issue or sell any of the
New Securities described in the Offer Notice without first again offering such
Securities to the Offeree Holders in the manner provided in this Section 4.
4.6 EXPIRATION. The right of first refusal granted under this Section 4
shall expire upon, and shall not be applicable to, the first sale of Common
Stock of the Company to the public effected pursuant to a Public Offering. The
right of first refusal set forth in this Section 4 may be waived as to all of
the Holders of any Series of Designated Preferred Stock by a written waiver
executed by Holders owning shares of such Series of Designated Preferred Stock
and
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Common Stock issued upon conversion of such Series of Designated Preferred Stock
representing not less than 50 percent of the sum of (i) the number of shares of
Common Stock issued upon the conversion of such Series of Designated Preferred
Stock, and (ii) the number of shares of Common Stock then issuable upon
conversion of the outstanding shares of such Series of Designated Preferred
Stock.
4.7 TRANSFER OF RIGHT. The right of first refusal of an Offeree Holder
set forth in this Section 4 may not be assigned or transferred, except that such
right may be assigned by such Offeree Holder (i) to any wholly-owned subsidiary
or parent of, or to any corporation or entity that is, within the meaning of the
Securities Act, controlling, controlled by or under common control with, such
Offeree Holder, (ii) to any other Offeree Holder or (iii) to any other Person
with the prior approval of the Board of Directors.
SECTION 5. RIGHT OF CO-SALE.
5.1 SALES BY FGN. If FGN proposes to sell or transfer any shares of
Common Stock held by it in one or more related transactions which will result in
the transfer by FGN of 450,000 or more shares of Common Stock (as adjusted for
any stock dividends, combinations or splits with respect to such shares), then
FGN shall promptly give written notice (the "Co-Sale Notice") to each Original
Holder of Designated Preferred Stock (each such Holder an "Original Preferred
Holder") at least 15 days prior to the closing of such sale or transfer. The
Co-Sale Notice shall describe in reasonable detail the proposed sale or transfer
by FGN, including, without limitation, the number of shares of Common Stock to
be sold or transferred, the nature of such sale or transfer, the consideration
to be received by FGN, the name and address of each prospective purchaser or
transferee and whether the sale or transfer is being made pursuant to the
provisions of Subsection 5.5 hereof.
5.2 RIGHT OF CO-SALE. Each Original Preferred Holder shall have the
right, exercisable upon written notice given to FGN within 15 days after receipt
of the Co-Sale Notice, to participate in such sale of Common Stock on the same
terms and conditions as set forth in the Co-Sale Notice. To the extent one or
more of the Original Preferred Holders exercise such right of participation in
accordance with the terms and conditions set forth below, the number of shares
of Common Stock that FGN may sell in the proposed transaction shall be
correspondingly reduced. Each Original Preferred Holder shall have the right to
sell all or any part of that number of shares of Common Stock equal to the
product obtained by multiplying (i) the aggregate number of shares of Common
Stock covered by the Co-Sale Notice by (ii) a fraction the numerator of which is
the sum of the number of shares of Common Stock owned by such Original Preferred
Holder at the time of the sale or transfer plus the number of shares of Common
Stock into which such Original Preferred Holder's Designated Preferred Stock is
then convertible, and the denominator of which is the sum of the number of
shares of Common Stock owned by all of the Original Holders at the time of such
sale or transfer plus the number of shares of Common Stock into which the
Designated Preferred Stock of all Original Holders is then convertible.
5.3 DELIVERY OF CERTIFICATES. Each Original Preferred Holder who
exercises his or its right to participate in FGN's sale pursuant to Subsection
5.2 hereof (a "Participant") shall effect his or its participation in the sale
by promptly delivering to FGN for transfer to the prospective purchaser one or
more certificates, properly endorsed for transfer, which represent either (i)
the
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number of shares of Common Stock which such Participant elects to sell, or (ii)
that number of shares of Designated Preferred Stock which is at such time
convertible into the number of shares of Common Stock which such Participant
elects to sell; provided, however, that if the prospective purchaser objects to
the delivery of Designated Preferred Stock in lieu of Common Stock, such
Participant shall convert his or its Designated Preferred Stock into Common
Stock and deliver Common Stock to the prospective purchaser. The Company agrees
to make any such conversion concurrently with the actual transfer of such shares
to the purchaser. The Stock certificate or certificates that the Participant
delivers to FGN pursuant to this Subsection 5.3 shall be transferred to the
prospective purchaser in consummation of the sale of Common Stock pursuant to
the terms and conditions specified in the Co-Sale Notice, and FGN shall
concurrently therewith remit to such Participant that portion of the sale
proceeds which such Participant is entitled to receive by reason of such
Participant's participation in such sale. If any Participant fails to deliver
his or its Stock certificates to FGN as required by this Subsection 5.3 within
10 days of any written notice given by FGN to such Participant requesting such
delivery, then such Participant shall be deemed to have waived his or its rights
of co-sale under this Section 5 with respect to the transaction described in the
Co-Sale Notice.
5.4 FUTURE RIGHTS. The exercise or non exercise of the rights of
Original Preferred Holders hereunder to participate in one or more sales of
Common Stock made by FGN shall not adversely affect their rights to participate
in subsequent sales of Common Stock by FGN to the extent permitted by this
Section 5.
5.5 EXEMPT TRANSFERS. Notwithstanding the foregoing, the co-sale rights
of Original Preferred Holders set forth in this Section 5 shall not apply to:
(i) any pledge of Stock by FGN made pursuant to a bona fide loan transaction
that creates a mere security interest; (ii) any transfer of Stock to the
officers, directors, employees or stockholders of FGN or the Company, or to any
consultants or other Persons providing services to FGN or the Company, or to the
ancestors, descendants or spouse of any of such Persons, or to trusts for the
benefit of any such Persons; or (iii) any bona fide gift; provided, however,
that FGN shall inform the Original Preferred Holders of such pledge, transfer or
gift prior to effecting it and the pledgee, transferee or donee shall furnish to
the Company (on behalf of the Original Preferred Holders) a written agreement to
be bound by and to comply with all of the provisions of this Section 5. In
addition, and notwithstanding the foregoing, the co-sale rights of Original
Preferred Holders set forth in this Section 5 shall not apply to the sale of any
Stock by FGN pursuant to any Public Offering.
5.6 PROHIBITED TRANSFERS. In the event FGN should sell any Common Stock
in contravention of the co-sale rights of the Original Preferred Holders under
this Section 5 ("Prohibited Transfer"), each Original Preferred Holder shall
have the right to sell to FGN such number of shares of Common Stock that such
Original Preferred Holder would have been entitled to transfer to the purchaser
had the Prohibited Transfer been effected pursuant to and in compliance with the
terms of this Section 5. Such sale shall be made on the following terms and
conditions:
(A) The price per share at which each Original
Preferred Holder's shares of Common Stock are to be sold to FGN shall be equal
to the price per share paid by the purchaser to FGN in the Prohibited Transfer.
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(B) Within 30 days after the later of the dates
on which such Original Preferred Holder (i) received notice of the Prohibited
Transfer or (ii) otherwise became aware of the Prohibited Transfer, such
Original Preferred Holder shall, in order to exercise the option provided for in
this Subsection 5.6, deliver to FGN the certificate or certificates representing
shares of the Original Preferred Holder's Common Stock to be sold, each
certificate to be properly endorsed for transfer.
(C) FGN shall, within 5 days after its receipt of
the certificate or certificates for the shares of Common Stock to be sold by
such Original Preferred Holder pursuant to this Subsection 5.6, pay the
aggregate purchase price therefor to such Original Preferred Holder.
5.7 TERMINATION OF CO-SALE RIGHTS. The co-sale rights of Original
Preferred Holders set forth in this Section 5 shall terminate upon the earliest
to occur of: (i) the closing of a firm commitment underwritten Public Offering
covering the offer and sale of Common Stock at a price of not less than $6.60
per share (as adjusted for any stock dividends, combinations or splits with
respect to the Common Stock) and an aggregate offering price (before deduction
of underwriters' discounts and expenses) of not less than $10,000,000; (ii) the
closing of the sale by the Company of all or substantially all of its assets or
the acquisition of the Company by another Person by means of a merger or
consolidation resulting in the exchange of the outstanding shares of the
Company's Stock for securities or consideration to be issued, or caused to be
issued, by the acquiring entity or its subsidiary or (iii) such time as the sum
of the number of shares of Common Stock held by FGN plus the number of shares of
Common Stock into which FGN's Designated Preferred Stock is then convertible
constitutes less than 10 percent of the sum of the number of shares of Common
Stock then outstanding plus the number of shares of Common Stock issuable upon
the exercise of all options, warrants and rights to acquire Common Stock and the
exchange or conversion of all Securities exchangeable for or convertible into
Common Stock (including, without limitation, all shares of Preferred Stock).
SECTION 6. COMPANY COVENANTS.
The Company covenants and agrees, until the closing of the Company's
first Public Offering but only so long as any Designated Preferred Stock remains
outstanding, as follows:
6.1 FINANCIAL STATEMENTS AND INFORMATION. The Company shall furnish the
following reports to each Holder:
6.1.1 ANNUAL REPORTS. As soon as practicable after the end of
each fiscal year of the Company, and in any event within 120 days thereafter, a
consolidated balance sheet of the Company and its subsidiaries, if any, as at
the end of such fiscal year, and consolidated statements of income and cash
flows of the Company and its subsidiaries, if any, for such year, prepared in
accordance with generally accepted accounting principles consistently applied
and setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail and certified by independent public
accountants of recognized national standing selected by the Company.
6.1.2 QUARTERLY REPORTS. As soon as practicable after the end
of the first, second and third fiscal quarters, and in any event within 90 days
thereafter, a consolidated
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balance sheet of the Company and its subsidiaries, if any, as of the end of each
such fiscal quarter, and consolidated statements of income and cash flows of the
Company and its subsidiaries, if any, for such period and for the current fiscal
year to date, prepared in accordance with generally accepted accounting
principles consistently applied and setting forth in comparative form the
figures for the corresponding periods of the previous Company fiscal year,
subject to changes resulting from normal year end audit adjustments, all in
reasonable detail and certified by the principal financial or accounting officer
of the Company, except that such financial statements need not contain the notes
required by generally accepted accounting principles.
6.1.3 COMMISSION REPORTS. From the date that the Company
becomes subject to the reporting requirements of the Securities Exchange Act,
and in lieu of the financial information required pursuant to Subsections 6.1.1
and 6.1.2 hereof, copies of the Company's annual reports on Form 10-K and the
Company's quarterly reports on Form 10-Q, respectively.
6.1.4 ADDITIONAL INFORMATION. The Company shall permit any
Holder of at least 2,000,000 shares of Registrable Securities (as adjusted for
any stock dividends, combinations or splits with respect to such shares) and any
Person designated from time to time by such Holder, at the expense of such
Holder, to visit and inspect any of the properties of the Company, including its
books and records (and to make copies thereof and take extracts therefrom), and
to discuss its affairs, finances and accounts with the Company's officers and
its independent public accountants, all at such reasonable times and as often as
any such Holder may reasonably request.
6.1.5 INSPECTION RIGHTS. The provisions of this Section 6
shall not be in limitation of any rights which any Holder may have to inspect
the books and records of the Company and its subsidiaries (if any), or to
inspect their properties or discuss their affairs, finances and accounts, under
the laws of the jurisdictions in which they are incorporated.
6.1.6 CONFIDENTIALITY. Anything in this Section 6 to the
contrary notwithstanding, no Holder by reason of this Agreement shall have
access to any trade secrets or proprietary information of the Company or of any
subsidiary of the Company. Each Holder shall hold in confidence and trust all
information delivered by the Company to such Holder, shall not disclose such
information to any third party, and shall use such information solely to
evaluate and protect such Holder's investment in Stock, except as otherwise
provided in a confidentiality agreement between such Holder and the Company.
6.2 KEY MAN INSURANCE. The Company shall use its best efforts to obtain
key man accidental death and disability insurance on the life of ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ in the amount of $1,000,000, payable to the Company.
6.3 UNDERWRITING PUBLIC OFFERING. (a) From and after the date hereof
and until June 30, 1998, with respect to (i) any public offering of equity
securities by the Company (whether in a primary or secondary offering) in the
United States through an underwriter or (ii) any merger and acquisition
transaction involving the Company or any subsidiary (including the sale of the
Company or any subsidiary), the Company shall first
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negotiate with ▇▇▇▇▇▇▇, Sachs & Co. in good faith to provide investment banking
services for the Company with respect to the transaction (including, in the case
of any public offering of securities, the Company shall first negotiate with
▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co. to act as the lead managing underwriter of such offering).
Should the parties be unable to agree upon reasonable terms after good faith
discussions, with in a reasonable period of time, the Company will be free to
negotiate with others but will also cooperate and discuss in good faith with
▇▇▇▇▇▇▇, Sachs & Co. to provide ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co. a mutually satisfactory
investment banking role in the transaction.
(b) If ▇▇▇▇▇▇▇, Sachs & Co. acts as a managing
underwriter in any public offering of securities of the Company, to the extent
required by applicable law, a Qualified Independent Underwriter (as defined in
Schedule E to the National Association of Securities Dealers, Inc. By-Laws)
shall be retained by the Company and shall be acceptable to ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co.
(which consent shall not be unreasonably withheld), and the Company shall pay
all fees and expenses (other than underwriting discounts and commissions) of
such Qualified Independent Underwriter.
SECTION 7. TRANSFER OF SECURITIES.
7.1 RESTRICTIONS ON TRANSFER. The Common Stock and Designated Preferred
Stock held by the Holders shall not be transferable except upon the conditions
specified in this Section 7, which conditions are intended to insure compliance
with the provisions of the Securities Act and applicable state securities laws
with respect to the transfer of Securities.
7.2 RESTRICTIVE LEGENDS. Unless and until otherwise permitted by this
Section 7, each certificate for Common Stock or Designated Preferred Stock
issued to any Holder, or to any subsequent transferee of any Holder, shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
THUS MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR UNLESS AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. FURTHER, SUCH TRANSFER IS SUBJECT
TO THE CONDITIONS SPECIFIED IN A FOURTH AMENDED AND RESTATED
STOCKHOLDERS' AGREEMENT DATED AS OF APRIL __, 1998, BY AND
AMONG THE COMPANY AND ITS STOCKHOLDERS, A COPY OF WHICH
STOCKHOLDERS' AGREEMENT IS ON FILE AND MAY BE INSPECTED AT THE
PRINCIPAL OFFICE OF THE COMPANY AND WILL BE FURNISHED BY THE
COMPANY TO THE HOLDER HEREOF UPON REQUEST AND WITHOUT CHARGE.
"THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER
WHO SO REQUESTS A STATEMENT OF THE POWERS, DESIGNATIONS,
PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER
SPECIAL RIGHTS OF EACH CLASS OF COMPANY STOCK OR SERIES
THEREOF AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF
SUCH PREFERENCES AND/OR RIGHTS."
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The Company may order its Stock transfer agents to stop the transfer of
any shares of Stock bearing the legend set forth in this Subsection 7.2 until
the conditions of this Section 7 with respect to the transfer of such shares
have been satisfied.
7.3 NOTICE OF PROPOSED TRANSFER. If, prior to any transfer or sale of
any Stock, the Holder desiring to effect such transfer or sale shall deliver a
written notice to the Company describing the manner of such transfer or sale
and, if requested by the Company, a written opinion of counsel for such Holder
(provided that such counsel, and the form and substance of such opinion, are
reasonably satisfactory to the Company) to the effect that (i) such transfer or
sale may be effected without the registration of such Securities under the
Securities Act and all applicable state securities laws, and (ii) all action
necessary for compliance with the Securities Act and such state securities laws
has been taken, then the Company shall thereupon permit or cause its transfer
agent (if any) to permit such transfer or sale to be effected.
7.4 TERMINATION OF RESTRICTIONS.
7.4.1 SECURITIES LAW RESTRICTIONS. The restrictions imposed by
this Section 7 upon the transferability of Stock shall terminate as to any
particular share of Stock when (i) such Stock shall have been effectively
registered under the Securities Act and sold by the Holder thereof in accordance
with such registration, or (ii) a written opinion to the effect that such
restrictions are no longer required or necessary under any federal or state
securities laws and regulations has been received from counsel for the Holder
thereof (provided that such counsel, and the form and substance of such opinion,
are reasonably satisfactory to the Company) or counsel for the Company, or (iii)
such Stock shall have been sold without registration under the Securities Act in
compliance with Rule 144, or (iv) the Company is reasonably satisfied that the
Holder of such Stock shall, in accordance with the terms of Subsection (k) of
Rule 144, be entitled to sell such Stock pursuant to such subsection, or (v) a
letter or an order shall have been issued to the Holder thereof by the staff of
the Commission stating that no enforcement action shall be recommended by such
staff or taken by the Commission if such Stock is transferred without
registration under the Securities Act in accordance with the conditions set
forth in such letter or order and such letter or order specifies that no
subsequent restrictions on transfer are required.
7.4.2 CO-SALE RESTRICTIONS. Notwithstanding the foregoing, if
the restrictions of this Section 7 shall terminate with respect to the shares of
Common Stock of FGN but such shares shall remain subject to the rights of
co-sale of Original Preferred Holders pursuant to Section 5 of this Agreement,
then the shares of such Common Stock shall contain the following legend:
"THE SALE, TRANSFER OR OTHER DISPOSITION OF THE
SHARES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
THE CONDITIONS SPECIFIED IN A FOURTH AMENDED AND
RESTATED STOCKHOLDERS' AGREEMENT DATED AS OF APRIL
__, 1998, BY AND AMONG THE COMPANY AND ITS
STOCKHOLDERS, A COPY OF WHICH STOCKHOLDERS' AGREEMENT
IS ON FILE AND MAY BE INSPECTED AT THE PRINCIPAL
OFFICE OF THE COMPANY AND WILL BE
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FURNISHED BY THE COMPANY TO THE HOLDER HEREOF UPON
REQUEST AND WITHOUT CHARGE."
7.5 ELIMINATION OF LEGEND. Whenever the restrictions imposed by this
Section 7 shall terminate, as hereinabove provided, the Holder of any particular
share of Stock then outstanding as to which such restrictions shall have
terminated shall be entitled to receive from the Company, without expense to
such Holder, one or more new certificates for Stock not bearing the restrictive
legend set forth in Subsection 7.2 hereof.
SECTION 8. MISCELLANEOUS.
8.1 SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
8.2 DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
8.3 NOTICES. All communications provided for under this Agreement shall
be in writing and shall be delivered by hand or by first class regular mail,
postage prepaid, to the following addresses, or such other addresses as shall be
given by notice delivered hereunder, and shall be deemed to have been given on
the day of personal delivery thereof on the third business day after such
mailing:
If to any Holder:
Addressed to such Holder at such Holder's address as shown on
the books of the Company or its transfer agent;
If to the Company, to:
Cell Pathways, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
with a copy to:
Cell Pathways, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Secretary
or to such other Persons or at such other addresses as shall be furnished by any
such party by like notice given to the other parties to this Agreement.
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8.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
together constitute one and the same document.
8.5 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
by and among the parties hereto with respect to the subject matter hereof.
8.6 AMENDMENTS. Except as otherwise specifically provided in this
Agreement, this Agreement may be amended, modified or supplemented only by a
written instrument executed by each of (i) the Company, (ii) Holders of 50
percent or more of the shares of Common Stock then outstanding, (iii) Holders of
50 percent or more of the shares of Series A and Series B Convertible Preferred
Stock then outstanding, voting as one class, and (iv) the Holders of 50 percent
or more of the shares of Series C, Series D, Series E, Series F and Series G
Convertible Preferred Stock then outstanding, voting as one class.
8.7 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to contracts made
and to be performed in that State.
8.8 INTENDED BENEFICIARIES. Sections 3, 4, 5, 6 and 7 of this Agreement
are made by the parties hereto for the express benefit of Holders of Securities
to the extent provided therein, and such Holders shall be entitled to rights
thereunder subject to the limitations set forth therein.
8.9 GS GROUP ASSIGNMENT. GS Group shall have the right, without having
to comply with the provisions of Section 7 of this Agreement, to transfer all or
a part of the Stock held by it to one or more other partnerships, corporations,
trusts or other organizations which control, are controlled by or are under
common control with GS Group or one or more of the then current, former or
future partners of GS Group, provided that such transfer occurs in compliance
with all applicable securities laws; and such transferee shall be deemed an
Original Holder entitled to the rights and subject to the limitations of this
Agreement.
8.10 NO INCONSISTENT AGREEMENTS. The Company will not, on or after the
date of this Agreement, enter into any agreement with respect to its securities
which is inconsistent with the rights granted to the Holders or otherwise
conflicts with the provisions hereof. The Company agrees and hereby represents
that the rights granted to the Holders hereunder do not in any way conflict with
and are not inconsistent with the rights granted to holders of the Company's
securities under any other agreements.
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THE COMPANY:
CELL PATHWAYS, INC.
By: __________________________________________
Its: _________________________________________
STOCKHOLDERS:
FGN, INC.
By: __________________________________________
Its: _________________________________________
NORTHWOOD VENTURES
By: __________________________________________
Its: _________________________________________
TECHNOLOGY PARTNERS WEST FUND IV, L.P.
By: __________________________________________
Its: _________________________________________
QUEST VENTURES II
By: __________________________________________
Its: _________________________________________
QUEST VENTURES INTERNATIONAL
By: __________________________________________
Its: _________________________________________
THE ▇▇▇▇▇▇▇ SACHS GROUP, L.P.
By: __________________________________________
Its: _________________________________________
NEW YORK LIFE INSURANCE COMPANY
By: __________________________________________
Its: _________________________________________
ATTORNEY IN FACT FOR OTHER STOCKHOLDERS
By: __________________________________________
Its: _________________________________________
31.