Registration Rights Agreement between ActivBiotics, Inc. and Silicon Valley Bank (November 2003)

Summary

This agreement is between ActivBiotics, Inc. and Silicon Valley Bank (SVB). It grants SVB certain rights to have shares of Series B Convertible Preferred Stock registered for public sale if SVB exercises its warrant to purchase those shares. SVB receives the same registration and related rights as other investors under the company's stockholders' agreement, with some exceptions. The agreement is tied to a loan arrangement between the parties and outlines how notices, amendments, and assignments are handled. It is governed by Massachusetts law.

EX-10.11 21 a2172035zex-10_11.txt EXHIBIT 10.11 Exhibit 10.11 ACTIVBIOTICS, INC. RIGHTS AGREEMENT This Registration Rights Agreement (this "Agreement") is made and entered into as of the _____th day of November, 2003 by and between ActivBiotics, Inc., a Delaware corporation (the "Corporation") and Silicon Valley Bank, a California chartered bank ("SVB"). RECITALS WHEREAS, the Corporation and SVB have entered into a Loan and Security Agreement of even date herewith (the "Loan Agreement"), pursuant to which the Bank has agreed to loan to the Corporation up to $1,000,000 (the "Loan"); and WHEREAS, in connection with the Loan, the Corporation has delivered to SVB a Warrant to Purchase Stock of even date herewith (the "Warrant Agreement"), pursuant to which SVB has the right to purchase up to 30,000 shares of the Corporation's Series B Convertible Preferred Stock (the "Series B Shares"); and WHEREAS, the Corporation and certain investors have entered into a First Amended and Restated Stockholders' Agreement (the "Stockholders' Agreement"), a copy of which is attached hereto as Exhibit A; and WHEREAS, it is a condition to the consummation of the transactions contemplated by the Loan Agreement that the Corporation deliver this Agreement to provide for the registration of the Series B Shares in the event that the Bank exercises its right to purchase the Series B Shares pursuant to the terms of the Warrant Agreement. NOW, THEREFORE, in consideration of the mutual premises and covenants set forth herein, the parties hereto agree as follows: 1. DEFINITIONS. Capitalized terms used and not otherwise defined herein shall have the meanings given them in the Stockholders Agreement. 2. REGISTRATION RIGHTS. 2.1. Piggyback Registration. The Series B Shares and any other securities of the Corporation acquired pursuant to the Warrant Agreement shall be deemed Restricted Securities, and SVB shall have the same rights as those granted to the holders of Restricted Securities in Sections 3.5, 3.7, 3.8, 3.9, 3.10 and 3.11 of the Stockholders' Agreement. 2.2. Other Provisions. SVB agrees to be bound by and shall be entitled to the rights granted under the provisions of Section 2.5, Section 4 and Section 12 of the Stockholders' Agreement as of SVB were an "Investor" and as if the Series B Shares held by SVB were Restricted Shares under the Stockholders Agreement, provided however, that SVB shall not be entitled to the rights granted to holders of Restricted Shares under Section 3.6 of the Stockholders' Agreement. 3. BRING-ALONG RIGHTS. After the exercise of the warrant pursuant to the Warrant Agreement, SVB agrees that it shall be bound by the provisions of Section 2.14 of the Stockholders' Agreement with respect to any Series B Shares and any other securities acquired by SVB pursuant to the Warrant Agreement. 4. MISCELLANEOUS. 4.1. Governing Law. This Agreement shall be governed in all respects by the laws of the Commonwealth of Massachusetts, without giving effect to principles of conflicts of law. 4.2. Successors and Assigns. Except as otherwise expressly provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assignees of the parties; provided, that written notice of such assignment is provided to the Corporation. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assignees any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. 4.3. Entire Agreement; Amendment; Waiver. This Agreement constitutes the full and entire understanding and agreement between the parties with regard to the subjects hereof Neither this Agreement nor any term hereof may be amended, waived, discharged or terminated, except by a written instrument signed by the Corporation and SVB, provided however, that SVB shall be bound by any amendment to or restatement of the Stockholders' Agreement to the extent that such amendment is applicable to SVB under the terms of Sections 2 and 3 of this Agreement and Section 12 of the Stockholders' Agreement. 4.4. Notices, etc. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given when delivered personally to the recipient, sent to the recipient by reputable overnight courier service (charges prepaid), or transmitted by facsimile or electronic mail (with request for immediate confirmation of receipt in a manner customary for communications of such type and with physical delivery of the communication being made by one of the other means specified in this Section as promptly as practicable thereafter). Such notices, demands and other communications shall be addressed as follows: If to the Corporation: ActivBiotics, Inc. 128 Spring Street Lexington, Massachusetts Attn: James Warren, Chief Financial Officer FAX ###-###-#### 2 with a copy to: Bingham McCutchen LLP 150 Federal Street Boston, Massachusetts 02110 Attn: Julio Vegas, Esquire FAX ###-###-#### If to SVB: Silicon Valley Bank One Newton Executive Park, Suite ###-###-#### Washington Street Newton, Massachusetts 02462 Attn: R Bryan Jadot Fax ###-###-#### with a copy to: Riemer & Braunstein LLP Three Center Plaza Boston, Massachusetts 02108 Attn: David A. Ephraim, Esquire FAX ###-###-#### 4.5. Titles and Subtitles. The titles of the paragraphs and subparagraphs of this Agreement are for convenience of reference only and are not to be considered in construing or interpreting this Agreement. 4.6. Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be limited or excluded from this Agreement to the minimum extent necessary and the balance of the Agreement shall be interpreted as if such provision were so limited or excluded and shall be enforceable in accordance with its terms. 4.7. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. [ADDITIONAL TEXT AND SIGNATURES APPEAR ON THE FOLLOWING PAGE] 3 IN WITNESS WHEREOF, the parties hereto have executed this Rights Agreement effective as of the day and year first above written. ACTIVBIOTICS, INC. By /s/ J. L. Warren ---------------------------------- Name: J. L. WARREN Title: C.E.O. SILICON VALLEY BANK By /s/ R. Bryan Jadot ---------------------------------- Name: R. BRYAN JADOT Title: VICE PRESIDENT 4 EXHIBIT A FIRST AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT This FIRST AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT (the "Agreement"), dated this 30th day of April 2003, is entered into by and among ACTIVBIOTICS, INC., a Delaware corporation (the "Corporation"), those holders of common stock of the Corporation listed on SCHEDULE 1 hereto (hereinafter referred to collectively as the "Original Stockholders"), those holders of Series A Preferred Stock of the Corporation listed on SCHEDULE 2 hereto (hereinafter referred to collectively as the "Series A Stockholders") and those purchasers of the Series B Preferred Stock of the Corporation listed on SCHEDULE 3 hereto (hereinafter referred to collectively as the "Series B Purchasers" and together with the Series A Stockholders as the "Investors"). This Agreement amends and restates and replaces in its entirety that certain Stockholders' Agreement by and among the Corporation, the Original Stockholders and the Series A Stockholders dated September 28, 2001. WITNESSETH: WHEREAS, the Corporation and the Series B Purchasers are entering into a Convertible Preferred Stock Purchase Agreement dated the date hereof (the "Stock Purchase Agreement") in connection with which the Corporation has agreed to sell shares of its Series B Convertible Preferred Stock, par value $0.01 per share, and the Corporation desires to grant to the Series B Purchasers certain registration and other rights with respect to such shares; and WHEREAS, as a condition to the Series B Purchasers entering into the Stock Purchase Agreement, the Original Stockholders have agreed to certain restrictions on their rights to dispose of their shares of Common Stock, par value $.01 per share, of the Corporation contained in this Agreement; NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and undertakings of the Corporation and the Series B Purchasers hereunder and under the Stock Purchase Agreement, the parties hereto do hereby agree as follows: SECTION 1. Definitions. As used herein, the following terms shall have the following respective meanings: Board or Board of Directors shall mean the Board of Directors of the Corporation. Budget shall have the meaning set forth in Section 2.8 hereof. Certificate shall mean the Third Amended and Restated Certificate of Incorporation of the Corporation. Commission shall mean the U.S. Securities and Exchange Commission. Common Stock shall mean the Common Stock, par value $0.01 per share, of the Corporation. Environmental Laws shall mean all applicable federal, state and local laws, ordinances, rules and regulations that regulate, fix liability for, or otherwise relate to, the handling, use (including use in industrial processes, in construction, as building materials, or otherwise), storage and disposal of hazardous and toxic wastes and substances, and to the discharge, leakage, presence, migration, threatened release or release (whether by disposal, a discharge into any water source or system or into the air, or otherwise) of any pollutant or effluent. Without limiting the preceding sentence, the term "Environmental Laws" shall specifically include the following federal and state laws, as amended: FEDERAL Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. 9601 et. seq.; Resource Conservation and Recovery Act of 1976, 42 U.S.C, 6901 et. seq.; Federal Water Pollution Control Act, 33 U.S.C. 1251 et. seq.; and Clean Air Act, 42 U.S.C. 7401 et. seq. STATE MASSACHUSETTS ENVIRONMENTAL STATUTES Massachusetts Clean Waters Act, MassGen. L. Ch. 21, Section 26, et. seq., and regulations thereto; Massachusetts Solid Waste Disposal Laws, Mass. Gen. L, Ch. 16, Section 18, et. seq., and Ch. 111, Section 105A, and regulations thereto; Massachusetts Oil and Hazardous Materials Release Prevention and Response Act, Mass. Gen. L., Ch. 21E, Section 1, et. seq., and regulations thereto; Massachusetts Solid Waste Facilities Law, Mass. Gen. L. Ch. 21H, Section 1, et. seq., and regulations thereto; Massachusetts Toxic Use Reduction Act, Mass. Gen. L, Ch. 21I, Section 1, et. seq., and regulations thereto; Massachusetts Litter Control Laws, Mass. Gen. L. Ch. 111, Section 150A, et. seq., and regulations thereto; Massachusetts Wetlands Protection Laws, Mass, Gen. L. Ch. 130, Section 105, et. seq., and regulations thereto; Massachusetts Environmental Air Pollution Control Law, Mass Gen, L. Ch. 101, Section 2B, et. seq., and regulations thereto; 2 Massachusetts Environmental Policy Act, Mass Gen. L 30, Section 61, et. seq., and regulations thereto; and Massachusetts Hazardous Waste Laws, Mass Gen L. Ch. 21C, Section 1, et. seq., and regulations thereto Equity Percentage shall mean, as to any Investor, that percentage figure which expresses the ratio that (a) the number of shares of issued and outstanding Common Stock then owned by such Investor bears to (b) the aggregate number of shares of issued and outstanding Common Stock then owned by all Investors. For purposes solely of the computation set forth in clauses (a) and (b) above and the right of oversubscription, all issued and outstanding securities held by the Investors that are convertible into or exercisable or exchangeable for shares of Common Stock (including any issued and outstanding shares of Preferred Stock) or for any such convertible, exercisable or exchangeable securities, shall be treated as having been so converted, exercised or exchanged for such Common Stock or for such convertible, exercisable or exchangeable securities (which shall be treated as having been further converted, exercised or exchanged for such Common Stock) all at the rate(s) or price(s) at which such securities are convertible, exercisable or exchangeable (and, as applicable, further convertible, exercisable or exchangeable) for shares of Common Stock in effect at the time in question (which, for purposes of Section 2.3 of this Agreement, shall be at the time of delivery by the Corporation of the Offer Notice contemplated by Section 2.3(b)), whether or not such securities are at such time immediately convertible, exercisable or exchangeable or, as applicable, further convertible, exercisable or exchangeable. Exchange Act shall mean the Securities Exchange Act of 1934, as amended. Exchange Act Registration Statement shall have the meaning set forth in Section 2.5 hereof. Excess Securities shall have the meaning set forth in Section 2.3(d) hereof. Excess Securities Notice shall have the meaning set forth in Section 2.3(d) hereof. Excess Securities Period shall have the meaning set forth in Section 2.3(d) hereof. Excluded Forms shall have the meaning given such term in Section 3.5 hereof. Excluded Securities shall have the meaning herein as the term "Excluded Stock" is defined to have in Article III, Section A.7(d)(ii) of the Certificate. Group shall mean: (i) as to an Investor that is a corporation: any and all of the venture capital limited partnerships or corporations now existing or hereafter formed that are affiliated with or under common control with one or more of the controlling stockholders of such Investor and any predecessor or successor thereto, (ii) in the case of HCV VI, the HCV Group, (iii) in the case of MDS, the MDS Group and (iii) as to any Investor, any other Investor. Hazardous Materials shall include without limitation, any flammable explosives, petroleum products, petroleum byproducts, radioactive materials, hazardous wastes, hazardous substances, toxic substances or other similar materials regulated by Environmental Laws. 3 HCV Director shall have the meaning set forth in Section 5.1 (b) hereof. HCV Group shall mean, (i) HCV VI, (ii) any venture capital limited partnership now existing or hereafter formed which is affiliated with or under common control with one or more general partners of any general partner of HCV VI (an "HCV Fund"); (iii) any limited partners or affiliates of HCV VI or any other HCV Fund; and (iv) any successors or assigns of any of the foregoing. HCV VI shall mean HealthCare Ventures VI, L.P., a Delaware limited partnership, including any successor thereto or any assignee of the interest, in whole or in part, of HCV IV under this Agreement. Investors shall have the meaning (severally, but not jointly) set forth in the preamble hereto. MDS shall mean MDS Capital Corp. MDS Group shall mean (i) MDS, (ii) any corporation, trust, partnership, limited liability corporation, partnership or other form of business entity which is an investment fund to which MDS or any of its affiliates provides investment management and/or advisory services (which for greater certainty currently includes, among others, MDS Life Sciences Technology Fund II NC Limited Partnership, MDS Life Sciences Technology Fund II Quebec Limited Partnership, MLII Co-Investment Fund NC Limited Partnership and SC Biotechnology Development Fund LP (an "MDS Fund"); (iii) any limited partners or affiliates of MDS or any MDS Fund; (iv) any venture capital limited partnership now existing or hereafter formed which is affiliated with or under common control with one or more general partners of any general partner of MDS and (iv) any successors or assigns of any of the foregoing. Notice of Acceptance shall have the meaning set forth in Section 2.3(c) hereof. Offer shall have the meaning set forth in Section 2.3(b) hereof. Offered Securities shall mean (i) any shares of Common Stock, Preferred Stock or any other equity security of the Corporation, (ii) any debt security or capitalized lease with any equity feature with respect to the Corporation, or (iii) any option, warrant or other right to subscribe for, purchase or otherwise acquire any such equity security, debt security or capitalized lease but shall not include the Excluded Securities, securities issued and outstanding as of the date of this Agreement and the Series B Preferred Stock to be issued pursuant to the Stock Purchase Agreement. Option Shares shall have the meaning set forth in Section 5.2(a)(iii) of the Stock Purchase Agreement. Other Shares shall have the meaning set forth in Section 3.5(e) hereof. Preferred Shares shall mean the Series A Preferred Shares and the Series B Preferred Shares. 4 Preferred Stock shall mean, collectively, the Series A Preferred Stock, par value $0.01 per share, of the Corporation, and the Series B Preferred Stock, par value $0.01 per share, of the Corporation. Preferred Stockholders shall mean, collectively, all holders of shares of Preferred Stock of the Corporation. Property shall include, without limitation, land, buildings and laboratory facilities owned or leased by the Corporation or as to which the Corporation now has any duties, responsibilities (for clean-up, remedy or otherwise) or liabilities under any Environmental Laws, or as to which the Corporation or any subsidiary of the Corporation may have such duties, responsibilities or liabilities because of past acts or omissions of the Corporation or any such subsidiary or their predecessors, or because the Corporation or any such subsidiary or their predecessors in the past was such an owner or operator of, or bore some other relationship with, such land, buildings and/or laboratory facilities. Qualified Public Offering shall have the meaning set forth in Section 2.17 hereof. Refused Securities shall have the meaning set forth in Section 2.3(f) hereof. Restricted Securities shall mean any of the Preferred Shares and the Common Stock issued or issuable upon the conversion of the Preferred Shares, all shares of Common Stock issued or issuable in respect thereof by way of stock splits, stock dividends, stock combinations, recapitalizations or like occurrences, and any other shares of Common Stock or other securities of the Corporation which may be issued hereafter to any of the Investors or any member of their Group which are convertible into or exercisable for shares of Common Stock (including, without limitation, other classes or series of Convertible Preferred Stock, warrants, options or other rights to purchase Common Stock or convertible debentures or other convertible debt securities) and the Common Stock issued or issuable upon such conversion or exercise of such other securities, which have not been sold (a) pursuant to an effective registration statement filed pursuant to the Securities Act, or (b) pursuant to Rule 144 or Rule 144A promulgated by the Commission under the Securities Act. Restricted Shares shall mean the shares of Common Stock issued or issuable upon the conversion or exchange of the Restricted Securities or otherwise constituting a portion of the Restricted Securities. Securities Act shall mean the Securities Act of 1933, as amended. Series A Directors shall mean the two members of the Board of Directors designated by HCV VI pursuant to Section 5 hereof. Series A Preferred Shares shall mean issued and outstanding shares of the Series A Preferred Stock. Series A Preferred Stock shall mean Series A Convertible Preferred Stock, par value $01 per share, of the Corporation. 5 Series B Director shall mean the member of the Board of Directors designated by the members of the MDS Group then holding capital stock of the Corporation pursuant to Section 5 hereof. Series B Preferred Shares shall mean shares of Series B Preferred Stock issued or issuable pursuant to the Stock Purchase Agreement. Series B Preferred Stock shall mean Series B Convertible Preferred Stock, par value $01 per share, of the Corporation. Stock Purchase Agreement shall mean the Convertible Preferred Stock Purchase Agreement, dated as of the date hereof, by and among the Corporation and the Series B Purchasers. Stockholders shall mean all holders of capital stock of the Corporation. Target Month shall have the meaning set forth in Section 2.7(a) hereof. 20-Day Period shall have the meaning set forth in Section 2.3(b) hereof. Transfer shall mean any disposition of any Restricted Securities or of any interest therein which would constitute a sale thereof within the meaning of the Securities Act. SECTION 2. Certain Covenants of the Corporation. 2.1. Meetings of the Board of Directors. The Corporation shall call, and use its best efforts to have, regular meetings of the Board not less often than quarterly. The Corporation shall pay all reasonable and appropriately documented travel expenses and other out-of-pocket expenses incurred by directors who are not employed by the Corporation in connection with attendance at meetings to transact the business of the Corporation or attendance at meetings of the Board or any committee thereof. 2.2. Reservation of Shares of Common Stock and Preferred Stock, Etc. The Corporation shall at all times have authorized and reserved out of its authorized but unissued shares of Common Stock, a sufficient number of shares of Common Stock to provide for the conversion of the Preferred Shares. Neither the issuance of the Series B Preferred Shares nor the shares of Common Stock issuable upon the conversion of the Preferred Shares shall be subject to a preemptive right of any other Stockholder, 2 3. Right of First Refusal (a) The Corporation shall not issue, sell or exchange, agree to issue, sell or exchange, or reserve or set aside for issuance, sale or exchange, any Offered Securities unless in each case the Corporation shall have first offered to sell to the Investors all of such Offered Securities on the terms set forth herein (the "Offer"). Each Investor shall be entitled to purchase up to its Equity Percentage of the Offered Securities. In addition, each Investor shall have a right of oversubscription ("Right of Oversubscription") such that if any Investor fails to accept the Offer as to its Equity Percentage of the Offered Securities, the remaining Investors shall, among 6 them, have the right to purchase up to the balance of the Offered Securities not so purchased. Such Right of Oversubscription may be exercised by an Investor (an "Oversubscribing Investor") by accepting the Offer as to more than its Equity Percentage of the Offered Securities. If as a result thereof, such oversubscriptions exceed the total number of the Offered Securities available in respect of such oversubscription privilege, the Oversubscribing Investors shall be cut back with respect to their oversubscriptions on a pro rata basis. Each Investor may delegate or assign its rights and obligations with respect to such Offer to one or more members of its Group, which members shall thereafter be deemed to be "Investors" for the purpose of applying this Section 2.3 to such Offer. (b) The Corporation shall deliver to each Investor written notice of the Offer, specifying the price and terms and conditions of the Offer (the "Offer Notice"). The Offer by its terms shall remain open and irrevocable for a period of 20 days from the date of delivery of the Offer Notice to each Investor (the "20-Day Period"), subject to extension to include the Excess Securities Period (as such term is hereinafter defined). (c) Each Investor shall evidence its intention to accept the Offer by delivering a written notice signed by the Investor setting forth the number of shares that the Investor elects to purchase (the "Notice of Acceptance"). The Notice of Acceptance must be delivered to the Corporation not later than the last day of the 20-Day Period. (d) If any Investor fails to exercise its rights hereunder to purchase all or any portion of its Equity Percentage of the Offered Securities, the Corporation shall so notify the other Investors in a written notice (the "Excess Securities Notice"). The Excess Securities Notice shall be given by the Corporation promptly after it learns of any Investor's intention not to purchase all or any portion of its Equity Percentage of the Offered Securities, but in no event later than ten (10) days after the expiration of the 20 Day Period. The Investors who or which have agreed to purchase their Equity Percentage of the Offered Securities shall have the right to purchase the portion not purchased by such other Investor(s) (the "Excess Securities"), on a pro rata basis, by giving notice within ten (10) days after receipt of the Excess Securities Notice from the Corporation. The twenty (20) day period during which (i) the Corporation must give the Excess Securities Notice to the other Investors, and (ii) each of the other Investors must give the Corporation notice of its intention to purchase all or any portion of its pro rata share of its Excess Securities is hereinafter referred to as the "Excess Securities Period." (e) If the Investors tender their Notices of Acceptance prior to the end of the 20-Day Period indicating their intention to purchase all of the Offered Securities, or if prior to the termination of the Excess Securities Period, the Investors tender Excess Securities Notices to purchase all of the Excess Securities, the Corporation shall proceed to promptly schedule a closing of the sale of all such Offered Securities at which closing each Investor shall (i) purchase from the Corporation that portion of the Offered Securities (including the Excess Securities) for which it tendered a Notice of Acceptance and an Excess Securities Notice, if applicable, upon the terms specified in the Offer Notice, and (ii) execute and deliver an agreement further restricting transfer of such Offered Securities substantially as set forth in Section 3.1, 3.2 and 3.3 of this Agreement. In addition, with respect to the Offered Securities being purchased by the Investors at such closing, the Corporation shall provide each such Investor with the rights and benefits set forth in this Agreement. The obligation of the Investors to purchase such Offered 7 Securities at such closing is further conditioned upon the preparation of a purchase agreement embodying the terms of the Offer, which shall be reasonably satisfactory in form and substance to such Investor and the Investor's counsel (f) In the event the Corporation does not sell all of the Offered Securities pursuant to Section 2.3(e), the Corporation shall have ninety (90) days from the expiration of 20 Day Period or, if applicable, the Excess Securities Period to sell the portion of the Offered Securities (including the Excess Securities) refused by the Investors (the "Refused Securities") to any other person or persons, but only upon terms and conditions which are in all material respects (including, without limitation, price and interest rate) no more favorable to such other person or persons, and no less favorable to the Corporation, than those set forth in the Offer Notice Upon and subject to the closing of the sale of all of the Refused Securities (which shall include full payment to the Corporation), each Investor shall (i) purchase from the Corporation those Offered Securities (including the Excess Securities) for which it tendered a Notice of Acceptance or an Excess Securities Notice, as applicable, upon the terms specified in the Offer Notice, and (ii) execute and deliver an agreement restricting transfer of such Offered Securities (including the Excess Securities) substantially as set forth in Sections 3.1, 3.2 and 3.3 of this Agreement. In addition, with respect to the Offered Securities being purchased by the Investors, the Corporation shall provide each such Investor with the rights and benefits set forth in this Agreement. The Corporation agrees, as a condition precedent to accepting payment for and making delivery of any Refused Securities to any person other than an Investor, to have each and every such person execute and deliver a Stock Restriction Agreement in the capacity of a "Principal Stockholder" as defined therein, substantially in the form attached hereto as Exhibit A, or as may be modified or amended from time to time with the prior approval of the holders of a majority of the combined voting power of the Preferred Shares then outstanding, calculated in accordance with Section A.6(a) of Article III of the Certificate (but including in such calculation, any outstanding Restricted Shares held by such holders), to the extent such purchaser has not already executed such Agreement. The obligation of the Investor to purchase such Offered Securities (including the Excess Securities) is further conditioned upon the preparation of a purchase agreement embodying the terms of the Offer; which shall be reasonably satisfactory in form and substance to such Investor and the Investor's counsel. (g) In each case, any Offered Securities not purchased either by the Investors or by any other person in accordance with this Section 2.3 may not be sold or otherwise disposed of until they are again offered to the Investors under the procedures specified in Paragraphs (a), (b), (c), (d) (e) and (f) hereof. (h) Each Investor may, by prior written consent, waive its rights under this Section 2.3. Such a waiver shall be deemed a limited waiver and shall only apply to the extent specifically set forth in the written consent of such Investor. 2.4. Negative Covenants. (a) Supermajority Approvals. The Corporation shall not, directly or indirectly, take any of the actions specified in Article III, Section A.6(c)(iii) of the Certificate without (x) the prior written consent or vote of the holders of at least a majority of the then outstanding shares of the Series A Preferred Stock, voting or consenting as a separate class, and (y) the prior 8 written consent or vote of the holders of at least two-thirds of the then outstanding shares of the Series B Preferred Stock, voting or consenting as a separate class. (b) Majority Approvals. The Corporation shall not, directly or indirectly, take any of the actions specified in Article III, Section A.6(c)(iv) of the Certificate without the prior written consent or vote of the holders of at least a majority of the then outstanding shares of the Series A Preferred Stock and the then outstanding shares of the Series B Preferred Stock, voting or consenting together as a single class. (c) Registration Rights. The Corporation shall not hereafter grant to any persons any rights to register or qualify stock of the Corporation under federal or state securities laws, without the prior written consent or vote of the holders of at least a majority of the then outstanding Restricted Securities. (d) Board Approvals. In addition to and not in limitation of the provisions of Section 2.4(a) and (b) above, the Corporation shall not, directly or indirectly, take any of the actions specified in Article V, Section A.2 of the Certificate without the prior written consent or vote of the Board of Directors. 2.5. Filing of Reports Under the Exchange Act (a) The Corporation shall give prompt notice to the holders of Preferred Stock of (i) the filing of any registration statement (an "Exchange Act Registration Statement") pursuant to the Exchange Act, relating to any class of equity securities of the Corporation, (ii) the effectiveness of such Exchange Act Registration Statement, and (iii) the number of shares of such class of equity securities outstanding, as reported in such Exchange Act Registration Statement, in older to enable the Investors to comply with any reporting requirements under the Exchange Act or the Securities Act. Upon the written request of a majority in interest of the holders of the Series A Preferred Shares or a majority in interest of the Series B Preferred Shares, the Corporation shall, at any time after the Corporation has registered any shares of Common Stock under the Exchange Act, file an Exchange Act Registration Statement relating to any class of equity securities of the Corporation then held by the holders of the Series A Preferred Shares or the Series B Preferred Shares, as applicable, or issuable upon conversion or exercise of any class of debt or equity securities or warrants or options of the Corporation then held by the applicable Investors, whether or not the class of equity securities with respect to which such request is made shall be held by the number of persons which would requite the filing of a registration statement under Section 12(g)(l) of the Exchange Act. (b) If the Corporation shall have filed an Exchange Act Registration Statement or a registration statement (including an offering circular under Regulation A promulgated under the Securities Act) pursuant to the requirements of the Securities Act, which shall have become effective (and in any event, at all times following the initial public offering of any of the securities of the Corporation), then the Corporation shall comply with all of the reporting requirements of the Exchange Act (whether or not it shall be required to do so) and shall comply with all other public information reporting requirements of the Commission as a condition to the availability of an exemption from the Securities Act for the sale of any of the Restricted Shares by any holder of Restricted Securities (including any such exemption pursuant to Rule 144 or 9 Rule 144A thereof, as amended from time to time, or any successor rule thereto or otherwise) The Corporation shall cooperate with each holder of Restricted Securities in supplying such information as may be necessary for such holder of Restricted Securities to complete and file any information reporting forms presently or hereafter required by the Commission as a condition to the availability of an exemption from the Securities Act (under Rule 144 or Rule 144A thereunder or otherwise) for the sale of any of the Restricted Shares by any holder of Restricted Securities. 2.6 Access to Records. The Corporation shall afford to each of the Investors and such Investor's employees, counsel and other authorized representatives, free and full access, at all reasonable times and for reasonable periods of time, to all of the books, records and properties of the Corporation and to all officers and employees of the Corporation. 2.7 Financial Reports. Until such time that the Corporation has a class of its equity securities registered under the Exchange Act and is required to file reports thereunder pursuant to Sections 13 or 15(d) of the Exchange Act, except with respect to the obligation set forth in Section 2.7(e)(i) hereunder which shall survive such time, the Corporation shall furnish each of the Investors with the financial information described below: (a) Within 20 days after the last day of each calendar month (or such other calendar period as is approved by the Board), financial statements, including a balance sheet as of the last date of such month, a statement of income (or monthly operating expenses) for such month, together with a cumulative statement of income from the first day of the fiscal year to the last day of such month, which statements shall be prepared from the books and records of the Corporation, a cash flow analysis, together with cumulative cash flow analyses from the first day of the fiscal year to the last day of such month, and a comparison between the actual monthly operating expenses and the projected figures for such month and the comparable figures for the prior year, subject to the provisions of Section 2.9 hereof. (b) The Corporation shall deliver to each of the Investors, within 45 days after the end of each fiscal quarter, unaudited financial statements for such fiscal quarter, certified by the Chief Financial Office or the Treasurer of the Corporation as presenting fairly the financial condition and results of operations of the Corporation and as having been prepared on a basis consistent with the accounting principles reflected in the Corporation's annual audited financial statements (subject to the absence of footnotes), accompanied by a report, signed by the Chief Financial Officer or the Treasurer of the Corporation, summarizing the operating and financial highlights of the Corporation for such quarter, which report shall include (a) a comparison between the actual quarterly operating and financial results, the Budget (as defined in Section 2.8 hereof) and the results of that quarter for the prior fiscal year of the Corporation, together with an explanation of material variances from the Budget and such prior year quarter, as the case may be, and (b) a narrative analysis of operations and trends in the business of the Corporation during such quarter. (c) Within 90 days after the end of each fiscal year of the Corporation, audited financial statements of the Corporation, which shall include an income statement and a statement of cash flow for such fiscal year and a balance sheet as of the last day thereof, each prepared in accordance with generally accepted accounting principles consistently applied, and accompanied 10 by the report of an independent accounting firm of national reputation as shall have been approved by the Board. (d) If for any period the Corporation shall have any subsidiary or subsidiaries whose accounts are consolidated with those of the Corporation, then the financial statements delivered for such period pursuant to paragraphs (a), (b) and (c) of this Section 2.7 shall be the consolidated and consolidating financial statements of the Corporation for all such consolidated subsidiaries. (e) Promptly upon becoming available: (i) copies of all financial statements, reports, press releases, notices, proxy statements and other documents sent by the Corporation to its Stockholders or released to the public and copies of all regular and periodic reports, if any, filed by the Corporation with the Commission or any securities exchange or self-regulatory organization; and (ii) any other financial or other information available to management of the Corporation that any of the Investors shall have reasonably requested on a timely basis. 2.8. Budget and Operating Forecast. The Corporation shall prepare and submit to the Board and each of the Investors an operating plan with monthly and quarterly breakdowns (the "Budget") for each fiscal year at least 45 days prior to the beginning of each fiscal year of the Corporation. The Budget shall be deemed accepted as the Budget for such fiscal year only when it has been approved by the Board. The Budget shall be reviewed by the Corporation periodically and all changes therein, and all material deviations therefrom, shall be reviewed by the Board on at least a quarterly basis. 2.9. System of Accounting. The Corporation shall maintain, and cause each of its subsidiaries, when and if any shall exist, to maintain, its books of accounts, related records and system of accounting in accordance with good business practices and generally accepted accounting principles, and shall cause the matters contained therein to be appropriately and accurately reflected in the financial reports (which shall be prepared in accordance with generally accepted accounting principles) furnished pursuant to this Agreement. 2.10. Restriction on Transfer Rights; Confidentiality. The rights granted to each of the Investors pursuant to Sections 2.6 through 2.8 hereof shall not be transferred or assigned by any Investor to, and shall not inure to the benefit of, any successor, transferee or assignee of any Investor, while it is engaged in any business directly competitive with the Corporation. 2.11. Confidentiality and Non-Competition Agreements for Key Employees. The Corporation shall cause each person who is presently an employee of or a consultant or independent contractor to the Corporation or who becomes an employee of or a consultant to the Corporation subsequent to the date hereof and who shall have or be proposed to have access to confidential or proprietary information of the Corporation to execute a confidentiality and non-competition agreement in form and substance attached hereto or otherwise approved by the Board prior to the commencement of such person's employment by the Corporation in such capacity. 11 2.12. Stock Restriction Agreement for Chief Officers. The Corporation shall cause Chalom B. Sayada, James L. Warren, and Art Michaelis to execute a First Amended and Restated Stock Restriction Agreement substantially in the form attached hereto as Exhibit A and maintain such agreement in full force and effect. 2.13. Marketing and Promotional Material. Each of the Investors will have the right to review and approve, in advance of publication, distribution or dissemination, any reference to such Investor or any entity affiliated with such Investor (other than the Corporation), contained in any document, instrument, report or filing or in any advertising, marketing, promotional and similar materials. 2.14. Bring-Along Rights. (a) If, by vote or written consent, (i) the Board of Directors and (ii) the holders of at least a majority of the then outstanding shares of the Series A Preferred Stock and the then outstanding shares of the Series B Preferred Stock, voting or consenting together as a single class (the "Approving Investors"), approve a change of control of the Corporation pursuant to which any bona fide unaffiliated third party proposes to acquire all or substantially all of the assets or all or substantially all of the capital stock of the Corporation, whether by purchase, merger, consolidation, share exchange, sale of assets, exclusive license or otherwise (an "Approved Sale"), the Approving Investors shall provide all other Investors who are not Approving Investors and each Original Stockholder (collectively, the "Remaining Stockholders") at least ten (10) days advance notice of such Approved Sale, which notice shall include a reasonably detailed description of the Approved Sale, including the proposed time and place of closing, the consideration to be received by the Remaining Stockholders, and any other material terms. The Remaining Stockholders shall consent to, vote for and raise no objections to the Approved Sale, and (i) the Remaining Stockholders shall waive any dissenters rights, appraisal rights or similar rights, if any, in connection with such merger, consolidation or asset sale, or (ii) if the Approved Sale is structured as a sale of the stock of the Corporation, the Remaining Stockholders shall agree to sell all of their shares of Capital Stock on the terms and conditions approved by the Approving Investors, provided such terms do not provide that the Remaining Stockholders would receive less than the amount that would be distributed to such Remaining Stockholders in the event the proceeds of the Approved Sale were distributed in accordance with the Restated Certificate. The Remaining Stockholders shall take all reasonably necessary and desirable actions requested by the Approving Investors in connection with the consummation of the Approved Sale, including the execution of such agreements and such instruments (collectively, the "Sale Documents") and other actions reasonably necessary to (i) effectuate the Approved Sale, including (only in the case that a third party requires both the Corporation and all of the Approving Investors and the Remaining Stockholders to individually sign such Sale Documents) making such customary representations, warranties, indemnities, covenants, conditions, escrow agreements and other customary agreements relating to such Approved Sale (provided that each Remaining Stockholder's aggregate liability pursuant to the Sale Documents or otherwise in connection with the Approved Sale shall be limited to the value of the consideration received by each such Remaining Stockholder on account of the Approved Sale) and (ii) effectuate the agreed-upon allocation and distribution of the aggregate consideration upon the Approved Sale. 12 (b) Each of the Remaining Stockholders hereby appoints the Approving Investor holding the largest number of shares of the Preferred Stock for so long as the provisions of Section 2.14(a) remain in effect, as such Remaining Stockholder's attorney and proxy with full power of substitution, to vote, and otherwise act (by written consent or otherwise) with respect to the capital stock of the Corporation owned by such Remaining Stockholder, solely on the matters and in the manner specified in Section 2.14(a). (c) THE PROXIES AND POWER OF ATTORNEY GRANTED PURSUANT TO THE ABOVE PARAGRAPH ARE IRREVOCABLE AND COUPLED WITH AN INTEREST. Each Remaining Stockholder hereby revokes all other proxies and powers of attorney on the matters specified in Section 2.14(a) with respect to the shares of capital stock of the Corporation which such Remaining Stockholder may have heretofore appointed or granted, and no subsequent proxy or power of attorney shall be given or written consent executed (and if given or executed, shall not be effective) by such Remaining Stockholder with respect thereto. All authority herein conferred or agreed to be conferred shall survive the death or incapacity of each Remaining Stockholder and any obligation of a Remaining Stockholder under this Agreement shall be binding upon the heirs, personal representatives and successors of such Remaining Stockholder. 2.15. Vesting of Stock. Unless otherwise approved by the Board of Directors by vote or written consent in which the Series A Directors and the Series B Director concur, all stock, stock options and other stock equivalents issued after the date of this Agreement to employees, directors, consultants and other service providers pursuant to a stock purchase or option plan or other employee stock incentive program or otherwise ("Stock Awards") (i) shall be subject to a minimum vesting schedule of at least four years, pursuant to which 25% of the shares subject to any such Stock Award will vest no sooner than one year after the date of the issuance or grant of such Stock Award, and 75% of the shares subject to such Stock Award will vest no more frequently and no sooner than monthly on a pro rata basis beginning on the first anniversary of the date of issuance or grant of such Stock Award, (ii) shall provide for termination of vesting and forfeiture of any unvested portion of such Stock Award upon cessation of employment and (ii) shall provide that as a condition to issuance of any shares, the recipient of such shares shall sign a written agreement in a form approved by the Board providing the Corporation with a right of first refusal on any transfer of such shares with certain exceptions for transfers to immediate family members and to trusts of which the holder is the trustee. 2.16. Environmental Matters. All development, construction and operation of property purchased, leased or otherwise acquired by the Corporation shall, in all material respects, comply with, and shall be lawful, permitted and conforming uses in all material respects under, all applicable building, fire, safety, subdivision, zoning, sewer, environmental, securities, health, insurance and other laws, ordinances, rules, regulations and plan approval conditions of any governmental or public body or authority. The Corporation shall promptly advise the Investors in writing of any pending or threatened claim, demand or action by any governmental authority or third party relating to any Hazardous Materials affecting the Property of which it has knowledge. The Corporation shall not discharge, place, release, spill or dispose of any Hazardous Materials or any other pollutants or effluents upon the Property or elsewhere (including, but not limited to, underground injection of such substances), and the Corporation shall not discharge into the air any emission which would require a permit under the Clean Air 13 Act or its state counterparts or any other Environmental Laws, except in compliance with the Environmental Laws. The Stockholders of the Corporation shall have no control over, or authority with respect to, the waste disposal operations of the Corporation. The Corporation hereby indemnifies, defends and holds harmless the Investors from and against any and all manner of actions, causes of action, suits, debts, accounts, controversies, judgments, claims, demands, losses or liabilities of any nature (including reasonable attorneys' fees) directly or indirectly arising out of or attributable to (a) any misrepresentation or breach of the representations and covenants set forth in Section 5.18 of the Stock Purchase Agreement, or (b) the use, generation, storage, release, threatened release, discharge, disposal or presence of Hazardous Materials on, under or about the Property by any person during the period that the Corporation was the legal or equitable owner of the Property or which occurred prior to such time and was otherwise actually known by, or should have been known by, the Corporation. The obligation of the Corporation to indemnify the Investors shall specifically cover and include, without limitation, all fines and penalties imposed by federal, state or local authorities, costs of removing or neutralizing the Hazardous Materials, injury to the property adjoining the Property, injury to persons living or working on or about the Property or adjoining or otherwise affecting property, and all other indirect or consequential damages incurred by the Investors. 2.17. Duration of Section. Section 2.3 and Sections 2.6-2.14 and the rights and obligations of the parties thereunder shall automatically terminate on the consummation of a firm commitment underwritten public offering of Common Stock registered under the Securities Act pursuant to which (X) Common Stock is offered to the public at a price of at least $5.00 per share of Common Stock (subject to adjustment for stock splits, stock dividends, stock combinations, recapitalizations and like occurrences) and (Y) the net proceeds to the Corporation are at least $40 million (a "Qualified Public Offering"). SECTION 3. Transfer of Securities. 3.1. Restriction on Transfer. The Restricted Securities shall not be transferable, except upon the conditions specified in this Section 3, which conditions are intended solely to ensure compliance with the provisions of the Securities Act in respect of the Transfer thereof. 3.2. Restrictive Legend. Each certificate evidencing any Restricted Securities and each certificate evidencing any such securities issued to subsequent transferees of any Restricted Securities shall (unless otherwise permitted by the provisions of Section 3.3 or 3.10 hereof) be stamped or otherwise imprinted with a legend in substantially the following form; THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW. THE SECURITIES MAY NOT BE PLEDGED, HYPOTHECATED, SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE SECURITIES LAW OR AN EXEMPTION THEREFROM 14 UNDER SUCH ACT OR LAW. ADDITIONALLY, THE TRANSFER OF THESE SECURITIES IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE FIRST AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT DATED APRIL 30, 2003 AMONG ACTIVBIOTICS, INC. AND CERTAIN OTHER SIGNATORIES THERETO, AND NO TRANSFER OF SUCH SECURITIES SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF ACTIVBIOTICS, INC. 3.3. Notice of Transfer. By acceptance of any Restricted Securities, the holder thereof agrees to give prior written notice to the Corporation of such holder's intention to effect any Transfer and to comply in all other respects with the provisions of this Section 3.3. Each such notice shall describe the manner and circumstances of the proposed Transfer and shall be accompanied by: (a) the written opinion of counsel for the holder of such Restricted Securities, or, at such holder's option, a representation letter of such holder, addressed to the Corporation (which opinion and counsel, or representation letter, as the case may be, shall be reasonably acceptable to the Corporation), as to whether, in the case of a written opinion, in the opinion of such counsel, such proposed Transfer involves a transaction requiring registration of such Restricted Securities under the Securities Act and applicable state securities laws or an exemption thereunder is available, or, in the case of a representation letter, such letter sets forth a factual basis for concluding that such proposed transfer involves a transaction requiring registration of such Restricted Securities under the Securities Act and applicable State Securities laws or an exemption thereunder is available, or (b) if such registration is required and if the provisions of Section 3.4 hereof are applicable, a written request addressed to the Corporation by the holder of such Restricted Securities, describing in detail the proposed method of disposition and requesting the Corporation to effect the registration of such Restricted Securities pursuant to the terms and provisions of Section 3.4 hereof; provided, however, that (y) in the case of a Transfer by a holder to a member of such holder's Group, no such opinion of counsel or representation letter of the holder shall be necessary, provided that the transferee agrees in writing to be subject to Sections 3.1, 3.2, 3.3 and 3.10 hereof to the same extent as if such transferee were originally a signatory to this Agreement, and (z) in the case of any holder of Restricted Securities that is a partnership, no such opinion of counsel or representation letter of the holder shall be necessary for a Transfer by such holder to a partner of such holder, or a retired partner of such holder who retires after the date hereof, or the estate of any such partner or retired partner if, with respect to such Transfer by a partnership, (i) such Transfer is made in accordance with the partnership agreement of such partnership, and (ii) the transferee agrees in writing to be subject to the terms of Sections 3.1, 3.2, 3.3 and 3.10 hereof to the same extent as if such transferee were originally a signatory to this Agreement. If in such opinion of counsel or as reasonably concluded from the facts set forth in the representation letter of the holder (which opinion and counsel, or representation letter, as the case may be, shall be reasonably acceptable to the Corporation), the proposed Transfer may be effected without registration under the Securities Act and any applicable state securities laws or "blue sky" laws, then the holder of Restricted Securities shall thereupon be entitled to effect such Transfer in accordance with the 15 terms of the notice delivered by it to the Corporation. Each certificate or other instrument evidencing the securities issued upon such Transfer (and each certificate or other) instrument evidencing any such securities not Transferred) shall bear the legend set forth in Section 3.2 hereof unless: (a) in such opinion of such counsel or as can be concluded from the representation letter of such holder (which opinion and counsel or representation letter shall be reasonably acceptable to the Corporation) the registration of future Transfers is not required by the applicable provisions of the Securities Act and state securities laws, or (b) the Corporation shall have waived the requirement of such legend; provided, however, that such legend shall not be required on any certificate or other instrument evidencing the securities issued upon such Transfer in the event such Transfer shall be made in compliance with the requirements of Rule 144 (as amended from time to time or any similar or successor rule) promulgated under the Securities Act. The holder of Restricted Securities shall not effect any Transfer until such opinion of counsel or representation letter of such holder has been given to and accepted by the Corporation (unless waived by the Corporation) or until registration of the Restricted Securities involved in the above-mentioned request has become effective under the Securities Act. In the event that an opinion of counsel is required by the registrar or transfer agent of the Corporation to effect a transfer of Restricted Securities in the future, the Corporation shall seek and obtain such opinion from its counsel, and the holder of such Restricted Securities shall provide such reasonable assistance as is requested by the Corporation (other than the furnishing of an opinion of counsel) to satisfy the requirements of the registrar or transfer agent to effectuate such transfer. 3.4. Required Registration. At any time following the date that is the earlier of (i) the fifth anniversary of the Stage IA Closing Date (as defined under the Stock Purchase Agreement) and (ii) six months following the closing of an initial public offering, if the Corporation shall be requested (i) by holders of 15% or more of the outstanding Restricted Securities (on an as-converted basis) to effect the registration under the Securities Act of Restricted Shares, or (ii) after the first registration pursuant to this Section 3.4, by one or more of the holders of Restricted Securities, to effect the registration under the Securities Act of Restricted Shares, then the Corporation shall promptly give written notice of such proposed registration to all holders of Restricted Securities, and thereupon the Corporation shall promptly use its best efforts to effect the registration under the Securities Act of the Restricted Shares that the Corporation has been requested to register for disposition as described in the request of such holders of Restricted Securities and in any response received from any of the holders of Restricted Securities within 30 days after the giving of the written notice by the Corporation; provided, however, that the Corporation shall not be obligated to effect any registration under the Securities Act except in accordance with the following provisions and Section 3.6: (a) Subject to Section 3.6, the Corporation shall not be obligated to file and cause to become effective more than an aggregate of four (4) registration statements (a maximum of two (2) of which may be initiated by the Series B Stockholders and two (2) of which may be initiated by the Series A Stockholders) in which Restricted Shares are registered under the Securities Act pursuant to this Section 3.4, if all of the Restricted Shares offered pursuant to such registration statements are sold thereunder upon the price and terms offered (b) Notwithstanding the foregoing, the Corporation may include in each such registration requested pursuant to this Section 3.4 any authorized but unissued shares of 16 Common Stock (or authorized treasury shares) for sale by the Corporation or any issued and outstanding shares of Common Stock for sale by others; provided, however, that, if the number of shares of Common Stock so included pursuant to this clause (b) exceeds the number of Restricted Shares requested by the holders of Restricted Securities requesting such registration, then such registration shall be deemed to be a registration in accordance with and pursuant to Section 3.5; and provided further, however, that in the event such registration is pursuant to this Section 3.4, the inclusion of such previously authorized but unissued shares by the Corporation or issued and outstanding shares of Common Stock by others in such registration does not adversely affect, in the sole opinion of the holders of Restricted Securities requesting such registration, the ability of the holders of Restricted Securities requesting such registration to market the entire number of Restricted Shares requested by them. 3.5 Piggyback Registration. (a) Each time that the Corporation proposes for any reason to register any of its securities under the Securities Act, other than the Corporation's initial public offering or pursuant to a registration statement on Form S-4 or Form S-8 or similar or successor forms (collectively, "Excluded Forms"), the Corporation shall promptly give written notice of such proposed registration to all holders of Restricted Securities, which shall offer such holders the right to request inclusion of any Restricted Shares in the proposed registration. (b) Each holder of Restricted Securities shall have 30 days from the receipt of such notice to deliver to the Corporation a written request specifying the number of Restricted Shares such holder intends to sell and the holder's intended method of disposition. (c) In the event that the proposed registration by the Corporation is, in whole or in part, an underwritten public offering of securities of the Corporation, any request under Section 3.5(b) may specify that the Restricted Shares be included in the underwriting (i) on the same terms and conditions as the shares of Common Stock, if any, otherwise being sold through underwriters under such registration, or (ii) on terms and conditions comparable to those normally applicable to offerings of common stock in reasonably similar circumstances in the event that no shares of Common Stock other than Restricted Shares are being sold through underwriters under such registration. (d) Upon receipt of a written request pursuant to Section 3 5(b), the Corporation shall promptly use its best efforts to cause all such Restricted Shares to be registered under the Securities Act, to the extent required to permit sale or disposition as set forth in the written request, (e) Notwithstanding the foregoing, if the managing underwriter of any such proposed registration determines and advises in writing that the inclusion of all Restricted Shares proposed to be included in the underwritten public offering, together with any other issued and outstanding shares of Common Stock proposed to be included therein by holders other than the holders of Restricted Securities (such other shares hereinafter collectively referred to as the "Other Shares"), would interfere with the successful marketing of the Corporation's securities, then the total number of such securities proposed to be included in such underwritten public offering shall be reduced. If such proposed registration is in connection with an offering other 17 than a Qualified Public Offering, such reduction shall occur (i) first, by the shares requested to be included in such registration by the holders of Other Shares, and (ii) second, if necessary, (A) one-half by the securities proposed to be issued by the Corporation, and (B) one-half by the Restricted Shares proposed to be included in such registration by the holders thereof, on a pro rata basis, based upon the number of Restricted Shares sought to be registered by each such holder, provided however, that in no event shall the number of Restricted Shares to be included in such offering be reduced to less than 15% of the total shares to be included therein. The shares of Common Stock that are excluded from the underwritten public offering pursuant to the preceding sentence shall be withheld from the market by the holders thereof for a period, not to exceed 180 days from the closing of such underwritten public offering, that the managing underwriter reasonably determines as necessary in order to effect such underwritten public offering. 3.6 Registrations on Form S-3 At such time as the Corporation shall have qualified for the use of Form S-3 (or any successor form promulgated under the Securities Act), each holder of Restricted Securities shall have the right to request in writing an unlimited number of registrations on Form S-3; provided that the Corporation shall not be required to file more than two such Registration Statements on Form S-3 pursuant to this Section 3.6 in any twelve month period. Each such request by a holder shall: (a) specify the number of Restricted Shares which the holder intends to sell or dispose of, (b) state the intended method by which the holder intends to sell or dispose of such Restricted Shares, and (c) request registration of Restricted Shares (including those Restricted Shares proposed to be registered by persons other than the initiating holder) having a proposed aggregate offering price of at least $1,000,000. Upon receipt of a request pursuant to this Section 3.6, the Corporation shall use its best efforts to effect such registration or registrations on Form S-3. 3.7. Preparation and Filing. If and whenever the Corporation is under an obligation pursuant to the provisions of this Section 3 to use its best efforts to effect the registration of any Restricted Shares, the Corporation shall, as expeditiously as practicable: (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 in accordance with Section 3.7(b) hereof; (b) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective until the earlier of(i) the sale of all Restricted Shares covered thereby or (ii) nine months, and to comply with the provisions of the Securities Act with respect to the sale or other disposition of all Restricted Shares covered by such registration statement; (c) furnish to each holder whose Restricted Shares are being registered pursuant to this Section 3 such number of copies of any summary prospectus or other prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act and such other documents as such holder may reasonably request in order to facilitate the public sale or other disposition of such Restricted Shares; 18 (d) use its best efforts to register or qualify the Restricted Shares covered by such registration statement under the securities or blue sky laws of such jurisdictions as each holder whose Restricted Shares are being registered pursuant to this Section 3 shall reasonably request and do any and all other acts or things which may be necessary or advisable to enable such holder to consummate the public sale or other disposition in such jurisdictions of such Restricted Shares; provided, however, that the Corporation shall not be required to consent to general service of process for all purposes in any jurisdiction where it is not then subject to process, qualify to do business as a foreign corporation where it would not be otherwise required to qualify or submit to liability for state or local taxes where it is not otherwise liable for such taxes; (e) at any time when a prospectus covered by such registration statement and relating thereto is required to be delivered under the Securities Act within the appropriate period mentioned in Section 3.7(b) hereof, notify each holder whose Restricted Shares are being registered pursuant to this Section 3 of the happening of any event as a result of which the prospectus included in such registration, 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 and, at the request of such holder, prepare, file and furnish to such holder a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such shares, such prospectus shall not include an untrue statement of a material fact or omit 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; (f) if the Corporation has delivered preliminary or final prospectuses to the holders of Restricted Shares that are being registered pursuant to this Section 3 and after having done so the prospectus is amended to comply with the requirements of the Securities Act, the Corporation shall promptly notify such holders and, if requested, such holders shall immediately cease making offers of Restricted Shares and return all prospectuses to the Corporation. The Corporation shall promptly provide such holders with revised prospectuses and, following receipt of the revised prospectuses, such holders shall be free to resume making offers of the Restricted Shares; and (g) furnish, at the request of any holder whose Restricted Shares are being registered pursuant to this Section 3, on the date that such Restricted Shares are delivered to the underwriters for sale in connection with a registration pursuant to this Section 3, if such securities are being sold through underwriters, or, on the date that the registration statement with respect to such securities becomes effective, if such securities are not being sold through underwriters, (i) an opinion, dated such date, of the counsel representing the Corporation for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the holder or holders making such request, and (ii) a letter dated such date, from the independent certified public accountants of the Corporation, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the holder or holders making such request. Notwithstanding the foregoing, if, after a registration statement becomes effective, the Corporation becomes engaged in any activity which, in the good faith determination of the 19 Board, involves information that would have to be disclosed in the registration statement but which the Corporation desires to keep confidential for valid business reasons, then the Corporation may at its option by notice to such holders of Restricted Shares that have included shares in such registration statement, require that such holders cease sales of such shares under such registration statement for a period not in excess of ninety days from the date of such notice, such right to be exercised by the Corporation not more than once in any 12-month period. If in connection therewith, the Corporation considers it appropriate for such registration statement to be amended, the Corporation shall so amend such registration statement as promptly as practicable and such holders shall suspend any further sales of their shares until the Corporation advises them that such registration statement has been amended. The time periods referred to herein during which such registration statement must be kept effective shall be extended for an additional number of days equal to the number of days during which the right to sell shares was suspended pursuant to this paragraph. 3.8. Expenses. The Corporation shall pay all expenses incurred by the Corporation in complying with this Section 3, including, without limitation, all registration and filing fees (including all expenses incident to filing with the National Association of Securities Dealers, Inc.), fees and expenses of complying with the securities and blue sky laws of all such jurisdictions in which the Restricted Shares are proposed to be offered and sold, printing expenses and fees and disbursements of counsel (including with respect to each registration effected pursuant to Sections 3.4, 3.5 and 3.6, the reasonable fees and disbursements of one counsel for the holders of Restricted Securities who may be chosen by a majority in interest of the Restricted Shares being registered in such offering); provided, however, that all underwriting discounts and selling commissions applicable to the Restricted Shares covered by registrations effected pursuant to Section 3.4, 3.5 or 3.6 hereof shall be borne by the seller or sellers thereof, in proportion to the number of Restricted Shares sold by each such seller or sellers 3.9. Indemnification. (a) (i) In the event of any registration of any Restricted Shares under the Securities Act pursuant to this Section 3 or registration or qualification of any Restricted Shares pursuant to Section 3.7(d) hereof, the Corporation shall indemnify and hold harmless the seller of such shares, each underwriter of such shares, if any, each broker or any other person acting on behalf of such seller and each other person, if any, who controls any of the foregoing persons, within the meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which any of the foregoing persons may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any registration statement under which such Restricted Shares were registered under the Securities Act, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto, or any document incident to registration or qualification of any Restricted Shares pursuant to Section 3.7(d) hereof, or arise out of or are based upon the 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, with respect to any prospectus, necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, or any violation by the Corporation of the Securities Act or any state securities or blue sky laws applicable to the Corporation and relating to action or inaction 20 required of the Corporation in connection with such registration or qualification under the Securities Act or such state securities or blue sky laws. The Corporation shall reimburse on demand such seller, underwriter, broker or other person acting on behalf of such seller and each such controlling person for any legal or any other expenses reasonably incurred by any of them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Corporation shall not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon (1) an untrue statement or alleged untrue statement or omission or alleged omission made in said registration statement, preliminary or final prospectus or amendment or supplement thereto or any document incident to registration or qualification of any Restricted Shares pursuant to Section 3.7(d) hereof, in reliance upon and in conformity with written information furnished to the Corporation by such seller, underwriter, broker, other person or controlling person specifically for use in the preparation thereof, or (2) if the Corporation provides an amended prospectus which corrects any misstatement or omission, any use of a prospectus which does not contain such correction after such correction is made and the prospectus is provided to such seller. (ii) In the event of any registration of any Restricted Shares under the Securities Act pursuant to this Section 3 or registration or qualification of any Restricted Shares pursuant to Section 3.7(d) hereof, the Investors severally, but not jointly, shall indemnify and hold harmless the Corporation and its directors, officers, employees, agents and affiliates and any other person, if any, who controls any of the foregoing persons, within the meaning of the Securities Act, against any losses, claims, damages or liabilities (or actions in respect thereof) which arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any registration statement under which such Restricted Shares were registered under the Securities Act, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto, or any document incident to registration or qualification of any Restricted Shares pursuant to Section 3.7(d) hereof, or arise out of or based upon the 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, with respect to any prospectus, necessary to make statements therein, in light of the circumstances under which they were made, not misleading, or any violation of the Securities Act or any state securities or applicable blue sky laws relating to action or inaction required of the Corporation in connection with such registration or qualification under the Securities Act or such state securities or blue sky laws arising out of or based upon written information furnished to the Corporation by any such Investor specifically for use in the preparation thereof Notwithstanding anything herein to the contrary, no Investor shall have any obligation hereunder to pay any amount in excess of the net proceeds received by any such Investor in connection with the registration of Restricted Shares. (b) Before Restricted Shares held by any prospective seller shall be included in any registration pursuant to this Section 3, such prospective seller and any underwriter acting on its behalf shall have agreed to indemnify and hold harmless (in the same manner and to the same extent as set forth in paragraph (a)) the Corporation, each director of the Corporation, each officer of the Corporation who signs such registration statement and any person who controls the Corporation within the meaning of the Securities Act, with respect to any untrue statement or omission from such registration statement, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto, if such untrue statement or omission was made in reliance upon and in conformity with written information furnished to the 21 Corporation through an instrument duly executed by such seller or such underwriter specifically for use in the preparation of such registration statement, preliminary prospectus, final prospectus or amendment or supplement; provided, however, that the maximum amount of liability in respect of such indemnification shall be limited, in the case of each prospective seller, to an amount equal to the net proceeds actually received by such prospective seller from the sale of Restricted Shares effected pursuant to such registration (c) Promptly after receipt by an indemnified party of notice of the commencement of any action involving a claim referred to in Section 3.9(a) or (b) hereof, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 3.9, give written notice to the latter of the commencement of such action. In case any such action is brought against an indemnified party, the indemnifying party will be entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and, after notice to such indemnified party from the indemnifying party of its election to assume the defense thereof, the indemnifying party shall be responsible for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof; provided, however, that, if any indemnified party shall have reasonably concluded that there may be one or more legal defenses available to such indemnified party which are different from, or additional to those available to the indemnifying party, or that such claim or litigation involves or could have an effect upon matters beyond the scope of the indemnity agreement provided in this Section 3.9, the indemnifying party shall not have the right to assume the defense of such action on behalf of such indemnified party, and such indemnifying party shall reimburse such indemnified party and any person controlling such indemnified party for the fees and expenses of counsel retained by the indemnified party which are reasonably related to the matters covered by the indemnity agreement provided in this Section 3.9. The indemnifying party shall not make any settlement of any claims indemnified against hereunder without the written consent of the indemnified party or parties, which consent shall not be unreasonably withheld. (d) In order to provide for just and equitable contribution to joint liability under the Securities Act in any case in which either (i) any holder of Restricted Securities exercising rights under this Agreement, or any controlling person of any such holder, makes a claim for indemnification pursuant to this Section 3.9, but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 3.9 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any such holder or any such controlling person in circumstances for which indemnification is provided under this Section 3.9; then, in each such case, the Corporation and such holder will contribute to the aggregate losses, claims, damages or liabilities to which they may be subject as is appropriate to reflect the relative fault of the Corporation and such holder in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities, it being understood that the parties acknowledge that the overriding equitable consideration to be given effect in connection with this provision is the ability of one party or the other to correct the statement or omission which resulted in such losses, claims, damages or liabilities, and that it would not be just and equitable if contribution pursuant hereto were to be determined by pro rata allocation or by any other 22 method of allocation which does not take into consideration the foregoing equitable considerations. Notwithstanding the foregoing, (i) no such holder will be required to contribute any amount in excess of the proceeds to it of all Restricted Shares sold by it pursuant to such registration statement, and (ii) no person or entity guilty of fraudulent misrepresentation, within the meaning of Section 11(f) of the Securities Act, shall be entitled to contribution from any person or entity who is not guilty of such fraudulent misrepresentation. (e) Notwithstanding any of the foregoing, if, in connection with an underwritten public offering of any Restricted Shares, the Corporation, the holders of such Restricted Shares and the underwriters enter into an underwriting or purchase agreement relating to such offering which contains provisions covering indemnification among the parties, then the indemnification provision of this Section 3.9 shall be deemed inoperative for purposes of such offering. 3.10. Removal of Legends, Etc. Notwithstanding the foregoing provisions of this Section 3, the restrictions imposed by this Section 3 upon the transferability of any Restricted Securities shall cease and terminate when (a) any such Restricted Shares are sold or otherwise disposed of in accordance with the intended method of disposition by the seller or sellers thereof set forth in a registration statement or such other method contemplated by Section 3.3 hereof that does not require that the securities transferred bear the legend set forth in Section 3.2 hereof, including a Transfer pursuant to Rule 144 or a successor rule thereof (as amended from time to time), or (b) the holder of Restricted Securities has met the requirements for transfer of such Restricted Securities pursuant to subparagraph (k) of Rule 144 or a successor rule thereof (as amended from time to time) promulgated by the Commission under the Securities Act. Whenever the restrictions imposed by this Section 3 have terminated, a holder of a certificate for Restricted Securities as to which such restrictions have terminated shall be entitled to receive from the Corporation, without expense, a new certificate not bearing the restrictive legend set forth in Section 3.2 hereof and not containing any other reference to the restrictions imposed by this Section 3. 3.11. Initial Public Offering. (a) In the event the Corporation undertakes an initial public offering, the registration statement for which is first filed with the Commission one year or more after the Stage IA Closing Date, and to the extent permitted by applicable law, rules and regulations, the Corporation shall grant, or cause the managing underwriter of such offering to grant, to each Series B Stockholder a right to purchase all or part of its pro rata portion of an aggregate of 10% of the shares of Common Stock offered by the Corporation in the initial public offering. A Series B Stockholder's pro rata portion, for purposes of this Section 3.11, shall equal a fraction, the numerator of which is the number of shares of Common Stock then held by such Series B Stockholder (giving effect to the conversion of all shares of Series B Stock then held by such Series B Stockholder, but not giving effect to the conversion of any options, warrants or other derivative securities then outstanding), and the denominator of which is the total number of shares of Common Stock then held by all of the Series B Stockholders (giving effect to the conversion of all shares of Series B Stock then held by all of the Series B Stockholders, but not giving effect to the conversion of any options, warrants or other derivative securities then outstanding). 23 (b) In the event the Corporation undertakes an initial public offering, the registration statement for which is first filed with the Commission prior to one year after the Stage IA Closing Date, or if the Corporation is prohibited by applicable laws, rules or regulations from offering initial public offering shares to the Series B Stockholders pursuant to Section 3.11(a), then in lieu thereof, the Corporation shall issue to each Series B Stockholder a warrant to purchase the number of shares of Common Stock that is equal to the number of shares of Common Stock that such Series B Stockholder otherwise would have been entitled to purchase under Section 3.11(a). Each warrant issued pursuant to this Section 3.11(b) shall have an exercise price equal to the price at which shares of Common Stock are offered to the public in the initial public offering and shall be exercisable in full for a period of five years commencing six months after the closing of the initial public offering. All such warrants shall be issued to the Series B Stockholders as soon as practicable after the closing of the initial public offering and shall carry equivalent registration rights to those rights provided in Section 3 hereof with respect to Restricted Shares. (c) Each Investor, if requested by the Corporation and the managing underwriter of initial public offering, shall enter into an agreement not to sell or otherwise transfer or dispose of any Restricted Securities or other securities of the Corporation (excluding securities acquired in the initial public offering or in the public market after such offering) held by such Investor for a period not to exceed 180 days following the effective date of the initial public offering registration statement; provided that: (i) all officers, directors and holders of 1% or more of the outstanding shares of Common Stock (on an as-converted basis) of the Corporation enter into similar agreements; (ii) the Corporation use its best efforts to ensure that such agreements provide for periodic early releases of the securities subject thereto based upon specified events; and (iii) the Corporation use its best efforts to ensure that such agreements provide that any discretionary waiver or termination of the restrictions of such agreements by the Corporation or the managing underwriter and any early release of shares from the restrictions of such agreements shall apply to all persons subject to such agreements on a pro rata basis, based upon the number of Common Shares (on an as-converted basis) held by such persons. SECTION 4. Securities Act Registration Statements. Except for securities of the Corporation registered on Excluded Forms, the Corporation shall not file any registration statement under the Securities Act covering any securities unless it shall first have given each holder of Restricted Securities written notice thereof. The Corporation further covenants that each holder of Restricted Securities shall have the right, at any time when it may be deemed to be a controlling person of the Corporation, within the meaning of the Securities Act, to participate in the preparation of such registration statement and to request the insertion therein of material furnished to the Corporation in writing which in such holder's judgment should be included. In connection with any registration statement referred to in this Section 4, the Corporation shall indemnify, to the extent permitted by law, each holder of Restricted Securities, its officers, partners and directors and each person, if any, who controls any such holder within 24 the meaning of the Securities Act in the same manner and to the same extent as the Corporation is required to indemnify a seller of Restricted Shares in Section 3.9 hereof. If, in connection with any such registration statement, any holder of Restricted Securities shall furnish written information to the Corporation expressly for use in the registration statement, then such holder shall indemnify the Corporation, each director of the Corporation, each officer of the Corporation who signs such registration statement and each person, if any, who controls the Corporation within the meaning of the Securities Act to the same extent as a seller of Restricted Shares is required to indemnify such persons in Section 3.9 hereof. SECTION 5. Election of Directors. 5.1 Voting for Directors. At each annual meeting of the stockholders of the Corporation and at each special meeting of the stockholders of the Corporation called for the purposes of electing directors of the Corporation, and at any time at which stockholders of the Corporation shall have the right to, or shall, vote for or consent to the election of directors, then, in each such event, each Original Stockholder and each Investor shall vote all shares of Preferred Stock and any other shares of voting stock of the Corporation then owned (or controlled as to voting rights) by it or him, whether by purchase, exercise of rights, warrants or options, stock dividends or otherwise as follows: (a) to fix and maintain the number of directors on the Board of Directors of the Corporation at nine (9); (b) as to Series A Stockholders, pursuant to Paragraph A.6(b)(iii) of Article III of the Certificate, to elect to the Board two (2) directors designated by HCV VI (each, an "HCV Director"), one of whom must be a biotechnology industry expert not affiliated with HCV or any member of the HCV Group (the "Unaffiliated HCV Director"); the HCV Director who is not the Unaffiliated HCV Director shall also serve on each committee of the Board of Directors; (c) as to Series B Stockholders, pursuant to Paragraph A.6(b)(i) of Article III of the Certificate, to elect to the Board one (1) director designated by the members of the MDS Group then holding capital stock of the Corporation (the "MDS Director"), who shall also serve on the Compensation Committee of the Board of Directors; and (d) to elect to the Board one (1) director (the "Bio Ventures Director") designated by Bio Ventures Investors Limited Partnership II ("Bio Ventures Investors") so long as Bio Ventures Investors shall own at least 50% of the Series B Preferred Shares that it owns on the date of this Agreement. 5.2 Post-Closing Board State. Following the Stage IA Closing (as defined in the Stock Purchase Agreement) of the issue and sale of the Series B Preferred Stock, the Board of Directors shall be constituted as follows: (a) Ray Baddour, Chairman of the Board; (b) Chalom Sayada, President and Chief Executive Officer; (c) John Littlechild, as an HCV Director; 25 (d) Walter Gilbert, as the BioVentures Director; (e) Paul Auerbach; (f) Mick Stadler; (g) Gerry Brunk, as the MDS Director; and (h) on or before July 30, 2003, two independent directors with significant pharmaceutical industry experience, one of which shall be the Unaffiliated HCV Director. 5.3. Cooperation of the Corporation. The Corporation shall use its best efforts to effectuate the purposes of this Section 5, including promoting the adoption of any necessary amendment of the By-laws of the Corporation and the Certificate. 5.4. Notices. The Corporation shall provide the Investors with at least twenty (20) days' prior notice in writing of any intended mailing of notice to the Investors of the Corporation for a meeting at which directors are to be elected, and such notice shall include the names of the persons designated by the Corporation pursuant to this Section 5. HCV VI and the relevant members of the MDS Group shall each notify the Corporation in writing at least three (3) days prior to such mailing of the person(s) respectively designated by it pursuant to Paragraphs A.6(b)(iii) and A.6(b)(i) of Article III of the Certificate, as applicable, and Section 5.1 above as nominees for election to the Board. In the absence of any notice from HCV VI or those members of the MDS Group, the director(s) then serving and previously designated by HCV VI or members of the MDS Group, as applicable, shall be renominated. 5.5. Removal. Except as otherwise provided in this Section 5, no Investor or Original Stockholder shall vote to remove any member of the Board designated in accordance with the foregoing provisions of this Section 5 unless the party who designated such director (the "Designating Party") shall so vote or otherwise consent, and, if the Designating Party shall so vote or otherwise consent, then the non-designating stockholders shall likewise so vote. Any vacancy on the Board created by the resignation, removal, incapacity or death of any person designated under the foregoing provisions of this Section 5 shall be filled by another person designated by the original Designating Party. Each Series A Stockholder shall vote all voting shares of Series A Stock and all other shares of voting stock of the Corporation owned or controlled by such Series A Stockholder for such subsequent designee where the original Designating Party was the Series A Stockholders and each Series B Stockholder shall vote all voting shares of Series B Stock and all other shares of voting stock of the Corporation owned or controlled by such Series B Stockholder for such subsequent designee where the original Designating Party was the Series B Stockholders, each in accordance with each such new designation, and no such vacancy shall be filled in the absence of a new designation by the original Designating Party. 5.6 Duration of Section. This Section 5 and the rights and obligations of the parties hereunder shall automatically terminate on the consummation of a Qualified Public Offering. Prior to such termination the rights and obligations of any Investor under this Section 5 shall terminate upon the date on which such Investor no longer owns any Preferred Stock, whereupon 26 the obligations of the remaining Investors to vote in favor of the designee of such Investor shall also terminate. SECTION 6. Indemnification and Insurance. 6.1. Indemnification of Investors. In the event that any Investor or any director, officer, employee, affiliate or agent thereof (the "Indemnitees") become involved in any capacity in any action, proceeding, investigation or inquiry other than a claim by the Corporation against such Indemnitee in connection with or arising out of any matter related to the Corporation or any Indemnitee's role or position with the Corporation, the Corporation shall reimburse each Indemnitee for its legal and other expenses (including the cost of any investigation and preparation) as they are incurred by such Indemnitee in connection therewith. The Corporation also agrees to indemnify each Indemnitee, pay on demand and protect, defend, save and hold harmless from and against any and all liabilities, damages, losses, settlements, claims, actions, suits, penalties, fines, costs or expenses (including, without limitation, attorneys' fees) (any of the foregoing, a "Claim") incurred by or asserted against any Indemnitee of whatever kind or nature, arising from, in connection with or occurring as a result of this Agreement or the matters contemplated by this Agreement. The foregoing agreement shall be in addition to any rights that any Indemnitee may have at common law or otherwise. Notwithstanding the foregoing, the Corporation shall not be required to indemnify any Indemnitee who is found to have acted in a manner demonstrating willful misconduct or in connection with any claim that such Indemnitee breached this Agreement unless it is determined that the Indemnitee did not breach this Agreement. 6.2. Advancement of Expenses. The Corporation shall advance all expenses reasonably incurred by or on behalf of the Indemnitees in connection with any Claim or potential Claim within twenty (20) days after the receipt by the Corporation of a statement or statements from the Indemnitee requesting such advance payment or payments from time to time. 6.3. Life Insurance. The Corporation shall procure and maintain a key man life insurance policy on the life of Chalom B. Sayada in the face amount of $1,000,000 00, with the Corporation as the named insured on such policy, effective as of the date hereof and continuing until such time as such person no longer serves as a director, officer, employee or consultant of the Corporation. SECTION 7. Remedies. In case any one or more of the covenants and/or agreements set forth in this Agreement shall have been breached by any party hereto, the party or parties entitled to the benefit of such covenants or agreements may proceed to protect and enforce its or their rights, either by suit in equity and/or action at law, including, but not limited to, an action for damages as a result of any such breach and/or an action for specific performance of any such covenant or agreement contained in this Agreement. Notwithstanding the generality of the foregoing, in the event that the Corporation breaches any of its covenants and/or agreements set forth herein, the Investors shall have the additional remedy, in their sole discretion, provided that such breach has not been cured by the later to occur of 15 days after receipt of notice of such breach by the Corporation or 30 days after the occurrence of such breach, of electing to immediately exercise their right of redemption set forth in Article III, Section A.5 of the Certificate, as provided therein, irrespective of whether such light of redemption otherwise is 27 mature. The rights, powers and remedies of the parties under this Agreement are cumulative and not exclusive of any other right, power or remedy which such parties may have under any other agreement or law. No single or partial assertion or exercise of any light, power or remedy of a party hereunder shall preclude any other or further assertion or exercise thereof. SECTION 8. Successors and Assigns. Except as otherwise expressly provided herein, this Agreement shall bind and inure to the benefit of the Corporation and each of the Investors and the respective successors and assigns of the Corporation and each of the Investors, Subject to the requirements of Section 3 hereof, this Agreement and the rights and duties of the Investors set forth herein may be freely assigned, in whole or in part (i) by each Investor to any member of such Investor's Group and (ii) to any other person or entity acquiring Restricted Securities including any Restricted Securities that are convertible into Common Stock, equal to no less than 100,000 shares of Common Stock. Any transferee (other than an Investor) to whom rights under Section 3 are transferred shall, as a condition to such transfer, deliver to the Corporation a written instrument by which such transferee identifies itself, gives the Corporation notice of the transfer of such rights, identifies the securities of the Corporation owned or acquired by it and agrees to be bound by the obligations imposed hereunder to the same extent as if such transferee were an Investor hereunder. A transferee to whom rights are transferred pursuant to this Section 8 will be thereafter deemed to be an Investor for the purpose of the execution of such transferred rights and may not again transfer such rights to any other person or entity, other than as provided in this Section 8. Neither this Agreement nor any of the rights or duties of the Corporation set forth herein shall be assigned by the Corporation, in whole or in part, without having first received the written consent or vote of a majority of the then outstanding shares of the Preferred Stock, voting together as a single class, on an as-converted basis. SECTION 9. Duration of Agreement. Except as otherwise set forth herein, the rights and obligations of the Corporation and each Investor set forth herein shall survive indefinitely, unless and until, by their respective terms, they are no longer applicable or except as specifically set forth herein. SECTION 10. Entire Agreement. This Agreement, together with the other writings referred to herein or delivered pursuant hereto which form a part hereof, contains the entire agreement among the parties with respect to the subject matter hereof and amends, restates and supersedes all prior and contemporaneous arrangements or understandings with respect thereto. SECTION 11. Notices. All notices, requests, consents and other communications hereunder to any party shall be deemed to be sufficient if contained in a written instrument delivered in person or duly sent by first class registered, certified or overnight mail, postage prepaid, or telecopied with a confirmation copy by regular mail, addressed or telecopied, as the case may be, to such party at the address or telecopier number, as the case may be, set forth below or such other address or telecopier number, as the case may be, as may hereafter be designated in writing by the addressee to the addressor listing all parties: (i) If to the Corporation, to: ActivBiotics, Inc. 128 Spring Street Lexington, Massachusetts 02421 Attention: Chief Executive Officer 28 Telecopier: (781 ###-###-#### with a copy to: Bingham McCutchen LLP 150 Federal Street Boston, Massachusetts 02110 Attention: Julio E. Vega, Esq. Telecopier: (617 ###-###-#### (ii) If to the Original Stockholders, as set forth on Schedule 1; (iii) If to the Series A Stockholders, as set forth on Schedule 2, with a copy to: McCarter & English, LLP Four Gateway Center 100 Mulberry Street Newark, New Jersey 07102 Attention: Jeffrey A. Baumel, Esq. Telecopier: (973 ###-###-#### (iv) If to the Series B Purchasers, as set forth on Schedule 3, with a copy to: Palmer & Dodge LLP 111 Huntington Avenue Boston, MA 02199-7613 Attention: James T Barrett, Esq. Telecopier: (617 ###-###-#### All such notices, requests, consents and communications shall be deemed to have been received (a) in the case of personal delivery, on the date of such delivery, (b) in the case of mailing, on the third business day following the date of such mailing, (c) in the case of overnight mail, on the first business day following the date of such mailing, and (d) in the case of facsimile transmission, when confirmed by facsimile machine report. SECTION 12. Changes. The terms and provisions of this Agreement may not be modified or amended, or any of the provisions hereof waived, temporarily or permanently, except pursuant to the written consent of the Corporation and the holders of a majority of the then outstanding shares of the Preferred Stock, voting together as a single class, on an as-converted basis, provided, however, that any such modification, amendment or waiver which materially and adversely affects one or more holders of any class or series of the capital stock of the Corporation (the "Affected Holders") in a manner different than other holders of that class or series of the capital stock of the Corporation shall require the written consent of each such Affected Holder, and provided further, that any such modification, amendment or waiver of any provision of Section 2.14 shall require the written consent of each holder of then outstanding shares of Preferred Stock. Notwithstanding the foregoing, and without any action by any of the parties hereto, any person who purchases shares of the Series B Preferred Stock at the Stage IB Closing (as defined in the Stock Purchase Agreement) shall be added as a party to this Agreement by signing a counterpart signature page hereto, upon the execution of which such 29 person shall become a "Series B Purchaser" hereunder, entitled to all the benefits and subject to all of the obligations of a "Series B Purchaser" hereunder. SECTION 13. Counterparts. This Agreement may be executed in any number of counterparts, and each such counterpart shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. SECTION 14. Headings. The headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of this Agreement. SECTION 15. Nouns and Pronouns. Whenever the context may require, any pronouns used herein shall include the corresponding masculine, feminine or neuter forms, and the singular form of names and pronouns shall include the plural and vice-versa. SECTION 16. Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. SECTION 17. Governing Law. Except to the extent that any provision of this Agreement is contrary to any mandatory provision of the Delaware General Corporation Law (in which case such mandatory statutory provision shall apply), this Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts and the laws of the United States applicable therein (without giving effect to any choice or conflict of laws provision or rule that would cause the application of the laws of any other jurisdiction) and shall be treated in all respects as a Massachusetts contract. SECTION 18. Effectiveness. Notwithstanding any other provision of this Agreement, this Agreement shall not be effective until the Stage IA Closing (as such term is defined in the Stock Purchase Agreement). 30 IN WITNESS WHEREOF the parties hereto have executed this First Amended and Restated Stockholders' Agreement on the date first above written, THE CORPORATION: ACTIVBIOTICS, INC. By: ------------------------------------ Chalom B. Sayada M.D., Ph.D. Title: Chief Executive Officer THE INVESTORS: MDS LIFE SCIENCES TECHNOLOGY FUND II NC LIMITED PARTNERSHIP By: MDS LSTF II (NCGP) Inc., its General Partner By: ------------------------------------ Name: Title: MDS LIFE SCIENCES TECHNOLOGY FUND II QUEBEC LIMITED PARTNERSHIP By: MDS LSTF II (QGP) Inc., its General Partner By: ------------------------------------ Name: Title: MLII CO-INVESTMENT FUND NC LIMITED PARTNERSHIP By: MLII (NCGP) Inc., its General Partner By: ------------------------------------ Name: Title: 31 SC BIOTECHNOLOGY DEVELOPMENT FUND LP By: SC (GP) Inc, its General Partner By: ------------------------------------ Name: Title: HEALTHCARE VENTURES VI, L.P. By: HealthCare Partners VI, L.P. its General Partner By: ------------------------------------ Jeffrey B. Steinberg Title: Administrative Partner DELPHI VENTURES V, L.P. By: Delphi Management Partners V, L.L.C. General Partner By: ------------------------------------ Name: Title: Managing Member DELPHI BIOINVESTMENTS V, L.P. By: Delphi Management Partners V, L.L.C. General Partner By: ------------------------------------ Name: Title: Managing Member 32 JOHNSON & JOHNSON DEVELOPMENT CORPORATION By: ------------------------------------ Ting Pau Oei Title: Vice President VANDERBILT UNIVERSITY By: ------------------------------------ Name: Title: CHINA DEVELOPMENT INDUSTRIAL BANK INC By: ------------------------------------ Name: Tze-Kaing Yang Title: President CDIB BIOTECH USA INVESTMENT CO., LTD. By: ------------------------------------ Name: Bing Shen Title: Chairman DC 1998 NFA TRUST By: ------------------------------------ Lee Casty, as Trustee 33 BIOVENTURES INVESTORS LIMITED PARTNERSHIP II By: BioVentures Investors II, LLC, its General Partner By: ------------------------------------ Name: Marc E. Goldberg Title: Managing Director NEW ENGLAND PARTNERS CAPITAL, L.P. By: NEP Capital, LLC, its General Partner By: ------------------------------------ Name: Title: ---------------------------------------- Justin P. Morreale ---------------------------------------- David L. Engel ---------------------------------------- Lawrence L. Silverstein ---------------------------------------- Mitchell P. Cybulski ---------------------------------------- Yuriko Dai-Cybulski ---------------------------------------- William Koch ---------------------------------------- John Finney 34 ROCHE FINANCE LTD Grenzacherstrasse 124 CH-4070 Basel Switzerland By: ------------------------------------ Name: Title: 35 THE ORIGINAL STOCKHOLDERS: ---------------------------------------- Raymond Baddour ---------------------------------------- Barry Eisenstein ---------------------------------------- John Finney ---------------------------------------- Walter Gilbert ---------------------------------------- G. Mick Stadler ---------------------------------------- Chalom B. Sayada ---------------------------------------- Gary Magnant ---------------------------------------- Richard Nicholson ---------------------------------------- Art Michaelis ---------------------------------------- Cathy Carew 36