EXHIBIT 2.4
UROGEN CORP.
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INVESTOR RIGHTS AGREEMENTS
JULY 8, 1998
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UROGEN CORP.
INVESTOR RIGHTS AGREEMENT
THIS AGREEMENT ("Agreement") is made as of the 8th day of July, 1998, by
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and among Urogen Corp., a Delaware corporation (the "Company"), ▇▇▇▇▇▇
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Healthcare Corporation, a Delaware corporation (the "Investor"), and with
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respect to Sections 2, 3, 5 and 7, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇
(collectively, the "Founders").
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RECITALS
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WHEREAS, the Company and the Investor have entered into that certain Asset
Purchase Agreement dated as of February 28, 1998, as amended by Amendment to
Asset Purchase Agreement dated as of May 27, 1998 (collectively, the "Asset
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Purchase Agreement");
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WHEREAS, pursuant to the Asset Purchase Agreement, the Company agreed to
grant the Investor certain rights regarding registration of the Company's
securities under the Securities Act (as defined below), co-sale rights,
investment rights and certain other rights;
WHEREAS, pursuant to the Asset Purchase Agreement the Investor has agreed
to comply with certain standstill and other conditions set forth herein; and
WHEREAS, the Founders have entered into this Agreement as an inducement to
the Investor entering into the Acquisition Agreements.
NOW, THEREFORE, in consideration of the above and of the mutual promises set
forth herein, the parties hereto agree as follows:
SECTION 1
DEFINITIONS
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1.1 CERTAIN DEFINITIONS. Hereafter, in this Agreement the following terms
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shall have the following respective meanings (capitalized terms not otherwise
defined shall have the meanings ascribed to them in the Asset Purchase
Agreement):
"Acquisition Agreements" shall mean the Asset Purchase Agreement, this
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Agreement, the Distribution Agreement, the Development Agreement, the Services
Agreement, the Royalty Agreement, the Seller License Agreement, the Credit
Agreement and the Employee Lease.
"Affiliate" of, or Person "affiliated" with, a specified Person shall
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mean a Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, the Person
specified.
"Co-Sale Pro Rata Share" shall mean, with respect to the Investor, the
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ratio that (i) the sum of (x) the total number of shares of then outstanding
Common Stock held by the Investor and (y) the number of shares of Common Stock
issuable upon the conversion of then outstanding Preferred Stock held by the
Investor bears to (ii) the sum of (x) the total number of shares of then
outstanding Common Stock held by the Investor or issuable upon the conversion of
then outstanding Preferred Stock held by the Investor and (y) the total number
of shares of Founders' Shares held by all Founders and Permitted Transferees.
"Commission" shall mean the Securities and Exchange Commission or any
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other federal agency at the time administering the Securities Act.
"Common Stock" shall mean the common stock, $.001 par value per share,
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of the Company.
"Common Stock Equivalents" shall mean (without duplication of any
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other Common Stock, Preferred Stock or Common Stock Equivalents) rights,
warrants, convertible securities or indebtedness, or other rights, exercisable
for or convertible or exchangeable into, directly or indirectly, Common Stock
and securities convertible or exchangeable into Common Stock, whether at the
time of issuance or upon the passage of time or the occurrence of some future
event.
"Company Securities" shall mean the Preferred Stock, Common Stock,
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Common Stock Equivalents and any other capital stock of the Company issued and
outstanding from time to time.
"Conversion Stock" shall mean (i) any Common Stock issued or issuable
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with respect to any Original Common Stock or Preferred Stock held by a Holder
and/or (ii) any Common Stock issued or issuable with respect to any other Common
Stock Equivalents issued or issuable with respect to any Original Common Stock
or Preferred Stock held by a Holder.
"First Public Offering" shall mean the first consummation of the
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Company's sale of its Common Stock pursuant to a registration statement under
the Securities Act after the date hereof.
"Founders' Shares" shall mean shares of outstanding Common Stock and
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Common Stock Equivalents held of record by the Founders on the date hereof or
issued with respect to such shares upon any Recapitalization and held by the
Founders and/or Permitted Transferees at the applicable time; provided, however
that Founders' Shares shall not include securities issued in connection with the
Bridge Financing or securities issued with respect to such securities upon any
Recapitalization.
"Holder" shall mean the Investor so long as the Investor holds
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Registrable Securities and any person holding Registrable Securities to whom the
rights under this Agreement have been transferred in accordance with Section
2.14 hereof.
"Initiating Holders" shall mean any Holder so long as such Holder
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holds at least 1,000,000 shares of Common Stock or Conversion Stock convertible
into or exercisable for at least 1,000,000 shares of Common Stock.
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"Offered Shares" shall mean Founders' Shares proposed to be sold,
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assigned or transferred by a Seller in a particular transaction.
"Permitted Transfer" shall mean: (a) a Transfer of Company Securities
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between any Stockholder and any Affiliate of such Stockholder; provided,
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however, that with respect to any Transfer of shares of Voting Stock, the
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Stockholder, or any successor to substantially all of the Stockholder's
business, retains, as trustee or by some other means, the sole authority to vote
such shares of Voting Stock; and (b) a bona fide pledge of Company Securities by
a Stockholder to a bank or financial institution. Except with respect to a bona
fide pledge to a bank or financial institution, no Permitted Transfer shall be
effective unless and until the transferee of the Company Securities so
transferred executes and delivers to the Company an executed counterpart of this
Agreement agreeing to be bound by the terms of this Agreement in the same manner
as the transferor.
"Permitted Transferee" shall mean any Person who shall have acquired
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and who shall hold Company Securities pursuant to a Permitted Transfer.
"Person" shall mean an individual, corporation, limited liability
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company, partnership, limited partnership, limited liability partnership, trust
or unincorporated association, or a government or any agency or political
subdivision thereof.
"Preferred Stock" shall mean the preferred stock, $.01 par value per
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share, of the Company.
"Recapitalization" shall mean with respect to any Company Securities,
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any stock split, stock dividend, recapitalization, or similar event.
"Registrable Securities" shall mean (i) the Conversion Stock and (ii)
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Common Stock issued to the Investor pursuant to the Asset Purchase Agreement and
held of record by a Holder (the "Original Common Stock"); provided, however,
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that shares of Common Stock or other securities shall be treated as Registrable
Securities only if and so long as they have not been (A) sold to or through a
broker or dealer or underwriter in a public distribution or a public securities
transaction, whether in a registered offering, Rule 144 transaction or
otherwise, or (B) sold, in the written opinion of counsel to the Company, in a
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act, such that all transfer restrictions and restrictive legends
with respect thereto are removed upon the consummation of such sale.
The terms "register," "registered" and "registration" refer to a
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registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses, except as otherwise
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stated below, incurred by the Company in complying with Sections 2.4, 2.5 and
2.6 hereof, including, without limitation, all registration, qualification and
filing fees, printing expenses, escrow fees, fees and
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disbursements of counsel for the Company, and blue sky fees and expenses, but
shall not include any Selling Expenses.
"Reorganization" shall mean the Company's sale of all or substantially
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all of its assets or the acquisition of the Company by another entity by means
of merger or consolidation resulting in the exchange of the outstanding shares
of the Company for securities or consideration issued, or caused to be issued,
by the acquiring entity in which the holders of capital stock of the Company
hold less than 50% of the voting securities of the acquiring corporation.
"Restricted Securities" shall mean the securities of the Company
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required to bear the legend set forth in Section 2.2 hereof.
"Rights" shall mean the registration rights and the co-sale rights of
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the Investor described in Sections 2 and 3, respectively.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
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any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Seller" shall mean a Founder or Permitted Transferee who proposes to
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sell, transfer or assign Founders' Shares.
"Selling Expenses" shall mean all underwriting discounts, selling
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commissions and stock transfer taxes applicable to the securities registered by
the Holders and all reasonable fees and, with respect to each Holder,
disbursements of counsel for such Holder.
"Series A Preferred Stock" shall mean the Series A preferred stock,
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$.01 par value per share, of the Company.
"Series B Preferred Stock" shall mean the Series B preferred stock,
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$.01 par value per share, of the Company.
"Series C Preferred Stock" shall mean the Series C preferred stock,
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$.01 par value per share, of the Company.
"Shares" shall mean all issued and outstanding shares of Original
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Common Stock, Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock.
"Stockholder" shall mean any holder of record of Company Securities
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(other than the Company) who may execute this Agreement or hereafter may execute
a separate agreement to be bound by the terms hereof.
"Total Voting Power" shall mean, at any time, the aggregate number of
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votes which may be cast by holders of outstanding Voting Stock.
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"Transfer" shall mean to transfer, sell, assign, pledge, hypothecate,
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create a security interest in or lien on, place in trust (voting or otherwise),
assign or in any other way encumber or dispose of, directly or indirectly and
whether or not by operation of law or for value, any Company Securities.
"Voting Stock" shall mean (i) shares of the Company's Common Stock,
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(ii) each series of Preferred Stock, (iii) all other securities issued by the
Company which are exercisable or convertible into Common Stock or exercisable or
convertible into securities that are exercisable or convertible into Common
Stock and (iv) all other securities directly or indirectly entitled to vote
generally for the election of directors of the Company, whether currently
outstanding or hereafter issued.
SECTION 2
GENERAL RESTRICTIONS ON TRANSFERABILITY OF SECURITIES;
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COMPLIANCE WITH SECURITIES ACT; REGISTRATION RIGHTS
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2.1 GENERAL RESTRICTIONS ON TRANSFERABILITY. The Shares, Founders' Shares
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and the Conversion Stock shall not be sold, assigned, transferred or pledged
except upon the conditions specified in this Section 2 and in Sections 5.1 and
5.7, which conditions are intended to ensure compliance with the provisions of
the Securities Act. Each Holder and Founder will cause any proposed purchaser,
assignee, transferee, or pledgee of the Shares, Founders' Shares or Conversion
Stock held by such Holder or Founder to agree to take and hold such securities
subject to the provisions and upon the conditions specified in this Section 2.
2.2 RESTRICTIVE LEGEND. Each certificate representing the Shares,
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Founders' Shares and any securities issued in respect of the Shares or Founders'
Shares, including upon conversion of the Preferred Stock held by a Holder and
upon any Recapitalization, Reorganization or similar event or a reincorporation
shall (unless otherwise permitted by the provisions of Section 2.3 below) be
stamped or otherwise imprinted with a legend in substantially the following form
(in addition to any legend required under applicable state securities laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL
REASONABLY ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF
SAID ACT. COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE
SECURITIES AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST
BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO
THE SECRETARY OF THE COMPANY AT THE PRINCIPAL EXECUTIVE OFFICES OF THE
COMPANY.
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Each Holder and Founder consents to the Company making a notation on its records
and giving instructions to any transfer agent of the Preferred Stock or the
Common Stock in order to implement the restrictions on transfer established in
this Section 2.
2.3 NOTICE OF PROPOSED TRANSFERS. The holder of each certificate
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representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 2.3. Prior to any proposed sale,
assignment, transfer or pledge of any Restricted Securities, unless there is in
effect a registration statement under the Securities Act covering the proposed
transfer, the holder thereof shall give written notice to the Company of such
holder's intention to effect such transfer, sale, assignment or pledge. Each
such notice shall describe the manner and circumstances of the proposed
transfer, sale, assignment or pledge in sufficient detail, and shall be
accompanied, at such holder's expense by either (i) an unqualified written
opinion of legal counsel, who shall be and whose legal opinion shall be
reasonably satisfactory to the Company, addressed to the Company, to the effect
that the proposed transfer of the Restricted Securities may be effected without
registration under the Securities Act, or (ii) a "no action" letter from the
Commission to the effect that the transfer of such securities without
registration will not result in a recommendation by the staff of the Commission
that action be taken with respect thereto (except that it is agreed that the
Company will not require opinions of counsel or "no action" letters for
transfers to Permitted Transferees), whereupon the holder of such Restricted
Securities shall be entitled to transfer such Restricted Securities in
accordance with the terms of this Agreement and the terms of the notice
delivered by such holder to the Company. Each certificate evidencing the
Restricted Securities transferred as above provided shall bear, except if such
transfer is made pursuant to Rule 144, the appropriate restrictive legend set
forth in Section 2.2 above, except that such certificate shall not bear such
restrictive legend if in the opinion of counsel for such holder and the Company
such legend is not required in order to establish compliance with any provision
of the Securities Act.
2.4 REQUESTED REGISTRATION.
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(a) Request for Registration. In case the Company shall receive from
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Initiating Holders a written request that the Company effect any registration,
qualification or compliance with respect to not less than such number of shares
such that the anticipated aggregate offering price, net of underwriting
discounts and commissions, would equal or exceed $5,000,000, the Company will:
(i) promptly give written notice of the proposed
registration, qualification or compliance to all other Holders; and
(ii) as soon as practicable, use its best efforts to
effect such registration, qualification or compliance (including, without
limitation, appropriate qualification under applicable blue sky or other state
securities laws and appropriate compliance with applicable regulations issued
under the Securities Act and any other governmental requirements or regulations)
as may be so requested and as would permit or facilitate the sale and
distribution of all or such portion of such Registrable Securities as are
specified in such request, together with all or such portion of the Registrable
Securities of any Holder or Holders joining in such request as are specified in
a written request received by the Company within forty-eight (48) hours after
the Company's giving of such written notice; provided,
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however, that the Company shall not be required to effect more than one
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registration pursuant to this Section 2.4 in any twelve (12) month period;
provided, further, that the Company shall not be obligated to take any action to
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effect any such registration, qualification or compliance pursuant to this
Section 2.4:
(A) With respect to any particular jurisdiction in
which the Company would be required to execute a general consent to service of
process in effecting such registration, qualification or compliance unless the
Company is already subject to service in such jurisdiction and except as may be
required by the Securities Act;
(B) Prior to the date six months after the closing of
the First Public Offering;
(C) During the period starting with the date sixty
(60) days prior to the Company's estimated date of filing of, and ending on the
date six (6) months immediately following the effective date of, any
registration statement pertaining to securities of the Company (other than a
registration of securities in a Rule 145 transaction or with respect to an
employee benefit plan), provided that the Company is actively employing in good
faith all reasonable efforts to cause such registration statement to become
effective;
(D) After the Company has effected two such
registrations pursuant to this Section 2.4(a), and such registrations have been
declared or ordered effective; or
(E) If the Company shall furnish to such Holders a
certificate signed by the Chief Executive Officer of the Company stating that in
the good faith judgment of the Board of Directors it would be seriously
detrimental to the Company or its shareholders for a registration statement to
be filed in the near future, in which case the Company's obligation to use its
best efforts to register, qualify or comply under this Section 2.4 shall be
deferred for a period not to exceed ninety (90) days from the date of mailing
such notice to the Initiating Holders (such notice shall also state that it is
the Company's bona fide intention to effect the filing of a registration
statement with the Commission within ninety (90) days of the date of such
notice); provided that the Company may not exercise this right more than once in
any twelve-month period.
Subject to the foregoing clauses (A) through (E), the Company shall file a
registration statement covering the Registrable Securities so requested to be
registered as soon as practicable, after receipt of the request or requests of
the Initiating Holders.
(b) Underwriting. In the event that a registration pursuant to
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Section 2.4 is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as part of the notice given pursuant to
Section 2.4(a)(i). In such event, the right of any Holder to registration
pursuant to Section 2.4 shall be conditioned upon such Holder's participation in
the underwriting arrangements required by this Section 2.4, and the inclusion of
such Holder's Registrable Securities in the underwriting to the extent requested
shall be limited to the extent provided herein. The Company shall (together with
all Holders proposing to distribute their securities through such underwriting)
enter into an underwriting agreement in customary form with the managing
underwriter selected for such
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underwriting by a majority in interest of the Initiating Holders, but subject to
the Company's reasonable approval. Notwithstanding any other provision of this
Section 2.4, if the managing underwriter advises the Initiating Holders in
writing that marketing factors require a limitation of the number of shares to
be underwritten, then the Company shall so advise all Holders, and the number of
shares of Registrable Securities that may be included in the registration and
underwriting shall be allocated among all Holders thereof in proportion, as
nearly as practicable, to the respective amounts of Registrable Securities held
by such Holders at the time of filing the registration statement; provided,
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however, that the number of shares of Registrable Securities to be included in
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such underwriting and registration shall not be reduced unless all other
securities of the Company are first entirely excluded from the underwriting and
registration; provided further, however, that if the number of shares of
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Registrable Securities to be included in such underwriting or registration is
reduced to less than 75% of the aggregate number of shares of Registrable
Securities originally requested for registration pursuant to Section 2.4(a),
then such registration or underwriting shall not be counted as one of the two
permitted requests for registration under Section 2.4(a)(D). No Registrable
Securities excluded from the underwriting by reason of the underwriter's
marketing limitation shall be included in such registration. To facilitate the
allocation of shares in accordance with the above provisions, the Company or the
underwriters may round the number of shares allocated to any Holder to the
nearest one hundred (100) shares. If any Holder of Registrable Securities
disapproves of the terms of the underwriting, such person may elect to withdraw
therefrom by written notice to the Company, the managing underwriter and the
Initiating Holders. The Registrable Securities and/or other securities so
withdrawn shall also be withdrawn from registration and such Registrable
Securities shall not be transferred in a public distribution prior to one
hundred eighty (180) days after the effective date of such registration, or such
other shorter period of time as the underwriters may require.
2.5 COMPANY REGISTRATION.
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(a) Notice of Registration. If at any time or from time to time
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after the First Public Offering the Company shall determine to register any of
its securities, either for its own account or the account of a security holder
or holders, other than (i) a registration relating solely to employee benefit
plans or (ii) a registration relating solely to a Rule 145 transaction, the
Company will:
(i) promptly give to each Holder written notice thereof;
and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests, made within forty-eight (48) hours after the Company's giving of
such notice, by any Holder.
(b) Underwriting. If the registration of which the Company gives
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notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 2.5(a)(i). In such event, the right of any Holder to
registration pursuant to Section 2.5 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of Registrable Securities
in the underwriting to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together
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with the Company and the other holders distributing their securities through
such underwriting) enter into an underwriting agreement in customary form with
the managing underwriter selected for such underwriting by the Company.
Notwithstanding any other provision of this Section 2.5, if the managing
underwriter determines that marketing factors require a limitation of the number
of shares to be underwritten, the managing underwriter may limit the Registrable
Securities to be included in such registration. The Company shall so advise all
Holders and other holders distributing their securities through such
underwriting, and the number of shares of Registrable Securities that may be
included in the registration and underwriting (after inclusion of all shares to
be included by the Company) shall be allocated among all Holders requesting
inclusion of Registrable Securities in such registration in proportion, as
nearly as practicable, to the respective amounts of Registrable Securities held
by such Holders at the time of filing the registration statement; provided,
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however, that the right of the underwriters to exclude Registrable Securities
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from the registration and underwriting as described above shall be restricted
such that (i) the number of Registrable Securities included in any such
registration may not be reduced below fifteen percent (15%) of the shares
proposed to be registered by such Holders; and (ii) all shares that are not
Registrable Securities and all shares that are held by persons who are employees
or directors of the Company (or any subsidiary of the Company) shall first be
excluded from such registration and underwriting before any Registrable
Securities are so excluded. To facilitate the allocation of shares in accordance
with the above provisions, the Company may round the number of shares allocated
to any Holder or holder to the nearest one hundred (100) shares. If any Holder
or holder disapproves of the terms of any such underwriting, he may elect to
withdraw therefrom by written notice to the Company and the managing
underwriter. Any securities excluded or withdrawn from such underwriting shall
be withdrawn from such registration, and shall not be transferred in a public
distribution prior to one hundred eighty (180) days after the effective date of
the registration statement relating thereto, or such other shorter period of
time as the underwriters may require.
(c) Right to Terminate Registration. The Company shall have the
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right to terminate or withdraw any registration initiated by it under this
Section 2.5 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration.
2.6 REGISTRATION ON FORM S-3.
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(a) If any Holder or Holders request that the Company file a
registration statement on Form S-3 (or any successor form to Form S-3) for a
public offering of shares of the Registrable Securities the reasonably
anticipated aggregate offering price to the public of which, net of underwriting
discounts and commissions, would exceed $1,000,000, and the Company is a
registrant entitled to use Form S-3 to register the Registrable Securities for
such an offering, the Company shall use its best efforts to cause such
Registrable Securities to be registered for the offering on such form and to
cause such Registrable Securities to be qualified in such jurisdictions as the
Holder or Holders may reasonably request; provided, however, that the Company
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shall not be required to effect more than one registration pursuant to this
Section 2.6 in any twelve (12) month period or in excess of two registrations
under this Section 2.6. The substantive provisions of Section 2.4(b) shall be
applicable to each registration initiated under this Section 2.6.
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(b) Notwithstanding the foregoing, the Company shall not be obligated
to take any action pursuant to this Section 2.6: (i) with respect to any
particular jurisdiction in which the Company would be required to execute a
general consent to service of process in effecting such registration,
qualification or compliance unless the Company is already subject to service in
such jurisdiction and except as may be required by the Securities Act; (ii) if
the Company, within ten (10) days of the receipt of the request of the
Initiating Holders, gives notice of its bona fide intention to effect the filing
of a registration statement with the Commission within ninety (90) days of
receipt of such request (other than with respect to a registration statement
relating to a Rule 145 transaction, an offering solely to employees or any other
registration which is not appropriate for the registration of Registrable
Securities); (iii) during the period starting with the date sixty (60) days
prior to the Company's estimated date of filing of, and ending on the date six
(6) months immediately following, the effective date of any registration
statement pertaining to securities of the Company (other than a registration of
securities in a Rule 145 transaction or with respect to an employee benefit
plan), provided that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become effective; or
(iv) if the Company shall furnish to such Holder a certificate signed by the
Chief Executive Officer of the Company stating that in the good faith judgment
of the Board of Directors it would be seriously detrimental to the Company or
its shareholders for registration statements to be filed in the near future, in
any such case the Company's obligation to use its best efforts to file a
registration statement shall be deferred for a period not to exceed ninety (90)
days from the receipt of the request to file such registration by such Holder.
2.7 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after the
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date of this Agreement, the Company shall not enter into any agreement granting
any holder or prospective holder of any securities of the Company registration
rights with respect to such securities unless such new registration rights,
including standoff obligations, are subordinate to the rights of the Holders
hereunder and would not reduce the amount of Registrable Securities of the
Holders which may be included in a registration.
2.8 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
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connection with all registrations pursuant to Sections 2.4, 2.5 and 2.6 shall be
borne by the Company. Unless otherwise stated, all Selling Expenses relating to
securities registered on behalf of the Holders and all other Registration
Expenses shall be borne by the Holders of such securities pro rata on the basis
of the number of shares so registered; provided, however that fees and
disbursements of counsel for a Holder shall be paid by the Holder incurring
same.
2.9 REGISTRATION PROCEDURES. In the case of each registration,
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qualification or compliance effected by the Company pursuant to this Section 2,
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense the Company will:
(a) Prepare and file with the Commission a registration statement
with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for at least one hundred
eighty (180) days or until the distribution described in the Registration
Statement has been completed;
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(b) Furnish to the Holders participating in such registration and to
the underwriters of the securities being registered such reasonable number of
copies of the registration statement, preliminary prospectus, final prospectus
and such other documents as such underwriters may reasonably request in order to
facilitate the public offering of such securities;
(c) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions;
(d) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriters of such offering;
(e) Notify each Holder of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
2.10 INDEMNIFICATION.
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(a) The Company will indemnify each Holder, each of its officers,
directors, partners, members, accountants, legal counsel and agents, and each
person controlling such Holder within the meaning of Section 15 of the
Securities Act, with respect to which registration, qualification or compliance
has been effected pursuant to this Section 2, and each underwriter, if any, and
each person who controls any underwriter within the meaning of Section 15 of the
Securities Act (each a "Company Indemnified Party"), against all expenses,
claims, losses, damages or liabilities (or actions in respect thereof),
including any of the foregoing incurred in settlement of any litigation,
commenced or threatened, arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any final registration
statement, prospectus, offering circular or other document, or any amendment or
supplement thereto, 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, in light of the circumstances in which they were made, not misleading,
or any violation by the Company of the Securities Act or any rule or regulation
promulgated under the Securities Act applicable to the Company in connection
with any such registration, qualification or compliance, and the Company will
reimburse each such Company Indemnified Party for any legal and any other
expenses reasonably incurred in connection with investigating, preparing or
defending any such claim, loss, damage, liability or action, provided that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on any untrue
statement or omission or alleged untrue statement or omission, made in reliance
-11-
upon and in conformity with written information furnished to the Company by an
instrument duly executed by such Company Indemnified Party and stated to be
specifically for use therein.
(b) Each Holder will, if Registrable Securities held by such Holder
are included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors,
officers, accountants, legal counsel and agents, each underwriter, if any, of
the Company's 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, and each other such Holder, each of its officers, directors,
partners, members, accountants, legal counsel and agents, and each person
controlling such Holder within the meaning of Section 15 of the Securities Act
(each a "Holder Indemnified Party"), against all claims, losses, damages and
------------------------
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement of a material fact contained in any final registration
statement, prospectus, offering circular or other document, or any omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse each such Holder
Indemnified Party 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 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 an instrument
duly executed by such Holder and stated to be specifically for use therein;
provided, however that the total amount payable in indemnity by a Holder under
-------- -------
this Section 2.10(b) shall not exceed the net proceeds received by such Holder
in the registered offering from which the obligation to indemnify under this
Section 2.10(b) arises.
(c) Each party entitled to indemnification under this Section 2.10
(the "Indemnified Party") shall give notice to the party required to provide
-----------------
indemnification (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 any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Section 2 unless the failure to give such notice is
materially prejudicial to an Indemnifying Party's ability to defend such action,
in which case the Indemnifying Party shall be relieved of its obligation under
this Section 2.10 to the extent of such prejudice, and provided further that the
Indemnifying Party shall not assume the defense for matters as to which there is
a conflict of interest or separate and different defenses. 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 which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation.
(d) If the indemnification provided for in this Section 2.10 is held
by a court of competent jurisdiction to be unavailable to an Indemnified Party
with respect to any claim, loss, damage, liability or action referred to herein,
then the Indemnifying Party, in lieu of indemnifying such
-12-
Indemnified Party hereunder, shall contribute to the amount paid or payable by
such Indemnified Party as a result of such claim, loss, damage, liability or
action in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and the Indemnified Party on the other in
connection with the statements or omissions that resulted in such claim, loss,
damage, liability or action 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 a material fact or omission to
state a material fact relates to information supplied by the Indemnifying Party
or by the Indemnified Party and the parties' relative intent, knowledge, access
to information, and opportunity to correct or prevent such statement or
omission.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with an underwritten public offering are in conflict
with the foregoing provisions, the provisions in the underwriting agreement
shall control.
2.11 TERMINATION OF REGISTRATION RIGHTS. The rights granted pursuant to
----------------------------------
this Section 2, to the extent not earlier terminated pursuant to Section 7.1,
shall terminate as to any Holder on the earlier of (a) such time as such Holder
is able to sell publicly without registration all Registrable Securities then
held by such Holder, if any, within a ninety (90) day period pursuant to Rule
144 under the Securities Act or a similar exemption or (b) five (5) years after
the date hereof (the "Five Year Termination Date"); provided, however, that
--------------------------
unless the Company provides written notice to such Holder at the Holder's
address of record with the Company at least twelve (12) months prior to the Five
Year Termination Date, the Five Year Termination Date shall automatically extend
for additional one year periods (the ending date of each, an "Extended
--------
Termination Date") unless written notice is provided to such Holder at such
----------------
address at least twelve (12) months prior to the applicable Extended Termination
Date.
2.12 INFORMATION BY HOLDER. The Holder or Holders of Registrable
---------------------
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders, the Registrable Securities held by
them and the distribution proposed by such Holder or Holders 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
2.
2.13 RULE 144 REPORTING. With a view to making available the benefits of
------------------
certain rules and regulations of the Commission that may at any time permit the
sale of the Restricted Securities to the public without registration, after such
time as a public market exists for the Common Stock of the Company, the Company
agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times after
the effective date that the Company becomes subject to the reporting
requirements of the Securities Act or the Securities Exchange Act of 1934, as
amended (the "Exchange Act");
------------
-13-
(b) File with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act
(at any time after it has become subject to such reporting requirements); and
(c) So long as the Investor owns any Restricted Securities, to
furnish to the Investor forthwith upon request (i) a written statement by the
Company as to its compliance with the reporting requirements of said Rule 144
and of the Securities Act and the Exchange Act, (ii) a copy of the most recent
annual or quarterly report of the Company, and (iii) such other reports and
documents of the Company and other information in the possession of or
reasonably obtainable by the Company as the Investor may reasonably request in
availing itself of any rule or regulation of the Commission allowing the
Investor to sell any such securities without registration.
2.14 TRANSFER OF REGISTRATION RIGHTS. The rights to cause the Company to
-------------------------------
register securities granted to the Investor under Sections 2.4, 2.5 and 2.6 may
be assigned in connection with any transfer or assignment of Registrable
Securities by the Investor provided that: (i) such transfer may otherwise be
effected in accordance with applicable securities laws, (ii) such transferee
agrees to be bound hereby and (iii) either (A) such assignee or transferee
acquires at least 1,000,000 shares of Common Stock or Conversion Stock
convertible into at least 1,000,000 shares of Common Stock (appropriately
adjusted for Recapitalizations) or (B) such transferee is a Permitted Transferee
of the Investor.
2.15 STANDOFF AGREEMENT. Each Holder agrees in connection with the
------------------
Company's registered public offering of the Company's securities that, upon
request of the Company or the underwriters managing any underwritten offering of
the Company's securities, not to publicly sell, make any short sale of, hedge,
loan, grant any option for the purchase of, or otherwise dispose of any
securities of the Company in a public transaction (other than those included in
the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed one
hundred eighty (180) days) from the effective date of any such registration;
provided, that the officers and directors of the Company who own stock of the
Company have also agreed to such restrictions (including without limitation, the
Founders and their Permitted Transferees).
SECTION 3
RIGHT OF CO-SALE
----------------
3.1 Investor's Right of Co-Sale. Prior to a registered public offering,
---------------------------
no Seller may sell, assign or transfer any of its Offered Shares until the
Investor shall have been given the opportunity, exercisable within twenty (20)
days from the date of receipt of the notice to it of such sale (including the
price, terms and conditions of such sale), to participate in such transfer,
provided that the Investor is capable of selling such securities under federal
and state securities laws, to the extent of its respective Co-Sale Pro Rata
Share of the Offered Shares. If the Investor fails to notify such Seller within
twenty (20) days after receipt of the notice given by such Seller pursuant to
this Section 3.1 of its agreement to sell all or part of its Co-Sale Pro Rata
Share of the Offered Shares, the Investor shall be deemed to have waived its
rights under this Section 3.1 with respect to such proposed transfer; provided,
--------
however that
-------
-14-
the foregoing restrictions on the sale, assignment or transfer by a Seller
set forth in this Section 3.1 shall not apply to any transfer to a Permitted
Transferee.
3.2 Termination of Co-Sale Rights. The rights set forth in this Section
-----------------------------
3, to the extent not earlier terminated pursuant to Section 7.1, shall terminate
and be of no further force or effect on the earlier of (a) the Company's First
Public Offering, (b) the listing of the Company's Common Stock on The Nasdaq
Stock Market, (c) the Investment Milestone Date (as defined in the Asset
Purchase Agreement) and (d) July 8, 2003.
SECTION 4
RIGHT TO PURCHASE NEW SECURITIES; OBLIGATION TO PURCHASE SERIES C PREFERRED
---------------------------------------------------------------------------
STOCK
-----
4.1 General. The Investor shall have the right to purchase up to twenty
-------
percent (20%) of any "New Securities" (as defined in Section 4.2) that the
Company may from time to time issue after the date of this Agreement.
4.2 New Securities. "New Securities" shall mean any Common Stock or
-------------- --------------
Preferred Stock, whether now authorized or not, and rights, options or warrants
to purchase such Common Stock or Preferred Stock, debt securities (other than
pursuant to capital leases, real property leases or indebtedness to banks or
other financial institutions), and securities of any type whatsoever that are,
or may become, convertible or exchangeable into such Common Stock or Preferred
Stock; provided, however, that the term "New Securities" does not include:
-------- ------- ----------------
(i) shares of the Company's Common Stock (and/or options or
warrants therefor) issued to employees, officers, directors, contractors,
advisors or consultants of the Company pursuant to incentive agreements or plans
approved by the Board of Directors of the Company;
(ii) as of such applicable date, any securities issuable upon
conversion of or with respect to any then outstanding shares of Common Stock or
Preferred Stock or other securities issuable upon conversion of or with respect
to such securities;
(iii) shares of the Company's Common Stock or Preferred Stock issued
in connection with any stock split, stock dividend or recapitalization in which
the Investor's percentage beneficial ownership of the Company's capital stock is
not reduced;
(iv) securities offered by the Company after the First Public
Offering;
(v) securities issued pursuant to the acquisition of another
corporation or entity by the Company by consolidation, merger, purchase of all
or substantially all of the assets, or other reorganization in which the Company
acquires, in a single transaction or series of related transactions, all or
substantially all of the assets of such other corporation or entity or fifty
percent (50%) or more of
-15-
the voting power of such other corporation or entity or fifty percent (50%) or
more of the equity ownership of such other entity;
(vi) securities issued to banks, equipment lessors, real property
lessors and in other similar debt financing transactions approved by the
Company's Board of Directors and securities issued upon conversion of or with
respect to such securities; or
(vii) any Company Securities issued as part of the Bridge Financing
(as defined in the Asset Purchase Agreement).
4.3 PROCEDURES. In the event that the Company proposes to undertake an
----------
issuance of New Securities, it shall give to the Investor written notice of its
intention to issue New Securities (the "Notice"), describing the type of New
------
Securities and the price and the general terms upon which the Company proposes
to issue such New Securities. The Investor shall have ten (10) days from the
date of the sending of any such Notice to agree in writing to purchase any of
such New Securities for the price and upon the general terms specified in the
Notice by giving written notice to the Company and stating therein the quantity
of New Securities to be purchased (not to exceed twenty percent (20%) of the New
Securities to be issued).
4.4 FAILURE TO EXERCISE. In the event that the Company has not issued and
-------------------
sold the New Securities within 120 days after sending the Notice to the
Investor, then the Company shall not thereafter issue or sell any New Securities
without again first offering such New Securities to the Investor pursuant to
this Section 4.
4.5 OBLIGATION TO PURCHASE SERIES C PREFERRED STOCK. Notwithstanding
-----------------------------------------------
anything in this Section 4 to the contrary, the Investor shall make the
following purchases of Series C Preferred Stock (with the rights, preferences
and limitations set forth in the Series C Certificate of Designation set forth
as part of Exhibit A to the Asset Purchase Agreement) at a purchase price of
---------
$1,000 per share upon the Company's achievement of the following milestones;
provided, however, that the Investor shall not be obligated to make such
-------- -------
purchases of Series C Preferred Stock if the Development Agreement has been
terminated by the Investor pursuant to Section 8.1 thereof:
(a) Two Million Dollars ($2,000,000) of Series C Preferred Stock on
the IND Milestone date (as defined in the Development Agreement);
(b) Five Million Dollars ($5,000,000) of Series C Preferred Stock
upon commencement of Phase III clinical trials of the Mini-Ad Vector Technology
(as defined in the Development Agreement) with respect to Collaboration
Product(s) (as defined in the Development Agreement);
(c) Ten Million Dollars ($10,000,000) of Series C Preferred Stock
upon FDA (as defined in the Development Agreement) approval of the first product
license application of a Collaboration Product(s) (as defined in the Development
Agreement).
-16-
4.6 TERMINATION OF RIGHTS. The rights set forth in this Section 4 (other
---------------------
than pursuant to Section 4.5), to the extent not earlier terminated pursuant to
Section 7.1, shall terminate and be of no further force or effect at such time
as the Investor does not own at least 250,000 shares of Common Stock and/or
Preferred Stock (on an as converted to Common Stock basis) issued upon
conversion of the shares of Preferred Stock and/or warrants or convertible
securities exercisable for or convertible into at least 250,000 shares of Common
Stock and/or Preferred Stock (on an as converted to Common Stock basis), in each
instance appropriately adjusted for Recapitalizations.
SECTION 5
ADDITIONAL COVENANTS OF THE INVESTOR
------------------------------------
Until the termination of this Agreement in accordance with Section 7.1 or
the particular covenant, as the case may be, the Investor covenants and agrees
as follows:
5.1 STANDSTILL RESTRICTIONS.
-----------------------
(a) Without the prior written consent of the Company, the Investor
shall not, and shall not permit any of its subsidiaries to, directly or
indirectly, authorize or make a tender or exchange offer for, or purchase or
otherwise acquire, or agree to acquire or obtain, directly or indirectly,
beneficial ownership of any Voting Stock, if the effect of such acquisition
would be to increase the number of shares of Voting Stock then beneficially
owned by the Investor and its subsidiaries to an amount representing more than
forty percent (40%) of the Total Voting Power; provided that (i) the issuance or
--------
ownership of New Securities pursuant to Section 4.1, (ii) issuance of Common
Stock or Preferred Stock pursuant to the Asset Purchase Agreement, (iii)
issuance or ownership of the Shares or shares of Common Stock or Preferred Stock
issuable or issued upon conversion of the Shares which constitute Preferred
Stock in accordance with the terms of the Certificate of Designation, and (iv)
the ownership or exercise of any Rights in accordance with the terms hereof,
shall in no event be prohibited by the foregoing limitation; provided, further
-------- -------
that until the Investor's percentage of the Total Voting decreases below forty
percent (40%) of the Total Voting Power, except as set forth in (i) through (iv)
above, the Investor shall not, and shall not permit any of its subsidiaries to,
directly or indirectly, authorize or make a tender or exchange offer for, or
purchase or otherwise acquire, or agree to acquire or obtain, directly or
indirectly, beneficial ownership of any Voting Stock.
(b) Notwithstanding the above, the Investor shall not be obligated to
dispose of any shares of Voting Stock if the aggregate percentage ownership of
the Investor is increased as a result of a Recapitalization of the Company or a
repurchase of securities by the Company or any other action taken by the Company
or its subsidiaries. If the Company repurchases any of its Voting Stock and such
repurchases result in the Investor owning more than the percentage of the Voting
Stock of the Company allowed under Section 5.1(a) at the effective time of such
repurchases, the Investor shall not be obligated to divest itself of the Voting
Stock to fall within the foregoing percentage limitation, but shall not acquire
any additional Voting Stock unless such acquisition would otherwise be Permitted
under this Section 5.
-17-
5.2 PURCHASE OF COMMON STOCK IN OPEN MARKET.
---------------------------------------
Subject to the limitations of Section 5.1, the Investor shall have the
right to purchase Voting Stock in the open market in an amount such that its
beneficial ownership does not exceed the percentage ownership permitted under
Section 5.1
5.3 VOTING.
------
(a) Until July 8, 2001, provided that the Company is not in material
breach of the Acquisition Agreements, the Investor and the Founders will take
such action as is reasonable so that all shares of Voting Stock owned by the
Investor and its Affiliates and the Founders and their Affiliates are voted (in
person or by proxy) for (and the Company will nominate and recommend to the
Company's Stockholders a vote for) the nominees to the Company's Board of
Directors such that (i) one Director is a nominee requested by the Investor;
(ii) two Directors are nominees requested by the Company's Stockholders (other
than the Investor and the Founders); and (iii) three directors are nominees
requested by the Company's management. On all other matters to be voted on by
holders of Voting Stock, the Investor and the Founders may vote (in person or by
proxy) their shares of Voting Stock at their sole discretion. So long as the
Investor holds at least five percent of the Total Voting Power, the Investor
shall be present, in person or by proxy, at all duly held meetings of
stockholders of the Company so that all shares of Voting Stock held by the
Investor may be counted for the purposes of determining the presence of a quorum
at such meetings.
(b) Notwithstanding the foregoing, nothing in this Section 5.3 shall
require the Investor to breach its fiduciary obligations by voting for an unfit
nominee or a nominee not reasonably acceptable to the Investor.
5.4 VOTING TRUSTS. Except as consented to by the Company in writing, the
-------------
Investor shall not deposit any shares of Voting Stock owned by it in a voting
trust or, except as otherwise provided in this Agreement, subject any such
shares to any similar arrangement or agreement with respect to the voting of
such shares.
5.5 SOLICITATION OF PROXIES. Without the Company's prior written consent,
-----------------------
the Investor shall neither solicit proxies with respect to any Voting Stock, nor
shall it become a "participant" in any "election contest" as such terms are used
in Rule 14a-11 of Regulation 14A under the Exchange Act relating to the election
of directors of the Company.
5.6 ACTS IN CONCERT WITH OTHERS. Except as otherwise provided herein or
---------------------------
permitted in writing by the Company, the Investor shall not join any group or
otherwise act in concert with any third person for the purpose of acquiring,
holding or disposing of Voting Stock.
5.7 RESTRICTIONS ON TRANSFER OF SHARES AND OTHER VOTING STOCK.
---------------------------------------------------------
(a) Until termination of this Section 5 (as provided in Section 5.9),
each Holder and Founder shall not, directly or indirectly, sell or transfer any
Voting Stock, except:
-18-
(i) to the Company or any person or group approved by the
Company; or
(ii) to any Permitted Transferee of the Holder or Founder; or
(iii) pursuant to a Recapitalization, Reorganization or similar
event of the Company or pursuant to a reincorporation or plan of liquidation of
the Company approved by the Company's Board of Directors; or
(iv) provided that the rights of such Holder or Founder under
this Agreement (other than rights specified in Section 2 hereof) shall not
transfer to the transferee of such securities, pursuant to a bona fide public
offering registered under the Securities Act (which shall be structured to
distribute such shares or other securities, if any, through an underwriter) or
otherwise in such a manner as, to the extent practicable, will not, to such
Holder's or Founder's knowledge, result in a sale or sales of beneficial
ownership of ten percent (10%) or more of the Total Voting Power being
transferred to a single person or group or pursuant to a rights offering or a
dividend or other distribution to stockholders of such Holder on a pro rata
basis; or
(v) provided that the rights of such Holder under this
Agreement (other than rights specified in Section 2 hereof) shall not transfer
to the transferee of such securities, pursuant to Rule 144 under the Securities
Act if any such sale will not, to the knowledge of such Holder or Founder,
result in the transferees (whether a single person or group) beneficially owning
more than ten percent (10%) of the Total Voting Power to a single person or
group;
(vi) in response to (A) an offer to purchase or exchange for
cash or other consideration any Voting Stock (1) which is made by or on behalf
of the Company, or (2) which is made by another person or group and is not
opposed by the Board of Directors of the Company within the time such Board is
required, pursuant to regulations under the Exchange Act, to advise the
stockholders of the Company of such Board's position an such offer, or (B)
subject to Sections 5.3 and 6.3, any other offer made by another person or group
to purchase or exchange for cash or other consideration any Voting Stock which,
if successful, would to such Holder's or Founder's knowledge, result in such
person or group beneficially owning or having the right to acquire ten percent
(10%) or less of the Total Voting power; or
(vii) pursuant to a plan of liquidation of such Holder; or
(viii) to employees of such Holder upon the exercise of options
issued to such employees (which options shall be exercisable for shares of
Common Stock only); or
(ix) provided that the rights of such Holder or Founder under
this Agreement (other than rights specified in Section 2 hereof) shall not
transfer to the transferee of such securities, pursuant to a bona fide public
offering (structured as set forth in Section 5.7 (a)(iv) above) by such Holder
of securities convertible into, or exchangeable for, Voting Stock; or
-19-
(x) subject to Section 6.1, in any transfer not otherwise
described herein so long as such transfer does not, directly or indirectly,
result, to the best knowledge of such Holder or Founder, after reasonable
inquiry, in any single person or group beneficially owning after such transfer
greater than ten percent (10%) of the Total Voting Power.
(b) Upon a proposed sale or transfer of any Shares, such Holder shall
so notify the Company, as promptly as is practicable.
(c) Notwithstanding the foregoing, no Holder or Founder will be
prohibited from any of the transactions set forth in this Section 5.7 if:
(i) prior to such transaction the Total Voting Power held by
such Holder or Founder was less than twenty-five percent (25%); or
(ii) any other holder of at least ten percent (10%) of the
Total Voting Power is not so bound.
5.8 SUPERMAJORITY VOTE. The Company agrees not to take any significant
------------------
corporate actions without obtaining the approval of a majority of the Company's
Board of Directors and the Investor-nominated director including:
(a) a Recapitalization;
(b) a Reorganization;
(c) the liquidation, dissolution or winding up of the Company's
business; or
(d) any similar transaction.
5.9 TERMINATION OF STANDSTILL PROVISIONS. The provisions of this Section
------------------------------------
5 shall terminate on July 8, 2003.
SECTION 6
RIGHTS OF THE COMPANY UPON CERTAIN SALES
----------------------------------------
6.1 NOTIFICATION OF INTENT TO SELL. Until July 8, 2003, if the Investor
------------------------------
shall decide to sell or transfer any Voting Stock pursuant to Section 5.7(a)(x),
the Investor shall notify the Company (in writing or otherwise) of such
intention, and shall consider in good faith any timely offer made by the Company
to purchase such Voting Stock. This Section 6.1 shall not obligate (i) the
Company to acquire or to offer to acquire any Voting Stock to be sold by the
Investor pursuant to Section 5.7(a) (x) or require the Investor to sell any such
Voting Stock to the Company.
-20-
6.2 RIGHT OF FIRST OFFER. Until July 8, 2003, prior to making any sale or
--------------------
transfer of shares of Voting Stock permitted by Section 5.7 (other than Sections
5.7(a)(ii), (iv), (vi) or (ix)), the Investor shall give the Company the
opportunity to purchase such shares in the following manner:
(a) The Investor shall give notice (the "Transfer Notice") to the
---------------
Company in writing of such intention specifying the number of shares of Voting
Stock proposed to be sold or transferred; provided, however, that if the
proposed sale or transfer is pursuant to an unsolicited offer ("Unsolicited
-----------
Offer"), then the Investor need not specify the number of shares of Voting Stock
-----
proposed to be sold or transferred.
(b) Within 20 calendar days after the receipt of the Transfer Notice,
the Company may offer to purchase from the Investor at a price and on terms
specified in a written notice to the Investor (the "Election Notice") any
---------------
portion of such Voting Stock set forth in the Transfer Notice.
(c) If the Transfer Notice relates to an Unsolicited Offer, the
Investor may reject the Company's proposal set forth in the Election Notice if
in the Investor's reasonable business judgement it believes that the Company's
proposal is inferior to the Unsolicited Offer.
(d) If the Transfer Notice does not relate to an Unsolicited Offer,
and if the Company and the Investor do not enter into an agreement for the sale
of the Voting Stock within the 30-day period following delivery by the Company
of the Election Notice and after good faith negotiation by each party, the
Investor shall be free, during the period of one hundred twenty (120) calendar
days thereafter to sell the shares of Voting Stock specified in the Transfer
Notice at a price not less and on terms not less favorable than that set forth
in the Election Notice.
(e) To the extent the Company and the Investor reach an agreement
pursuant to this Section 6.2 the Company and the Investor shall be legally
obligated to consummate the purchase contemplated thereby and shall use their
best efforts to secure any approvals required in connection therewith.
(f) If the Investor accepts the Company's proposal set forth in the
Election Notice in lieu of an Unsolicited Offer, then promptly after the
Investor's acceptance of the Company's proposal, the Investor must disclose the
written Unsolicited Offer to the Company.
(g) If the Company does not send an Election Notice within the time
specified for such notice, the Investor shall be free, during the period of one
hundred twenty (120) calendar days following the expiration of such time for
sending the Election Notice, to sell the shares of Voting Stock specified in the
Transfer Notice or again be subject to the provisions of this Section 6.2 with
respect to such Voting Stock.
6.3 TENDER OFFER SALE. Until July 8, 2003, prior to making any sale or
-----------------
exchange of shares of Voting Stock pursuant to Section 5.7(a)(vi)(B) in response
to a tender or exchange offer referred to therein (the "Eligible Tender Offer"),
---------------------
the Investor shall give the Company the opportunity to purchase such shares of
Voting Stock in the following manner:
-21-
(a) The Investor shall give notice (the "Tender Notice") to the
-------------
Company in writing of its intention to tender shares of Voting Stock in the
Eligible Tender Offer no later than 48 hours prior to the then-scheduled
expiration of the Eligible Tender Offer, which Tender Notice shall specify the
number of shares proposed to be tendered (the "Tendered Shares"). If the
---------------
Investor thereafter chooses not to tender any or all of such Tendered Shares
into the Eligible Tender Offer (which the Investor may do at any time prior to
receipt of an Exercise Notice (as defined below) from the Company), the Investor
shall promptly advise the Company thereof by amending the Tender Notice and
thereafter such shares shall no longer be deemed to be Tendered Shares.
(b) If the Tender Notice is given, the Company shall have the right
to purchase part or all of the Tendered Shares specified in the Tender Notice,
exercisable, no later than 24 hours prior to the expiration of the Eligible
Tender Offer (as specified in the Tender Notice or any extension of the Eligible
Tender Offer), by giving written notice (an "Exercise Notice") to the Investor
---------------
and depositing in escrow (or similar arrangement) a sum (in cash) sufficient to
purchase all Tendered Shares at the price then being offered in the Eligible
Tender Offer, without regard to any provision thereof with respect to proration
or conditions to the offeror's obligation to purchase. The delivery by the
Company of an Exercise Notice and deposit of funds as provided above will,
except as provided below, constitute an irrevocable agreement by the Company to
purchase, and the Investor to sell, the Tendered Shares in accordance with the
terms of this Section 6.3, whether or not the Eligible Tender Offer or any other
tender or exchange offer (a "Competing Tender Offer") for Voting Stock that was
----------------------
outstanding during the Eligible Tender offer is consummated; provided that if
--------
prior to delivery of the Tender Notice, the Investor has commenced a tender or
exchange offer for Voting Stock, the Investor will not be obligated to sell the
Tendered Shares to the Company unless such offer has expired or been withdrawn
without the purchase of any Voting Stock by the Investor thereunder. If the
Company exercises its right to purchase Tendered Shares by giving such notice
and depositing such cash, the closing of the purchase of such Tendered Shares
shall take place not later than five business days after the expiration or
withdrawal of the Eligible Tender Offer or any Competing Tender Offer. If the
cash deposited by the Company in the escrow account is insufficient to pay all
amounts required to be paid to the Investor pursuant to Section 6.3(c), the
Company shall pay any additional amounts necessary to cover such insufficiency
to the Investor in cash at the closing.
If the Eligible Tender Offer is extended, any Tender Notice or related
Exercise Notice shall be deemed invalid subject to the obligation of the
Investor to give notice pursuant to Section 6.3(a) at least 48 hours prior to
the new scheduled expiration date if it intends to tender voting stock into the
Eligible Tender Offer and the right of the Company to purchase any Tendered
Shares by giving notice pursuant to Section 6.3(b) not later than 24 hours prior
to the new scheduled expiration date.
(c) The purchase price to be paid by the Company pursuant to this
Section 6.3 shall be the highest price offered or paid in the Eligible Tender
Offer or in any Competing Tender Offer. For purposes hereof, the price offered
or paid in a tender or exchange offer for shares of Voting Stock Shall be deemed
to be the price offered or paid pursuant thereto, without regard to any
provisions thereof with respect to proration or conditions to the offeror's
obligation to purchase.
-22-
If the purchase price specified in the tender offer includes any
property other than cash, the value of any property included in the purchase
price shall be jointly determined by a nationally recognized investment banking
firm selected by each party or, in the event such firms are unable to agree, a
third nationally recognized investment banking firm to be selected by such two
firms. For this purpose:
(i) The parties shall use their best efforts to cause any
determination of the value of any securities included in the purchase price to
be made within the three business days after the date of delivery of the Tender
Notice. If the firms selected by the Investor and the Company are unable to
agree upon the value of any such securities within such three-day period, the
firms shall promptly select a third firm whose determination shall be made
promptly and shall be conclusive.
(ii) The parties shall use their best effort to cause any
determination of the value of property other than securities to be made within
four business days after the date of delivery of the Tender Notice. If the firms
selected by the Investor and the Company are unable to agree upon a value within
such four-day period, the firms shall promptly select a third firm whose
determination shall be made promptly and shall be conclusive.
The Company shall bear the costs of any investment banking firms and escrow
agents retained in accordance with this Section 6.3.
(d) If the Company does not exercise its right of first refusal as
contemplated in this Section 6.3, the Investor shall be free to accept the
Eligible Tender Offer.
6.4 ASSIGNMENT OF RIGHTS. In the event that the Company elects to
--------------------
exercise any of its rights under this Section 6, the Company may specify, prior
to closing such purchase, another Person (reasonably acceptable to ▇▇▇▇▇▇) as
its designee to purchase the shares of Voting Stock to which such notice of
intention to exercise such rights relates. If the Company designates another
person as the purchaser pursuant to this Section 6, the Company shall be legally
obligated to complete such purchase if its designee fails to do so. Any such
designee of the Company must agree in writing to comply with and be bound by the
terms of this Agreement.
-23-
SECTION 7
MISCELLANEOUS
-------------
7.1 TERMINATION.
-----------
(a) This Agreement may be terminated at any time prior to the Closing
by mutual consent of the respective Boards of Directors of the Company and the
Investor;
(b) After the Closing, this Agreement shall terminate an the earliest
to occur of:
(i) the tenth anniversary of the date hereof ; or
(ii) such time or times as the Investor beneficially owns less
than 5% of the aggregate Common Stock and Common Stock Equivalents.
7.2 GOVERNING LAW. This Agreement shall be governed and construed in all
-------------
respects in accordance with the laws of the State of California as applied to
agreements made and performed in California by residents of the State of
California.
7.3 ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the full and
---------------------------
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof, and no party shall be liable or bound to any other
party in any manner by any warranties, representations or covenants except as
specifically set forth herein and therein. Except as expressly provided herein,
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought;
provided, however, that holders of a majority of the Registrable Securities may,
-------- -------
with the Company's prior written consent, waive, modify or amend on behalf of
all holders, any provisions hereof, except that any such waiver, modification or
amendment which affects a Holder in a manner or to an extent more adverse than
any other Holder shall require the prior written consent of such Holder.
7.4 NOTICES. All notices, requests, demands, and other communications
-------
permitted or required (i) under this Agreement shall be in writing and shall be
either personally delivered (including couriers such as Federal Express) or sent
by pre-paid certified mail, return receipt requested, or facsimile transmission,
with a confirmation copy personally delivered or sent by pre-paid certified
mail, addressed or transmitted to the address or number stated below of the
party to which notice is given, or to such other address or number as such party
may have fixed by notice given in accordance with the terms hereof (ii) pursuant
to the Certificates of Designation set forth as Exhibit A to the Asset Purchase
---------
Agreement, shall be sent in the manner set forth in such certificates to the
following address of the applicable party:
-24-
To the Company:
Urogen Corp.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
To the Investor:
▇▇▇▇▇▇ Healthcare Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President - Venture Management
Associate General Counsel
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Seyfarth, Shaw, ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
To any other Holder:
At such Holder's address of record with the Company.
To the Founders:
At such Founder's address of record with the Company.
Any notice, sent as provided above, shall be deemed given if personally
delivered or, if sent by certified mail, upon delivery at the address provided
for above (or, in the event delivery is refused, the first date
-25-
on which delivery was tendered) or, if sent by facsimile transmission, upon
receipt by the sender of confirmation of delivery.
7.5 DISPUTE RESOLUTION.
------------------
(a) Provisional Remedies: The procedures specified in this Section
7.5 shall be the sole and exclusive procedures for the resolution of disputes
between the parties arising out of or relating to this Agreement; provided,
--------
however, that a party, without prejudice to these procedures, may seek a
-------
preliminary injunction or other provisional relief if, in its sole judgment,
such action is deemed necessary to avoid irreparable damage or to preserve the
status quo. During such action, the parties will continue to participate in good
faith in the procedures specified in this Section 7.5.
(b) Negotiations Between Executives: If the dispute is between the
Company or the Founders and the Investor, the parties will first attempt in good
faith to resolve promptly any claim or controversy arising out of or relating to
the execution, interpretation or performance of this Agreement (including the
validity, scope and enforceability of the provisions contained in this Section
7.5) through negotiation by executive officers of the Company and the Investor.
(c) Arbitration: In the event that any dispute arising out of or
relating to this Agreement or its breach, termination or validity has not been
resolved after good faith negotiation pursuant to the procedures of Section
7.5(b) or if Section 7.5(b) is inapplicable, after good faith negotiation by the
applicable parties, within thirty (30) days following any party delivering
notice of such dispute to any adverse party hereto, such dispute shall, upon
written notice by either party to the other, be finally settled by arbitration
administered by JAMS/Endispute in accordance with the provisions of its
Comprehensive Arbitration Rules and Procedures and the United States Federal
Arbitration Act, as modified below:
(i) The arbitration shall be heard by a panel of three (3)
independent and impartial arbitrators all of whom shall be
selected from a list of neutral arbitrators supplied by
the JAMS/Endispute. From such list, each of such adverse
parties shall select one (1) arbitrator, and the
arbitrators so selected shall select a third. The panel
shall designate one (1) among them to serve as chair.
(ii) The arbitration proceedings shall be conducted in San
Diego County, California unless notice demanding
arbitration is delivered by the Company or the Founders to
the Investor, in which case the arbitration proceedings
shall be conducted in ▇▇▇▇ County, Illinois.
(iii) Any party may seek interim or provisional remedies under
the Federal Rules of Civil Procedure and the United States
Federal Arbitration Act as necessary to protect the rights
or property of the party pending the decision of the
arbitrators.
-26-
(iv) The parties shall allow and participate in limited
discovery for the production of documents and taking of
depositions, which shall be conducted in accordance with
the Comprehensive Arbitration Rules and Procedures of
JAMS/Endispute. All discovery shall be completed within
sixty (60) days following the filing of the answer or
other responsive pleading. Unresolved discovery disputes
shall be brought to the attention of the chair of the
arbitration panel and may be disposed of by the chair.
(v) Each party shall have up to fifty (50) hours to present
evidence and argument in a hearing before the panel of
arbitrators, provided that the chair of the panel of
arbitrators may establish such longer times for
presentations as the chair deems appropriate
(vi) The arbitration award shall be rendered by the arbitrators
within fifteen (15) business days after conclusion of the
hearing of the matter, shall be in writing and shall
specify the factual and legal basis for the award.
Judgment thereon may be entered in any court having
jurisdiction thereof.
(vii) The arbitrations are empowered to order money damages in
compensation for a party's actual damages, specific
performance or other appropriate relief to cure a breach;
provided, however, that the arbitrators will have no
-------- -------
authority to award special, punitive or exemplary damages,
or other money damages that are not measured by the
prevailing party's actual damages.
(d) Performance During Dispute: Each party is required to continue
to perform its obligations under this Agreement pending final resolution of any
dispute arising out of or relating to this Agreement, unless to do so would be
commercially impossible or impractical under the circumstances.
(e) Costs of Arbitration: The party which is found to have been more
at fault in a dispute arbitrated under this Section 7.5 shall be responsible for
paying the costs and expenses, including reasonable attorney's fees, which the
other party has incurred in such arbitration.
7.6 REPRESENTATIONS OF THE COMPANY AND THE FOUNDERS. Each of the Company
-----------------------------------------------
and the Founders severally, but not jointly, represent and warrant to the
Investor that to its knowledge, the terms of the Certificates of Designation of
the Preferred Stock set forth as Exhibit A to the Asset Purchase Agreement do
---------
not materially conflict with the Articles of Incorporation, the By-Laws, or any
other instrument or agreement to which any of the Company or the Founders are
parties or with respect to which any of them are bound.
7.7 SEVERABILITY. In the event that any provision of this Agreement
------------
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue
-27-
in full force and effect without said provision; provided that no such
severability shall be effective if it materially changes the economic benefit of
this Agreement to any party.
7.8 TITLES AND SUBTITLES. The titles and subtitles used in this Agreement
--------------------
are used for convenience only and are not considered in construing or
interpreting this Agreement.
7.9 COUNTERPARTS; EXECUTION BY FACSIMILE. This Agreement may be executed
------------------------------------
in any number of counterparts, each of which shall be enforceable against the
parties actually executing such counterparts, and all of which together shall
constitute one instrument. This Agreement may be executed and delivered by
exchange of facsimile copies showing the signatures of the parties hereto, and
those signatures need not be affixed to the same copy. The facsimile copies
showing the signatures of the parties will constitute originally signed copies
of the same agreement requiring no further execution.
-28-
IN WITNESS WHEREOF, the Company, the Investor and the Founders (but only as
to Sections 2, 3, 5 and 7) have executed this Investor Rights Agreement as of
the date first above written.
UROGEN CORP.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Its: President and Chief Executive Officer
INVESTOR:
▇▇▇▇▇▇ HEALTHCARE CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Its: President, Venture Management
FOUNDERS:
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
[INVESTOR RIGHTS AGREEMENT]