November 8, 2019
RTW Master Fund, Ltd.
RTW Innovation Master Fund, Ltd.
RTW Venture Fund Limited
c/o RTW Investments, LP
412 West 15th Street, Floor 9,
New York, NY, 10011 USA
Attn: Roderick Wong, M.D.
Re: IPO Participation Right
This letter agreement (this Agreement) memorializes the agreement and understanding between RTW Master Fund, Ltd., RTW Innovation Master Fund, Ltd. and RTW Venture Fund Limited (collectively, RTW), on the one hand, and Avidity Biosciences, Inc., a Delaware corporation (the Company), on the other hand, regarding the Companys grant to RTW of the right to participate in the Companys future initial public offering of its equity securities on the terms, and subject to the conditions, set forth below.
The Company is entering into this Agreement as a material inducement to cause RTW to enter into that certain Series C Preferred Stock Purchase Agreement, dated as of the date hereof, by and among the Company, RTW and the other purchasers named therein (the Purchase Agreement). Capitalized terms not otherwise defined herein shall have the meanings ascribed to such terms in the Purchase Agreement and, to the extent not defined therein, such terms shall have the meanings ascribed to them in that certain Registration Rights Agreement, dated as of the date hereof, by and among the Company, RTW and the parties named therein.
In consideration of the foregoing and the mutual promises and covenants hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, by execution of this Agreement, the parties hereto hereby agree as follows:
1. In connection with the Companys sale of shares of its common stock (Common Stock) to the public in a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act (the IPO), the Company shall, within a reasonable period of time preceding the consummation of the IPO and in compliance with all applicable laws and regulations, use commercially reasonable efforts to provide RTW with the opportunity to purchase shares of Common Stock to be sold in the IPO (including any over-allotment option by the underwriters to the IPO, if any) at the same price per share at which the Common Stock offered in the IPO are being offered to the public (the IPO Price) (such right, the Public Offering Participation Right). If RTW exercises its Public Offering Participation Right, RTW shall have the right to purchase up to a number of shares of Common Stock to be sold in the IPO equal to (a) the Participation Right Percentage (as defined below), multiplied by, (b) the aggregate number of shares of Common Stock to be sold in the IPO (including any overallotment option by the underwriters to the IPO, if any). RTW may assign its Public Offering Participation Right to any of its Affiliates. For the avoidance of doubt, nothing in this Section 1 is intended to limit the number of shares that RTW or its Affiliates may acquire in the IPO outside of its Public Offering Participation Right. For purposes of this Agreement, the Participation Right Percentage shall mean a fraction, the numerator of which shall be equal to 150% of the number of shares of Common Stock held by RTW and its Affiliates immediately prior to the IPO (including all shares of Common Stock then issuable (directly or indirectly) upon conversion and/or exercise, as applicable, of any shares of the Companys preferred stock (Preferred Stock) held by RTW and its Affiliates immediately prior to the IPO), and the denominator of which shall be the total number of outstanding shares of Common Stock (including all shares of Common Stock issuable (directly or indirectly) upon conversion and/or exercise, as applicable, of the Preferred Stock or other convertible securities then outstanding).