Amended and Restated Investor Rights Agreement, dated August 26, 2019, by and among the Registrant and certain of its stockholders
FOURTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
THIS FOURTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT (this Agreement) is entered into as of August 26, 2019, by and among METACRINE, INC., a Delaware corporation (the Company) and the investors listed on Exhibit A attached hereto, referred to hereinafter as the Investors and each individually as an Investor.
WHEREAS, the Company and K2 HealthVentures LLC (and any other lender from time to time party thereto, Lenders) are entering into that certain Loan and Security Agreement on or about the date hereof (the Loan and Security Agreement), pursuant to which the Company shall grant to Lenders or their respective assignees or nominees the right, in their sole discretion, to participate in an aggregate amount up to $2,500,000 in any Qualified Financing (as defined in the Loan and Security Agreement) on the same terms, conditions and pricing afforded to others participating in any such Qualified Financing (the Right to Invest);
WHEREAS, in connection with the Loan and Security Agreement and as a condition to each Lenders obligation to make the First Tranche Term Loan (as defined in the Loan and Security Agreement), the Company shall issue a warrant to purchase Series C Preferred Stock of the Company (the Warrant) to K2 HealthVentures Equity Trust LLC (together with any successor or permitted assignee or transferee of the Warrant or of any shares issued upon exercise thereof, Warrantholder), pursuant to which, upon exercise of the Warrant and execution of a counterpart signature page to this Agreement, the Common Stock into which the Shares (as defined in the Warrant) are convertible shall have piggyback registration rights set forth under this Agreement (the Piggyback Rights);
WHEREAS, the Company and the Investors are parties to that certain Third Amended and Restated Investor Rights Agreement, dated June 5, 2018 (the Prior Agreement), entered into in connection with that certain Series C Preferred Stock Purchase Agreement (the Purchase Agreement) of even date therewith, pursuant to which certain of the Investors purchased shares of the Companys Series C Preferred Stock (the Series C Preferred, together with Companys Series B Preferred Stock and/or Series A Preferred Stock, the Series Preferred);
WHEREAS, the parties to the Prior Agreement desire to amend and restate the Prior Agreement and accept the rights and covenants hereof in lieu of their rights and covenants under the Prior Agreement; and
WHEREAS, in connection with the Loan and Security Agreement and issuance of the Warrant, the Company and the Investors have agreed to the registration rights, information rights and other rights as set forth below.
NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and
the Investors each hereby agree to amend and restate the Prior Agreement in its entirety as set forth herein and the parties hereto agree as follows:
SECTION 1. GENERAL.
1.1 Definitions. As used in this Agreement the following terms shall have the respective meanings set forth below:
(a) Charter means the Companys Fourth Amended and Restated Certificate of Incorporation, as amended from time to time.
(b) Common Stock means the Common Stock of the Company, par value $0.0001 per share.
(c) Exchange Act means the Securities Exchange Act of 1934, as amended.
(d) Form S-3 means such form under the Securities Act as in effect on the date hereof or any successor or similar registration form under the Securities Act subsequently adopted by the SEC which permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC.
(e) Holder means any person owning of record Registrable Securities that have not been sold to the public or any assignee of record of such Registrable Securities in accordance with Section 2.9 hereof.
(f) Initial Offering means the Companys first firm commitment underwritten public offering of its Common Stock registered under the Securities Act.
(g) Register, registered, and registration refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of effectiveness of such registration statement or document.
(h) Registrable Securities means (a) Common Stock of the Company issuable or issued upon conversion of the Shares; (b) any Common Stock of the Company issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, such above-described securities; and (c) any shares of Common Stock acquired by the Investors subsequent to the date hereof, provided that the shares of Common Stock issuable upon conversion of the shares issuable pursuant to the Warrant shall not be deemed to be Registrable Securities hereunder for purposes of Section 2.2 or Section 2.4. Notwithstanding the foregoing, Registrable Securities shall not include any securities (i) sold by a person to the public either pursuant to a registration statement or Rule 144 or (ii) sold in a private transaction in which the transferors rights under Section 2 of this Agreement are not assigned.
(i) Registrable Securities then outstanding means be the number of shares of the Companys Common Stock that are Registrable Securities and either (a) are then issued and outstanding or (b) are issuable pursuant to then exercisable or convertible securities.
(j) Registration Expenses means all expenses incurred by the Company in complying with Sections 2.2, 2.3 and 2.4 hereof, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel for the Company, reasonable fees and disbursements of a single special counsel for the Investors, blue sky fees and expenses and the expense of any special audits incident to or required by any such registration (but excluding the compensation of regular employees of the Company which shall be paid in any event by the Company).
(k) SEC or Commission means the U.S. Securities and Exchange Commission.
(l) Securities Act means the Securities Act of 1933, as amended.
(m) Selling Expenses means all underwriting discounts and selling commissions applicable to the sale.
(n) Shares means the Companys Series Preferred held by the Investors on the date hereof or issued pursuant to the Purchase Agreement.
(o) Special Registration Statement means (i) a registration statement relating to any employee benefit plan or (ii) with respect to any corporate reorganization or transaction under Rule 145 of the Securities Act, any registration statements related to the issuance or resale of securities issued in such a transaction.
(p) Qualified IPO has the meaning set forth in the Charter.
SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER.
2.1 Restrictions on Transfer.
(a) Each Holder agrees not to make any disposition of all or any portion of the Shares or Registrable Securities unless and until:
(i) there is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such registration statement; or
(ii) (A) the transferee has agreed in writing to be bound by the terms of this Agreement, (B) such Holder shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, and (C) if reasonably requested by the Company, such Holder shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, that such disposition will not require registration of such shares under the Securities Act. It is agreed that the Company will not require opinions of counsel for transactions made pursuant to Rule 144, except in unusual circumstances. After its Initial Offering, the Company will not require any transferee pursuant to Rule 144 to be bound by the terms of this Agreement if the shares so transferred do not remain Registrable Securities hereunder following such transfer.
(b) Notwithstanding the provisions of subsection (a) above, no such restriction shall apply to a transfer by a Holder that is (A) a partnership transferring to its partners, limited partners or former partners in accordance with partnership interests, (B) solely where no consideration is paid to the Holder at the time of such transfer in connection with such transfer, to a current or former limited partner of such Holder, (C) a corporation transferring to a wholly-owned subsidiary or a parent corporation that owns all of the capital stock of the Holder, (D) a limited liability company transferring to its members or former members in accordance with their interest in the limited liability company, (E) an individual transferring to the Holders family member or trust for the benefit of an individual Holder or (F) transferring to an Affiliate of such Holder for no consideration; provided that in each case the transferee will agree in writing to be subject to the terms of this Agreement to the same extent as if he were an original Holder hereunder. For purposes of this Section 2.1(b), (A) Affiliate means, with respect to any specified Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with such Person, including without limitation any general partner, managing member, officer or director of such Person or any venture capital fund now or hereafter existing that is controlled by one or more general partners or managing members of, or shares the same management company with, such Person; and (B) Person means any individual, corporation, partnership, trust, limited liability company, association or other entity.
(c) Each certificate representing Shares or Registrable Securities shall be stamped or otherwise imprinted with legends substantially similar to the following (in addition to any legend required under applicable state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE ACT) AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN INVESTOR RIGHTS AGREEMENT BY AND BETWEEN THE STOCKHOLDER AND THE COMPANY. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY.
(d) The Company shall be obligated to reissue promptly un-legended certificates at the request of any Holder thereof if the Company has completed its Initial Offering and the Holder shall have obtained an opinion of counsel (which counsel may be counsel to the Company) reasonably acceptable to the Company to the effect that the securities proposed to be disposed of may lawfully be so disposed of without registration, qualification and legend; provided
that the second legend listed above shall be removed only at such time as the Holder of such certificate is no longer subject to any restrictions hereunder.
(e) Any legend endorsed on an instrument pursuant to applicable state securities laws and the stop-transfer instructions with respect to such securities shall be removed upon receipt by the Company of an order of the appropriate blue sky authority authorizing such removal.
2.2 Demand Registration.
(a) Subject to the conditions of this Section 2.2, if the Company shall receive a written request (a Receipt of Registration Request) from the Holders of at a majority of the Registrable Securities (the Initiating Holders) that the Company file a registration statement under the Securities Act covering the registration of the Registrable Securities then outstanding, then the Company shall, within thirty (30) days of Receipt of Registration Request, give written notice of such request to all Holders, and subject to the limitations of this Section 2.2, use best efforts to effect, within ninety (90) days of Receipt of Registration Request, the registration under the Securities Act of all Registrable Securities that all Holders request to be registered.
(b) If the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to this Section 2.2 or any request pursuant to Section 2.4 and the Company shall include such information in the written notice referred to in Section 2.2(a) or Section 2.4(a), as applicable. In such event, the right of any Holder to include its Registrable Securities in such registration shall be conditioned upon such Holders participation in such underwriting and the inclusion of such Holders Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Holders of at least a majority of the Registrable Securities held by all Initiating Holders (which underwriter or underwriters shall be reasonably acceptable to the Company). Notwithstanding any other provision of this Section 2.2 or Section 2.4, if the underwriter advises the Company that marketing factors require a limitation of the number of securities to be underwritten (including Registrable Securities) then the Company shall so advise all Holders of Registrable Securities that would otherwise be underwritten pursuant hereto, and the number of shares that may be included in the underwriting shall be allocated to the Holders of such Registrable Securities on a pro rata basis based on the number of Registrable Securities held by all such Holders (including the Initiating Holders); provided, however, that the number of shares of Registrable Securities to be included in such underwriting and registration shall not be reduced unless all other securities of the Company are first entirely excluded from the underwriting and registration. Any Registrable Securities excluded or withdrawn from such underwriting shall be withdrawn from the registration.
(c) The Company shall not be required to effect a registration pursuant to this Section 2.2:
(i) prior to the earlier of (A) December 31, 2022 or (B) six (6) months after the effective date of the first registration statement filed by the Company under the Securities Act;
(ii) if the anticipated net offering proceeds resulting from the sale of Registrable Securities for such registration are less than $50,000,000;
(iii) after the Company has effected three (3) registrations pursuant to this Section 2.2, and such registrations have been declared or ordered effective;
(iv) during the period starting with the date of filing of, and ending on the date one hundred eighty (180) days following the effective date of the registration statement pertaining to the Initial Offering (or such longer period as may be determined pursuant to Section 2.11 hereof); provided that the Company makes reasonable good faith efforts to cause such registration statement to become effective;
(v) if within thirty (30) days of receipt of a written request from Initiating Holders pursuant to Section 2.2(a), the Company gives notice to the Holders of the Companys intention to file a registration statement for a public offering, other than pursuant to a Special Registration Statement, within ninety (90) days;
(vi) if the Company shall furnish to Holders requesting a registration statement pursuant to this Section 2.2 a certificate signed by the Chairman of the Board stating that in the good faith judgment of the Board, it would be seriously detrimental to the Company and its stockholders for such registration statement to be effected at such time, in which event the Company shall have the right to defer such filing for a period of not more than sixty (60) days after receipt of the request of the Initiating Holders; provided that such right to delay a request shall be exercised by the Company not more than twice in any twelve (12) month period;
(vii) if the Initiating Holders propose to dispose of shares of Registrable Securities that may be immediately registered on Form S-3 pursuant to a request made pursuant to Section 2.4 below; or
(viii) in any particular jurisdiction in which the Company would be required to qualify to do business or to execute a general consent to service of process in effecting such registration, qualification or compliance.
2.3 Piggyback Registrations. At any time from and after the earlier of (A) December 31, 2022 or (B) six (6) months after the effective date of the first registration statement filed by the Company under the Securities Act, the Company shall notify all Holders of Registrable Securities in writing at least fifteen (15) days prior to the filing of any registration statement under the Securities Act for purposes of a public offering of securities of the Company (including, but not limited to, registration statements relating to secondary offerings of securities of the Company, but excluding Special Registration Statements) and will afford each such Holder an opportunity to include in such registration statement all or part of such Registrable Securities held by such Holder. Each Holder desiring to include in any such registration statement all or any part of the Registrable Securities held by it (Piggyback Registration Holders) shall, within fifteen (15) days after the
above-described notice from the Company, so notify the Company in writing. Such notice shall state the intended method of disposition of the Registrable Securities by such Holder. If a Holder decides not to include all of its Registrable Securities in any registration statement thereafter filed by the Company, such Holder shall nevertheless continue to have the right to include any Registrable Securities in any subsequent registration statement or registration statements as may be filed by the Company with respect to offerings of its securities, all upon the terms and conditions set forth herein.
(a) Underwriting. If the registration statement of which the Company gives notice under this Section 2.3 is for an underwritten offering, the Company shall so advise the Holders of Registrable Securities. In such event, the right of any such Holder to include Registrable Securities in a registration pursuant to this Section 2.3 shall be conditioned upon such Holders participation in such underwriting and the inclusion of such Holders Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their Registrable Securities through such underwriting shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Company. Notwithstanding any other provision of this Agreement, if the Company determines in good faith, based on consultation with the underwriter, that marketing factors require a limitation of the number of shares to be underwritten, the number of shares that may be included in the underwriting shall be allocated, first, to the Company; second, to the Piggyback Registration Holders on a pro rata basis based on the total number of Registrable Securities held by the Piggyback Registration Holders; third, to the Holders who are not Piggyback Registration Holders on a pro rata basis based on the total number of Registrable Securities held by such Holders; and fourth, to any stockholder of the Company (other than a Holder) on a pro rata basis; provided, however, that no such reduction shall reduce the amount of securities of the selling Holders included in the registration below 25% of the total amount of securities included in such registration, unless such offering is the Initial Offering and such registration does not include shares of any other selling stockholders, in which event any or all of the Registrable Securities of the Holders may be excluded in accordance with the immediately preceding clause. In no event will shares of any other selling stockholder be included in such registration that would reduce the number of shares which may be included by Holders without the written consent of Holders of not less than a majority of the Registrable Securities proposed to be sold in the offering. If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to the Company and the underwriter, delivered at least ten (10) business days prior to the effective date of the registration statement. Any Registrable Securities excluded or withdrawn from such underwriting shall be excluded and withdrawn from the registration. For any Holder which is a partnership, limited liability company or corporation, the partners, retired partners, members, retired members and stockholders of such Holder, or the estates and family members of any such partners, retired partners, members and retired members and any trusts for the benefit of any of the foregoing person shall be deemed to be a single Holder, and any pro rata reduction with respect to such Holder shall be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals included in such Holder, as defined in this sentence.
(b) Right to Terminate Registration. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 2.3 whether or not any Holder has elected to include securities in such registration, and shall promptly notify any Holder
that has elected to include shares in such registration of such termination or withdrawal. The Registration Expenses of such withdrawn registration shall be borne by the Company in accordance with Section 2.5 hereof.
2.4 Form S-3 Registration. At any time from and after the first anniversary of the effective date of the registration statement for the Initial Offering, in case the Company shall receive from any Holder or Holders of Registrable Securities a written request or requests that the Company effect a registration on Form S-3 (or any successor to Form S-3) or any similar short-form registration statement and any related qualification or compliance with respect to all or a part of the Registrable Securities owned by such Holder or Holders, the Company will:
(a) promptly give written notice of the proposed registration, and any related qualification or compliance, to all other Holders of Registrable Securities; and
(b) as soon as practicable, effect such registration and all such qualifications and compliances as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Holders or Holders Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any other Holder or Holders joining in such request as are specified in a written request given within fifteen (15) days after receipt of such written notice from the Company; provided, however, that the Company shall not be obligated to effect any such registration, qualification or compliance pursuant to this Section 2.4:
(i) if Form S-3 is not available for such offering by the Holders;
(ii) if the Holders, together with the holders of any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable Securities and such other securities (if any) at an aggregate price to the public of less than $1,000,000;
(iii) if within thirty (30) days of receipt of a written request from any Holder or Holders pursuant to this Section 2.4, the Company gives notice to such Holder or Holders of the Companys intention to make a public offering within ninety (90) days, other than pursuant to a Special Registration Statement;
(iv) if the Company shall furnish to the Holders a certificate signed by the Chairman of the Board stating that in the good faith judgment of the Board, it would be seriously detrimental to the Company and its stockholders for such Form S-3 registration to be effected at such time, in which event the Company shall have the right to defer the filing of the Form S-3 registration statement for a period of not more than sixty (60) days after receipt of the request of the Holder or Holders under this Section 2.4; provided, that such right to delay a request shall be exercised by the Company not more than twice in any twelve (12) month period;
(v) if the Company has, within the twelve (12) month period preceding the date of such request, already effected two (2) registrations on Form S-3 for the Holders pursuant to this Section 2.4; or
(vi) in any particular jurisdiction in which the Company would be required to qualify to do business or to execute a general consent to service of process in effecting such registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a Form S-3 registration statement covering the Registrable Securities and other securities so requested to be registered as soon as practicable after receipt of the requests of the Holders. Registrations effected pursuant to this Section 2.4 shall not be counted as demands for registration or registrations effected pursuant to Section 2.2. All Registration Expenses incurred in connection with registrations requested pursuant to this Section 2.4 after the first two (2) registrations shall be paid by the selling Holders pro rata in proportion to the number of shares to be sold by each such Holder in any such registration.
2.5 Expenses of Registration. Except as specifically provided herein, all Registration Expenses incurred in connection with any registration, qualification or compliance pursuant to Section 2.2, 2.3 or 2.4 herein shall be borne by the Company. All Selling Expenses incurred in connection with any registrations hereunder, shall be borne by the holders of the securities so registered pro rata on the basis of the number of shares so registered. The Company shall not, however, be required to pay for expenses of any registration proceeding begun pursuant to Section 2.2 or 2.4, the request of which has been subsequently withdrawn by the Initiating Holders unless (a) the withdrawal is based upon material adverse information concerning the Company of which the Initiating Holders were not aware at the time of such request or (b) the Holders of a majority of Registrable Securities agree to deem such registration to have been effected as of the date of such withdrawal for purposes of determining whether the Company shall be obligated pursuant to Section 2.2(c) or 2.4(b)(5), as applicable, to undertake any subsequent registration, in which event such right shall be forfeited by all Holders). If the Holders are required to pay the Registration Expenses, such expenses shall be borne by the holders of securities (including Registrable Securities) requesting such registration in proportion to the number of shares for which registration was requested. If the Company is required to pay the Registration Expenses of a withdrawn offering pursuant to clause (a) above, then such registration shall not be deemed to have been effected for purposes of determining whether the Company shall be obligated pursuant to Section 2.2(c) or 2.4(b)(5), as applicable, to undertake any subsequent registration.
2.6 Obligations of the Company. Whenever required to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use all reasonable efforts to cause such registration statement to become effective, and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for up to thirty (30) days or, if earlier, until the Holder or Holders have completed the distribution related thereto; provided, however, that at any time, upon written notice to the participating Holders and for a period not to exceed sixty (60) days thereafter (the Suspension Period), the Company may delay the filing or effectiveness of any registration statement or suspend the use or effectiveness of any registration statement (and the Initiating Holders hereby agree not to offer or sell any Registrable Securities pursuant to such registration statement during the Suspension Period) if the Company reasonably believes that there is or may be in existence material nonpublic information or events involving the Company, the
failure of which to be disclosed in the prospectus included in the registration statement could result in a Violation (as defined below). In the event that the Company shall exercise its right to delay or suspend the filing or effectiveness of a registration hereunder, the applicable time period during which the registration statement is to remain effective shall be extended by a period of time equal to the duration of the Suspension Period. The Company may extend the Suspension Period for an additional consecutive sixty (60) days with the consent of the holders of at least a majority of the Registrable Securities registered under the applicable registration statement, which consent shall not be unreasonably withheld. No more than two (2) such Suspension Periods shall occur in any 12 month period. In no event shall any Suspension Period, when taken together with all prior Suspension Periods, exceed one hundred twenty (120) days in the aggregate. If so directed by the Company, all Holders registering shares under such registration statement shall (i) not offer to sell any Registrable Securities pursuant to the registration statement during the period in which the delay or suspension is in effect after receiving notice of such delay or suspension; and (ii) use their best efforts to deliver to the Company (at the Companys expense) all copies, other than permanent file copies then in such Holders possession, of the prospectus relating to such Registrable Securities current at the time of receipt of such notice. Notwithstanding the foregoing, the Company shall not be required to file, cause to become effective or maintain the effectiveness of any registration statement other than a registration statement on Form S-3 that contemplates a distribution of securities on a delayed or continuous basis pursuant to Rule 415 under the Securities Act.
(b) Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement for the period set forth in subsection (a) above.
(c) Furnish to the Holders such number of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them.
(d) Use its reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders; provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter(s) of such offering. Each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. The Company will use reasonable efforts to amend or supplement such prospectus in order to cause such prospectus not to include any 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.
(g) Use its reasonable efforts to furnish, on the date that such Registrable Securities are delivered to the underwriters for sale, if such securities are being sold through underwriters, (i) an opinion, dated as of such date, of the counsel representing the Company 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 (ii) a letter, dated as of such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering addressed to the underwriters.
2.7 Delay of Registration; Furnishing Information.
(a) No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 2.
(b) It shall be a condition precedent to the obligations of the Company to take any action pursuant to Section 2.2, 2.3 or 2.4 that the selling Holders shall furnish to the Company such information regarding themselves, the Registrable Securities held by them and the intended method of disposition of such securities as shall be required to effect the registration of their Registrable Securities.
(c) The Company shall have no obligation with respect to any registration requested pursuant to Section 2.2 or Section 2.4 if the number of shares or the anticipated aggregate offering price of the Registrable Securities to be included in the registration does not equal or exceed the number of shares or the anticipated aggregate offering price required to originally trigger the Companys obligation to initiate such registration as specified in Section 2.2 or Section 2.4, whichever is applicable.
2.8 Indemnification. In the event any Registrable Securities are included in a registration statement under Sections 2.2, 2.3 or 2.4:
(a) To the extent permitted by law, the Company will indemnify and hold harmless each Holder, the partners, members, officers and directors of each Holder, any underwriter (as defined in the Securities Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a Violation) by the Company: (i) any untrue statement or alleged untrue statement of a material fact contained in such registration
statement or incorporated reference therein, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) 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 (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law in connection with the offering covered by such registration statement; and the Company will reimburse each such Holder, partner, member, officer, director, underwriter or controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided however, that the indemnity agreement contained in this Section 2.8(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, nor shall the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by such Holder, partner, member, officer, director, underwriter or controlling person of such Holder.
(b) To the extent permitted by law, each Holder will, if Registrable Securities held by such Holder are included in the securities as to which such registration qualifications or compliance is being effected, indemnify and hold harmless the Company, each of its directors, its officers and each person, if any, who controls the Company within the meaning of the Securities Act, any underwriter and any other Holder selling securities under such registration statement or any of such other Holders partners, directors or officers or any person who controls such Holder, against any losses, claims, damages or liabilities (joint or several) to which the Company or any such director, officer, controlling person, underwriter or other such Holder, or partner, director, officer or controlling person of such other Holder may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any of the following statements: (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement or incorporated reference therein, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) 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 (iii) any violation or alleged violation by the Company of the Securities Act (collectively, a Holder Violation), in each case to the extent (and only to the extent) that such Holder Violation occurs in reliance upon and in conformity with written information furnished by such Holder under an instrument duly executed by such Holder and stated to be specifically for use in connection with such registration; and each such Holder will reimburse any legal or other expenses reasonably incurred by the Company or any such director, officer, controlling person, underwriter or other Holder, or partner, officer, director or controlling person of such other Holder in connection with investigating or defending any such loss, claim, damage, liability or action if it is judicially determined that there was such a Holder Violation; provided, however, that the indemnity agreement contained in this Section 2.8(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; provided further, that in no event shall any indemnity under this Section 2.8 exceed the net proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this Section 2.8 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.8, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the right to retain its own counsel, with the fees and expenses thereof to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall relieve such indemnifying party of any liability to the indemnified party under this Section 2.8 to the extent, and only to the extent, prejudicial to its ability to defend such action, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 2.8.
(d) If the indemnification provided for in this Section 2.8 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any losses, claims, damages or liabilities referred to herein, the indemnifying party, in lieu of indemnifying such indemnified party thereunder, shall to the extent permitted by applicable law contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the Violation(s) or Holder Violation(s) that resulted in such loss, claim, damage or liability, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by a court of law by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided, that in no event shall any contribution by a Holder hereunder exceed the proceeds from the offering received by such Holder.
(e) The obligations of the Company and Holders under this Section 2.8 shall survive completion of any offering of Registrable Securities in a registration statement and, with respect to liability arising from an offering to which this Section 2.8 would apply that is covered by a registration filed before termination of this Agreement, such termination. No indemnifying party, in the defense of any such claim or litigation, shall, except with the consent of each indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation.
2.9 Assignment of Registration Rights. The rights to cause the Company to register Registrable Securities pursuant to this Section 2 may be assigned by (a) a Holder to a transferee or assignee of Registrable Securities (for so long as such shares remain Registrable Securities) that acquires at least 100,000 shares of Registrable Securities (as adjusted for stock splits, subdivisions,
stock dividends, changes, and combinations), (b) if the transferor or assignor is a partnership, limited liability company or corporation (an Entity Holder), to a transferee or assignee of Registrable Securities (for so long as such shares remain Registrable Securities) that (i) is an entity affiliated directly or indirectly with such Entity Holder, (ii) is a partner (or former partner or prospective partner), limited partner (or former limited partner or prospective limited partner), member (or former member) or stockholder of such Entity Holder (an Entity Holder Manager), (iii) is the spouse, sibling, lineal descendant or ancestor of an Entity Holder Manager (Entity Holder Manager Family Member), (iv) is the estate of any Entity Holder Manager or (v) is the custodian or trustee for a trust for the benefit of an Entity Holder Manager or an Entity Holder Manager Family Member or (c) if a Holder is a trustee, manager or custodian of a trust, to a transferee or assignee that is a replacement trustee, manager or custodian of such trust; provided, however, that (x) the transferor shall, within ten (10) days after such transfer, furnish to the Company written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned, (y) the transferee or assignee shall not be a competitor or potential competitor of the Company, as determined by the Board, in its reasonable judgment, and (z) such transferee or assignee shall agree to be subject to all restrictions set forth in this Agreement.
2.10 Limitation on Subsequent Registration Rights. The Company shall not enter into any agreement with any holder or prospective holder of any securities of the Company that would grant such holder rights to demand the registration of shares of the Companys capital stock, or to include such shares in a registration statement that would reduce the number of shares includable by the Holders.
2.11 Market Stand-Off Agreement. Each Holder hereby agrees that such Holder shall not sell, dispose of, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, any shares of Common Stock (or other securities) of the Company held by such Holder (other than those included in the registration) during the 180-day period following the effective date of the Initial Offering (or such longer period, not to exceed thirty-four (34) days after the expiration of the 180-day period, as the underwriters or the Company shall request in order to facilitate compliance with NASD Rule 2711 or NYSE Member Rule 472 or any successor or similar rule or regulation), as the underwriters or the Company shall request in order to facilitate compliance with NASD Rule 2711 or NYSE Member Rule 472 or any successor or similar rule or regulation); provided, that all officers and directors of the Company and holders of at least one percent (1%) of the Companys voting securities are bound by and have entered into similar agreements; provided, further, that the restriction set forth in this Section 2.11 shall not apply to the transfer of any shares to an affiliate or current or former limited partner of a Holder; provided that the affiliate agrees to be bound in writing by the restrictions set forth herein; provided, further, that the restriction set forth in this Section 2.11 shall not apply to the transfer of any shares acquired (A) from the underwriters in the Initial Offering or (B) in open market transactions on or after the Initial Offering. Any discretionary waiver or termination of the restrictions of any or all of such agreements by the Company or the underwriters shall apply pro rata to all Holders subject to such agreements, based on the number of shares subject to such agreements. The underwriters of the Companys stock are intended third party beneficiaries of Section 2.11 and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto.
2.12 Agreement to Furnish Information. Each Holder agrees to execute and deliver such other agreements as may be reasonably requested by the Company or the managing underwriters that are consistent with the Holders obligations under Section 2.11 or that are necessary to give further effect thereto. In addition, if requested by the Company or the representative of the underwriters of Common Stock (or other securities) of the Company, each Holder shall provide, within ten (10) days of such request, such information as may be required by the Company or such representative in connection with the completion of any public offering of the Companys securities pursuant to a registration statement filed under the Securities Act. The obligations described in Section 2.11 and this Section 2.12 shall not apply to a Special Registration Statement. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to such shares of Common Stock (or other securities) until the end of such period. Each Holder agrees that any transferee of any shares of Registrable Securities shall be bound by Sections 2.11 and 2.12. The underwriters of the Companys stock are intended third party beneficiaries of Section 2.12 and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto.
2.13 Rule 144 Reporting. With a view to making available to the Holders the benefits of certain rules and regulations of the SEC which may permit the sale of the Registrable Securities to the public without registration, the Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are understood and defined in SEC Rule 144 or any similar or analogous rule promulgated under the Securities Act, at all times after the effective date of the first registration filed by the Company for an offering of its securities to the general public;
(b) File with the SEC, in a timely manner, all reports and other documents required of the Company under the Exchange Act; and
(c) So long as a Holder owns any Registrable Securities, furnish to such Holder forthwith upon request: a written statement by the Company as to its compliance with the reporting requirements of said Rule 144 of the Securities Act, and of the Exchange Act (at any time after it has become subject to such reporting requirements); a copy of the most recent annual or quarterly report of the Company filed with the Commission; and such other reports and documents as a Holder may reasonably request in connection with availing itself of any rule or regulation of the SEC allowing it to sell any such securities without registration.
2.14 Termination of Registration Rights. The right of any Holder to request registration or inclusion of Registrable Securities in any registration pursuant to Section 2.2, Section 2.3, or Section 2.4 hereof shall terminate upon the earlier of: (i) the date 5 years following the closing of the Initial Offering; or (ii) with respect to a Holder, such time as all Registrable Securities of the Company issuable or issued upon conversion of the Shares held by and issuable to such Holder (and its affiliates) may be sold pursuant to Rule 144 during any 90 day period without any restriction on volume or manner of sale. Upon such termination, such shares shall cease to be Registrable Securities hereunder for all purposes.
SECTION 3. COVENANTS OF THE COMPANY.
3.1 Basic Financial Information and Reporting.
(a) The Company will maintain true books and records of account in which full and correct entries will be made of all its business transactions pursuant to a system of accounting established and administered in accordance with generally accepted accounting principles consistently applied (except as noted therein or as disclosed to the recipients thereof), and will set aside on its books all such proper accruals and reserves as shall be required under generally accepted accounting principles consistently applied.
(b) Within one hundred twenty (120) days after the end of each fiscal year of the Company, the Company will furnish each Investor that, individually or together with its affiliates, holds at least 2,300,000 shares of Series Preferred (each, a Major Investor), a balance sheet of the Company, as of the end of such fiscal year, and a statement of income, stockholders equity and a statement of cash flows of the Company, for such year, all prepared in accordance with generally accepted accounting principles consistently applied (except as noted therein or as disclosed to the recipients thereof) and setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail. Such financial statements shall be accompanied by a report and opinion thereon by independent public accountants of national standing selected by the Board.
(c) Within forty-five (45) days after the end of the first, second and third quarterly accounting periods in each fiscal year of the Company, the Company will furnish each Major Investor a balance sheet of the Company as of the end of each such quarterly period, and a statement of income and a statement of cash flows of the Company for such period and for the current fiscal year to date (collectively, the Quarterly Financial Statements), prepared in accordance with generally accepted accounting principles consistently applied (except as noted therein or as disclosed to the recipients thereof), with the exception that no notes need be attached to such statements and year-end audit adjustments may not have been made.
(d) The Company will furnish each Major Investor: (i) as soon as practicable following submission to and approval by the Board, and in any event, within thirty (30) days prior to the beginning of each fiscal year, an operating budget and plan for such fiscal year (the Plan) as well as a summary of the Plan and any update of the Plan as such update is prepared; and (ii) at such time as the Company delivers the Quarterly Financial Statements, a comparison of such Quarterly Financial Statements against the Plan.
3.2 Inspection Rights. Each Major Investor shall have the right to visit and inspect any of the properties of the Company or any of its subsidiaries, and to discuss the affairs, finances and accounts of the Company or any of its subsidiaries with its officers, and to review such information as is reasonably requested all at such reasonable times and as often as may be reasonably requested; provided, however, that the Company shall not be obligated under this Section 3.2 with respect to a competitor of the Company or with respect to information which the Board determines in good faith is confidential or attorney-client privileged and should not, therefore, be disclosed. For the avoidance of doubt, NEA, Venrock, Polaris and Invus (each as defined below) shall not be deemed competitors.
3.3 Observer Rights. As long as Venrock (as defined below) owns not less than twenty-five percent (25%) of the shares of the Series C Preferred it is purchasing under the Purchase Agreement (or an equivalent amount of Common Stock issued upon conversion thereof) (as adjusted for any stock split, stock dilution, combination, or other recapitalization or reclassification effective after the date hereof), the Company shall invite a representative of Venrock to attend all meetings of the Board of Directors in a nonvoting observer capacity and, in this respect, shall give such representative copies of all notices, minutes, consents, and other materials that it provides to its directors; provided, however, that such representative shall agree to hold in confidence and trust and to act in a fiduciary manner with respect to all information so provided; and provided further, that the Company reserves the right to withhold any information and to exclude such representative from any meeting or portion thereof if access to such information or attendance at such meeting could adversely affect the attorney-client privilege between the Company and its counsel or result in disclosure of trade secrets or a conflict of interest.
3.4 Confidentiality of Records. Each Investor agrees to use the same degree of care as such Investor uses to protect its own confidential information to keep confidential any information furnished to such Investor pursuant to Section 3.1 and 3.2 hereof that the Company identifies as being confidential or proprietary (so long as such information is not in the public domain), except that such Investor may disclose such proprietary or confidential information (i) to any partner, former or prospective partner, limited partner, former or prospective limited partner, member, stockholder, subsidiary or parent of such Investor as long as such party is advised of and agrees or has agreed to be bound by the confidentiality provisions of this Section 3.4 or comparable restrictions; (ii) at such time as it enters the public domain through no fault of such Investor; (iii) that is communicated to it free of any obligation of confidentiality; (iv) that is developed by Investor or its agents independently of and without reference to any confidential information communicated by the Company; or (v) as required by applicable law.
3.5 Reservation of Common Stock. The Company will at all times reserve and keep available, solely for issuance and delivery upon the conversion of the Series Preferred, all Common Stock issuable from time to time upon such conversion.
3.6 Stock Vesting. Unless otherwise approved by the Board, all stock options and other stock equivalents issued after the date of this Agreement to employees, directors, consultants and other service providers shall be subject to vesting as follows: (a) 25% of such stock shall vest at the end of the first year following the earlier of the date of issuance or such persons services commencement date with the Company and (b) 75% of such stock shall vest over the remaining three (3) years.
3.7 Director and Officer Insurance. The Company will use its best efforts to obtain and maintain in full force and effect director and officer liability insurance in the amount of $2,000,000.
3.8 Proprietary Information and Inventions Agreement. The Company shall require all employees and consultants to execute and deliver a Proprietary Information and Inventions Agreement substantially in a form approved by the Companys counsel or Board.
3.9 Directors Liability and Indemnification. The Companys Charter and Bylaws shall provide (a) for elimination of the liability of director to the maximum extent permitted by law and (b) for indemnification of directors for acts on behalf of the Company to the maximum extent permitted by law.
3.10 Compensation of Directors and Reimbursement of Expenses. Except as set forth on Schedule A of the Schedule of Exceptions attached to the Purchase Agreement, all non-employee members of the Board will be compensated identically. The Company will promptly reimburse all reasonable documented costs and expenses incurred by members of the Board in attending Board meetings, attending any Board committee meetings, and performing the Companys business at the request of the Company.
3.11 Compensation Committee. The compensation committee established by the Board (the Compensation Committee) which shall be comprised of at least three (3) directors, two (2) of whom shall be Series A Preferred Directors (as defined in the Charter) and one (1) of whom shall be the Series B Preferred Director (as defined in the Charter), in each case, unless waived by the Series A Preferred Directors or Series B Preferred Director, as applicable.
3.12 Board Committees Generally. If the Board establishes any other committees or subcommittees, two (2) of the Series A Preferred Directors and the Series B Preferred Director shall have the right to be appointed to such committee or subcommittee, as the case may be, unless waived by the Series A Preferred Directors or Series B Preferred Director, as applicable.
3.14 Issuances of Common Stock. The Company shall not issue any shares of Common Stock without the approval of a majority of the members of the Board except for the purposes of (a) issuing shares upon exercise of outstanding Options or Convertible Securities (each, as defined in the Charter) or (b) issuing shares in connection with a stock split, stock dividend or other recapitalization in accordance with the Charter.
3.15 Foreign Entity Informational Filings. The Company will comply with any obligation imposed on the Company to make any filing (including any filing on Internal Revenue Service Form 5471) as a result of any interest that the Company holds in a non-U.S. entity or any activities that the Company conducts outside of the United States and shall include in such filing any information necessary to obviate (to the extent possible) any similar obligation to which any shareholder of the Company would otherwise be subject with respect to such interest or such activity. The Company shall promptly provide the Investors with a copy of any such filing.
3.16 Right to Conduct Activities. The Company hereby agrees and acknowledges that New Enterprise Associates 16, L.P. (together with its affiliates, NEA), Venrock Healthcare Capital Partners III, L.P. and VHCP Co-Investment Holdings III, LLC (together with their affiliates, Venrock), LAV Foresight Limited (together with its affiliates, LAV), Artal International S.C.A. (together with its affiliates, Invus), Vivo Panda Fund, L.P. (together with its affiliates, Vivo), Deerfield Special Situations Fund, L.P. (together with its affiliates, Deerfield), Polaris Partners VII, L.P. (together with its affiliates, Polaris) and Franklin Advisers, Inc. (together with its affiliates and managed funds, Franklin) are professional
investment funds, and as such invest in numerous portfolio companies, some of which may be deemed competitive with the Companys business (as currently conducted or as currently propose to be conducted). The Company hereby agrees that, to the extent permitted under applicable law, NEA, Venrock, LAV, Invus, Vivo, Deerfield, Polaris and Franklin shall not be liable to the Company for any claim arising out of, or based upon, (i) the investment by NEA, Venrock, LAV, Invus, Vivo, Deerfield, Polaris or Franklin in any entity competitive with the Company, or (ii) actions taken by any partner, officer or other representative of NEA, Venrock, LAV, Invus, Vivo, Deerfield, Polaris or Franklin to assist any such competitive company, whether or not such action was taken as a member of the board of directors of such competitive company or otherwise, and whether or not such action has a detrimental effect on the Company; provided, however, that the foregoing shall not relieve (x) any of the Investors from liability associated with the unauthorized disclosure of the Companys confidential information obtained pursuant to this Agreement, or (y) any director or officer of the Company from any liability associated with his or her fiduciary duties to the Company. Nothing in this Agreement shall preclude or create an obligation or duty restricting NEA, Venrock, LAV, Invus, Vivo, Deerfield, Polaris or Franklin, as applicable, from evaluating or purchasing securities, including publicly traded securities, of a particular enterprise, whether or not such enterprise has products or services which compete with those of the Company.
3.17 Indemnification Matters. The Company hereby acknowledges that one (1) or more of the directors nominated to serve on the Board of Directors by the Investors (each a Fund Director) may have certain rights to indemnification, advancement of expenses and/or insurance provided by one or more of the Investors and certain of their affiliates (collectively, the Fund Indemnitors). The Company hereby agrees (a) that it is the indemnitor of first resort (i.e., its obligations to any such Fund Director are primary and any obligation of the Fund Indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities incurred by such Fund Director are secondary), (b) that it shall be required to advance the full amount of expenses incurred by such Fund Director and shall be liable for the full amount of all expenses, judgments, penalties, fines and amounts paid in settlement by or on behalf of any such Fund Director to the extent legally permitted and as required by the Companys Charter or Bylaws of the Company (or any agreement between the Company and such Fund Director), without regard to any rights such Fund Director may have against the Fund Indemnitors, and, (c) that it irrevocably waives, relinquishes and releases the Fund Indemnitors from any and all claims against the Fund Indemnitors for contribution, subrogation or any other recovery of any kind in respect thereof. The Company further agrees that no advancement or payment by the Fund Indemnitors on behalf of any such Fund Director with respect to any claim for which such Fund Director has sought indemnification from the Company shall affect the foregoing and the Fund Indemnitors shall have a right of contribution and/or be subrogated to the extent of such advancement or payment to all of the rights of recovery of such Fund Director against the Company.
3.19 FIRPTA Compliance. The Company shall provide prompt notice to each party hereto following any determination date (as defined in Treasury Regulation Section 1.897-2(c)(1)) on which the Company becomes a United States real property holding corporation. In addition, within ten (10) days of a written request from any party hereto, the Company shall provide such party with a written statement informing such party whether such partys interest in the Company constitutes a United States real property interest. The Companys determination shall comply with the requirements of Treasury Regulation Section 1.897-2(h)(1) or any successor regulation, and the Company shall provide timely notice to the Internal Revenue Service, in
accordance with and to the extent required by Treasury Regulation Section 1.897-2(h)(2) or any successor regulation, that such statement has been made. The Companys obligation to furnish such written statement shall continue notwithstanding the fact that a class of the Companys stock may be regularly traded on an established securities market or the fact that there is no preferred stock then outstanding.
3.20 Foreign Initial Public Offering. If the Company closes an initial public offering in a country other than the United States, then, prior to the closing of such initial public offering, the Company and the Investors shall amend this Agreement to conform the provisions set forth in this Agreement with the applicable laws and market practice for registration rights in the applicable country.
3.21 FCPA. The Company represents that it shall not (and shall not permit any of its subsidiaries or any of its or their respective directors, officers, managers, or employees, to) promise, authorize or make any payment to, or otherwise contribute any item of value to, directly or indirectly, to any third party, including any Non-U.S. Official (as (as such term is defined in the U.S. Foreign Corrupt Practices Act of 1977, as amended (the FCPA)), in each case, in violation of the FCPA, the U.K. Bribery Act, or any other applicable anti-bribery or anti-corruption law. The Company further represents that it shall (and shall cause each of its subsidiaries to) cease all of its or their respective activities, as well as remediate any actions taken by the Company or its subsidiaries, or any of their respective directors, officers, managers or employees, in violation of the FCPA, the U.K. Bribery Act, or any other applicable anti-bribery or anti-corruption law. Upon request, the Company agrees to provide responsive information and/or certifications concerning its compliance with applicable anti-corruption laws. The Company shall promptly notify each Investor if the Company becomes aware of any Enforcement Action (as defined in the Purchase Agreement). The Company shall, and shall use its best efforts to cause any direct or indirect subsidiary or entity controlled by it, whether now in existence or formed in the future, to comply with the FCPA.
3.22 Termination of Covenants. All covenants of the Company contained in Section 3 of this Agreement (other than the provisions of Section 3.4, 3.9, 3.16 and 3.20) shall expire and terminate as to each Investor upon the earlier of (i) the effective date of the registration statement pertaining to the Initial Offering or (ii) an Acquisition or Asset Transfer (as defined in the Charter); provided that the consideration received pursuant to such Acquisition or Asset Transfer is limited to cash or marketable securities.
SECTION 4. RIGHTS OF FIRST REFUSAL.
4.1 Subsequent Offerings. Subject to applicable securities laws, each Investor shall have a right of first refusal to purchase its pro rata share of all Equity Securities, as defined below, that the Company may, from time to time, propose to sell and issue after the date of this Agreement in a transaction, or series of transactions, that is primarily for capital raising purpose, other than the Equity Securities excluded by Section 4.6 hereof. Each Investors pro rata share is equal to the ratio of (a) the number of shares of the Companys Common Stock (including all shares of Common Stock issuable or issued upon conversion of the Shares or upon the exercise of outstanding warrants or options) of which such Investor is deemed to be a holder immediately prior to the issuance of such Equity Securities to (b) the total number of shares of the Companys
outstanding Common Stock (including all shares of Common Stock issued or issuable upon conversion of the Shares or upon the exercise of any outstanding warrants or options) immediately prior to the issuance of the Equity Securities. The term Equity Securities shall mean (i) any Common Stock, Series Preferred or other security of the Company, (ii) any security convertible into or exercisable or exchangeable for, with or without consideration, any Common Stock, Series Preferred or other security (including any option to purchase such a convertible security), (iii) any security carrying any warrant or right to subscribe to or purchase any Common Stock, Series Preferred or other security or (iv) any such warrant or right.
4.2 Exercise of Rights. If the Company proposes to issue any Equity Securities, it shall give each Investor written notice of its intention, describing the Equity Securities, the price and the terms and conditions upon which the Company proposes to issue the same. Each Investor shall have fifteen (15) days from the giving of such notice to agree to purchase its pro rata share of the Equity Securities for the price and upon the terms and conditions specified in the notice by giving written notice to the Company and stating therein the quantity of Equity Securities to be purchased. Notwithstanding the foregoing, the Company shall not be required to offer or sell such Equity Securities to any Investor who would cause the Company to be in violation of applicable federal securities laws by virtue of such offer or sale.
4.3 Issuance of Equity Securities to Other Persons. If not all of the Investors elect to purchase their pro rata share of the Equity Securities, then the Company shall promptly notify in writing the Investors who do so elect and shall offer such Investors the right to acquire such unsubscribed shares on a pro rata basis. The Investors shall have five (5) days after receipt of such notice to notify the Company of its election to purchase all or a portion thereof of the unsubscribed shares. The Company shall have ninety (90) days thereafter to sell the Equity Securities in respect of which the Investors rights were not exercised, at a price not lower and upon general terms and conditions not materially more favorable to the purchasers thereof than specified in the Companys notice to the Investors pursuant to Section 4.2 hereof. If the Company has not sold such Equity Securities within ninety (90) days of the notice provided pursuant to Section 4.2, the Company shall not thereafter issue or sell any Equity Securities, without first offering such securities to the Investors in the manner provided above.
4.4 Termination and Waiver of Rights of First Refusal. The rights of first refusal established by this Section 4 shall not apply to, and shall terminate upon the earliest to occur of (i) the conversion of all outstanding shares of Series Preferred into Common Stock, (ii) the effective date of the registration statement pertaining to the Qualified IPO, or (iii) an Acquisition or Asset Transfer; provided that the consideration received pursuant to such Acquisition or Asset Transfer is limited to cash or marketable securities.
4.5 Assignment of Rights of First Refusal. The rights of first refusal of each Investor under this Section 4 may be assigned to the same parties, subject to the same restrictions as any transfer of registration rights pursuant to Section 2.9.
4.6 Excluded Securities. The rights of first refusal established by this Section 4 shall not be applicable to any of the Excluded Securities (as defined in the Charter) or to any Equity Securities issuable to Lenders pursuant to the Right to Invest.
SECTION 5. MISCELLANEOUS.
5.1 Governing Law. This Agreement shall be governed by and construed under the laws of the State of California in all respects as such laws are applied to agreements among California residents entered into and to be performed entirely within California, without reference to conflicts of laws or principles thereof. The parties agree that any action brought by either party under or in relation to this Agreement, including without limitation to interpret or enforce any provision of this Agreement, shall be brought in, and each party agrees to and does hereby submit to the jurisdiction and venue of, any state or federal court located in the County of San Diego, California.
5.2 Successors and Assigns. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the parties hereto and their respective successors, assigns, heirs, executors, and administrators and shall inure to the benefit of and be enforceable by each person who shall be a holder of Registrable Securities from time to time; provided, however, that prior to the receipt by the Company of adequate written notice of the transfer of any Registrable Securities specifying the full name and address of the transferee, the Company may deem and treat the person listed as the holder of such shares in its records as the absolute owner and holder of such shares for all purposes, including the payment of dividends or any redemption price.
5.3 Entire Agreement. This Agreement, the Exhibits and Schedules hereto, the Purchase Agreement and the other documents delivered pursuant thereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and no party shall be liable or bound to any other in any manner by any oral or written representations, warranties, covenants and agreements except as specifically set forth herein and therein. Each party expressly represents and warrants that it is not relying on any oral or written representations, warranties, covenants or agreements outside of this Agreement.
5.4 Severability. In the event one or more of the provisions of this Agreement should, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.
5.5 Amendment and Waiver.
(a) Except as otherwise expressly provided, this Agreement may be amended or modified, and the obligations of the Company and the rights of the Holders under this Agreement may be waived, only upon the written consent of the Company and the holders of at least a majority of the then-outstanding Registrable Securities.
(b) For the purposes of determining the number of Holders or Investors entitled to vote or exercise any rights hereunder, the Company shall be entitled to rely solely on the list of record holders of its stock as maintained by or on behalf of the Company.
(c) If the Company closes an initial public offering in a country other than the United States, then, prior to the closing of such initial public offering, the Company and the Investors shall amend this Agreement to conform the provisions set forth in Section 2 hereto with the applicable laws and market practice for registration rights in the applicable country.
(d) Notwithstanding anything to the contrary herein, upon exercise of the Warrant, the Warrantholder shall become a party to this Agreement by executing and delivering a counterpart signature page hereto, and thereafter shall be deemed an Investor and a Holder for all purposes hereunder, other than for purposes of Section 2.2, Section 2.4, Section 3 and Section 4 of this Agreement, and Exhibit A hereto may be amended by the Company without the consent of the other parties to add the Warrantholder thereto.
5.6 Delays or Omissions. It is agreed that no delay or omission to exercise any right, power, or remedy accruing to any party, upon any breach, default or noncompliance by another party under this Agreement shall impair any such right, power, or remedy, nor shall it be construed to be a waiver of any such breach, default or noncompliance, or any acquiescence therein, or of any similar breach, default or noncompliance thereafter occurring. It is further agreed that any waiver, permit, consent, or approval of any kind or character on any partys part of any breach, default or noncompliance under the Agreement or any waiver on such partys part of any provisions or conditions of this Agreement must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement, by law, or otherwise afforded to any party, shall be cumulative and not alternative.
5.7 Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient; if not, then on the next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the party to be notified at the address as set forth on the signature pages hereof or Exhibit A hereto or at such other address or electronic mail address as such party may designate by ten (10) days advance written notice to the other parties hereto.
5.8 Attorneys Fees. In the event that any suit or action is instituted under or in relation to this Agreement, including without limitation to enforce any provision in this Agreement, the prevailing party in such dispute shall be entitled to recover from the losing party all fees, costs and expenses of enforcing any right of such prevailing party under or with respect to this Agreement, including without limitation, such reasonable fees and expenses of attorneys and accountants, which shall include, without limitation, all fees, costs and expenses of appeals.
5.9 Titles and Subtitles. The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement.
5.10 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.
5.11 Aggregation of Stock. All shares of Registrable Securities held or acquired by affiliated entities or persons or persons or entities under common management or control shall be aggregated together for the purpose of determining the availability of any rights under this Agreement.
5.12 Pronouns. All pronouns contained herein, and any variations thereof, shall be deemed to refer to the masculine, feminine or neutral, singular or plural, as to the identity of the parties hereto may require.
5.13 Termination. This Agreement shall terminate and be of no further force or effect upon the earlier of (i) an Acquisition; provided that the consideration received pursuant to such Acquisition is limited to cash or marketable securities; or (ii) the date five (5) years following the closing of the Initial Offering.
5.14 Amendment and Restatement of Prior Agreement. The Prior Agreement is hereby amended in its entirety and restated herein. Such amendment and restatement is effective upon the execution of this Agreement by the Company and the holders of a majority of the then-outstanding Registrable Securities as of the date of this Agreement. Upon such execution, all provisions of, rights granted and covenants made in the Prior Agreement are hereby waived, released and superseded in their entirety and shall have no further force or effect, including, without limitation, all rights of first refusal and any notice period associated therewith otherwise applicable to the transactions contemplated by the Purchase Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this FOURTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT as of the date set forth above.
|By:||/s/ Ken Song|
|Title:||Chief Executive Officer|
3985 Sorrento Valley Blvd., Suite C
San Diego, CA 92121
IN WITNESS WHEREOF, the parties hereto have executed this FOURTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT as of the date set forth above.
|NEW ENTERPRISE ASSOCIATES 16, L.P.|
|By:||NEA Partners 16, L.P., its general partner|
|By:||NEA 16 GP, LLC, its general partner|
|By:||/s/ Louis Citron, Director|
|NEA VENTURES 2017, LIMITED PARTNERSHIP|
|By:||/s/ Louis Citron, Vice-President|
IN WITNESS WHEREOF, the parties hereto have executed this FOURTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT as of the date set forth above.
|POLARIS PARTNERS VII, L.P.|
Polaris Management Co. VII, L.L.C.,
|its General Partner|
|By:||/s/ Lauren Crockett|
|POLARIS ENTREPRENEURS FUND VII, L.P.|
Polaris Management Co. VII, L.L.C.,
|its General Partner|
|By:||/s/ Lauren Crockett|
|VENBIO GLOBAL STRATEGIC FUND L.P.|
|By:||venBio Global Strategic GP, L.P., its general partner|
|By:||venBio Global Strategic GP, Ltd., its general partner|
|By:||/s/ Robert Adelman|
|ARCH VENTURE FUND VIII, L.P.|
By: ARCH Venture Partners VIII, L.P.
Its: General Partner
By: ARCH Venture Partners VIII, LLC
Its: General Partner
|By:||/s/ Mark McDonnell|
|ARCH VENTURE FUND VIII OVERAGE, L.P.|
By: ARCH Venture Partners VIII, LLC
Its: General Partner
|By:||/s/ Mark McDonnell|
|ALEXANDRIA VENTURE INVESTMENTS, LLC|
By: Alexandria Real Estate Equities, Inc.
Its: Managing Member
|By:||/s/ Aaron Jacobson|
|Title:||SVP Venture Counsel|
|SONG FAMILY TRUST DATED OCTOBER 14, 2016|
|By:||/s/ Ken Song|
|Kenneth Song, Trustee|
|By:||/s/ Yu Linda Song|
|Yu Linda Song, Trustee|
|/s/ Patricia Millican|
MILLICAN FAMILY TRUST, DATED MARCH 10, 2016
|By:||/s/ Patricia Millican|
|Patricia Millican, Trustee|
Alexandria Venture Investments, LLC
ARCH Venture Fund VIII, L.P.
ARCH Venture Fund VIII Overage, L.P.
Arrowmark Fundamental Opportunity Fund, L.P.
Arrowmark Life Science Fund, LP
ARTAL INTERNATIONAL, S.C.A.
BLN Capital, LLC
CF Ascent LLC
DEERFIELD SPECIAL SITUATIONS FUND, L.P.
EcoR1 Capital Fund Qualified, L.P.
EcoR1 Capital Fund, L.P.
Evans Potter Rev. Trust 12/29/1989
Franklin Strategic Series Franklin Biotechnology Discovery Fund
Franklin Templeton Investment Funds Franklin Biotechnology Discovery Fund
GC&H Investments, LLC
Highside Family Partners, LP
Jae Myoung Suh
JBA Investors, LLC
Kenneth Song and Yu Linda Song, Trustees of the Song Family Trust Dated October 14, 2016
LAV Foresight Limited
LifeSci Venture Master SPV, LLC
LifeSci Venture Partners I, LP
Longevity Fund 1 LP
Lookfar Investments, LLC
Meridian Small Cap Growth Fund
Millican Family Trust, dated March 10, 2016
Miramar Pharma Investors, LLC
NEA Ventures 2017, Limited Partnership
New Enterprise Associates 16, L.P.
Polaris Entrepreneurs Fund VII, L.P.
Polaris Partners VII, L.P.
Red Fish Blue Fish Revocable Trust, Dated December 31, 2012
Ruth T. Yu
SE Solomon Family Trust
THB Iron Rose LLC, Life Science Portfolio
venBio Global Strategic Fund L.P.
Venrock Healthcare Capital Partners III, L.P.
VHCP Co-Investment Holdings III, LLC
VIVO PANDA FUND, L.P.