Exhibit 10.3

 

 

 

 

GI DYNAMICS, INC.

 

INVESTORS’ RIGHTS AGREEMENT

 

 

 

 

 

 

 

TABLE OF CONTENTS

 

1.   Definitions 1     2.   Registration Rights 4 2.1   Demand Registration 4
2.2   Company Registration 5 2.3   Underwriting Requirements 6 2.4   Obligations
of the Company 7 2.5   Furnish Information 9 2.6   Expenses of Registration 9
2.7   Delay of Registration 9 2.8   Indemnification 9 2.9   Reports Under
Exchange Act 12 2.10   Limitations on Subsequent Registration Rights 12
2.11   “Market Stand-off” Agreement 13 2.12   Restrictions on Transfer 13
2.13   Termination of Registration Rights 15     3.   Information Rights 15
3.1   Delivery of Financial Statements 15 3.2   Inspection 16 3.3   Termination
of Information and Inspection Rights 16 3.4   Confidentiality 17     4.   Rights
to Future Stock Issuances 17 4.1   Right of First Offer 17 4.2   Termination 18
    5.   Additional Covenants 19 5.1   Board Matters 19 5.2   Successor
Indemnification 19 5.3   Termination of Covenants 19     6.   Miscellaneous 19
6.1   Successors and Assigns 19 6.2   Governing Law 20 6.3   Counterparts 20
6.4   Titles and Subtitles 20 6.5   Notices 20 6.6   Amendments and Waivers 21
6.7   Severability 21 6.8   Aggregation of Stock 22 6.9   Additional Investors
22 6.10   Entire Agreement 22 6.11   Dispute Resolution 22 6.12   Delays or
Omissions 23

 

Schedule A - Schedule of Investors

 

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INVESTORS’ RIGHTS AGREEMENT

 

THIS INVESTORS’ RIGHTS AGREEMENT (this “Agreement”), is made as of the 4th day
of September, 2020, by and among GI Dynamics, Inc., a Delaware corporation (the
“Company”), each of the investors listed on Schedule A hereto and any Additional
Purchaser (as defined in the Purchase Agreement) that becomes a party to this
Agreement in accordance with Subsection 6.9 hereof, which are referred to in
this Agreement collectively as the “Investors” and individually as an
“Investor.”

 

RECITALS

 

WHEREAS, the Company and the Investors are parties to that certain Series A
Preferred Stock Purchase Agreement, dated as of August 10, 2020 (the “Purchase
Agreement”); and

 

WHEREAS, in order to induce the Company to enter into the Purchase Agreement and
to induce the Investors to invest funds in the Company pursuant to the Purchase
Agreement, the Investors and the Company hereby agree that this Agreement shall
govern the rights of the Investors to cause the Company to register shares of
Common Stock issuable to the Investors, to receive certain information from the
Company, and to participate in future equity offerings by the Company, and shall
govern certain other matters as set forth in this Agreement.

 

NOW, THEREFORE, the parties hereby agree as follows:

 

1. Definitions. For purposes of this Agreement:

 

1.1 “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, director or trustee of such Person, or any venture
capital fund or registered investment company now or hereafter existing that is
controlled by one or more general partners, managing members or investment
adviser of, or shares the same management company or investment adviser with,
such Person.

 

1.2 “Board of Directors” means the board of directors of the Company.

 

1.3 “Certificate of Incorporation” means the Company’s Seventh Amended and
Restated Certificate of Incorporation, as amended and/or restated from time to
time.

 

1.4 “Common Stock” means shares of the Company’s common stock, par value $0.01
per share.

 

1.5 “Damages” means any loss, damage, claim or liability (joint or several) to
which a party hereto may become subject under the Securities Act, the Exchange
Act, or other federal or state law, insofar as such loss, damage, claim or
liability (or any action in respect thereof) arises out of or is based upon: (i)
any untrue statement or alleged untrue statement of a material fact contained in
any registration statement of the Company, including any preliminary prospectus
or final prospectus contained therein or any amendments or supplements thereto;
(ii) an 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 indemnifying
party (or any of its agents or Affiliates) 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.

 

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1.6 “Derivative Securities” means any securities or rights convertible into, or
exercisable or exchangeable for (in each case, directly or indirectly), Common
Stock, including options and warrants.

 

1.7 “Exchange Act” means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.

 

1.8 “Excluded Registration” means (i) a registration relating to the sale or
grant of securities to employees of the Company or a subsidiary pursuant to a
stock option, stock purchase, equity incentive or similar plan; (ii) a
registration relating to an SEC Rule 145 transaction; (iii) a registration on
any form that does not include substantially the same information as would be
required to be included in a registration statement covering the sale of the
Registrable Securities; or (iv) a registration in which the only Common Stock
being registered is Common Stock issuable upon conversion of debt securities
that are also being registered.

 

1.9 “FOIA Party” means a Person that, in the reasonable determination of the
Board of Directors, may be subject to, and thereby required to disclose
non-public information furnished by or relating to the Company under, the
Freedom of Information Act, 5 U.S.C. 552 (“FOIA”), any state public records
access law, any state or other jurisdiction’s laws similar in intent or effect
to FOIA, or any other similar statutory or regulatory requirement.

 

1.10 “Form S-1” means such form under the Securities Act as in effect on the
date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC.

 

1.11 “Form S-3” means such form under the Securities Act as in effect on the
date hereof or any registration form under the Securities Act subsequently
adopted by the SEC that permits forward incorporation of substantial information
by reference to other documents filed by the Company with the SEC.

 

1.12 “GAAP” means generally accepted accounting principles in the United States
as in effect from time to time.

 

1.13 “Holder” means any holder of Registrable Securities who is a party to this
Agreement.

 

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1.14 “Immediate Family Member” means a child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including,
adoptive relationships, of a natural person referred to herein.

 

1.15 “Initiating Holders” means, collectively, Holders who properly initiate a
registration request under this Agreement.

 

1.16 “IPO” means the Qualified IPO, as defined in the Certificate of
Incorporation.

 

1.17 “Major Investor” means any Investor that, individually or together with
such Investor’s Affiliates, holds at least 1,000,000 shares of Registrable
Securities (as adjusted for any stock split, stock dividend, combination,
recapitalization or other similar transaction effected after the date hereof).

 

1.18 “New Securities” means, collectively, equity securities of the Company,
whether or not currently authorized, as well as rights, options, or warrants to
purchase such equity securities, or securities of any type whatsoever that are,
or may become, convertible or exchangeable into or exercisable for such equity
securities.

 

1.19 “Person” means any individual, corporation, partnership, trust, limited
liability company, association or other entity.

 

1.20 “Registrable Securities” means (i) the Common Stock issuable or issued upon
conversion of the Series A Preferred Stock, and (ii) any Common Stock, or any
Common Stock issued or issuable (directly or indirectly) upon conversion and/or
exercise of any securities of the Company, acquired by the Investors after the
date hereof, excluding, in all cases, however, any Registrable Securities sold
by a Person in a transaction in which the applicable rights under this Agreement
are not assigned pursuant to Subsection 6.1, and excluding for purposes of
Section 2 any shares for which registration rights have terminated pursuant to
Subsection 2.13 of this Agreement.

 

1.21 “Registrable Securities then outstanding” means the number of shares
determined by adding the number of shares of outstanding Common Stock that are
Registrable Securities and the number of shares of Common Stock issuable
(directly or indirectly) pursuant to the then exercisable and/or convertible
securities that are Registrable Securities.

 

1.22 “Restricted Securities” means the securities of the Company required to be
notated with the legend set forth in Subsection 2.12(b) hereof.

 

1.23 “SEC” means the Securities and Exchange Commission.

 

1.24 “SEC Rule 144” means Rule 144 promulgated by the SEC under the Securities
Act.

 

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1.25 “SEC Rule 145” means Rule 145 promulgated by the SEC under the Securities
Act.

 

1.26 “Securities Act” means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.

 

1.27 “Selling Expenses” means all underwriting discounts, selling commissions,
and stock transfer taxes applicable to the sale of Registrable Securities, and
fees and disbursements of counsel for any Holder, except for the fees and
disbursements of the Selling Holder Counsel borne and paid by the Company as
provided in Subsection 2.6.

 

1.28 “Series A Preferred Stock” means shares of the Company’s Series A Preferred
Stock, par value $0.01 per share.

 

2. Registration Rights. The Company covenants and agrees as follows:

 

2.1 Demand Registration.

 

(a) Form S-1 Demand. If at any time after the earlier of (i) three (3) years
after the date of this Agreement or (ii) one hundred eighty (180) days after the
effective date of the registration statement for the IPO, the Company receives a
request from Holders of at least fifty percent (50%) of the Registrable
Securities then outstanding that the Company file a Form S- 1 registration
statement with respect to at least fifty percent (50%) of the Registrable
Securities then outstanding, then the Company shall (x) within ten (10) days
after the date such request is given, give notice thereof (the “Demand Notice”)
to all Holders other than the Initiating Holders; and (y) as soon as
practicable, and in any event within sixty (60) days after the date such request
is given by the Initiating Holders, file a Form S-1 registration statement under
the Securities Act covering all Registrable Securities that the Initiating
Holders requested to be registered and any additional Registrable Securities
requested to be included in such registration by any other Holders, as specified
by notice given by each such Holder to the Company within twenty (20) days of
the date the Demand Notice is given, and in each case, subject to the
limitations of Subsections 2.1(c) and 2.3.

 

(b) Form S-3 Demand. If at any time when it is eligible to use a Form S-3
registration statement, the Company receives a request from Holders of at least
thirty percent (30%) of the Registrable Securities then outstanding that the
Company file a Form S-3 registration statement with respect to outstanding
Registrable Securities of such Holders having an anticipated aggregate offering
price, net of Selling Expenses, of at least $5 million, then the Company shall
(i) within ten (10) days after the date such request is given, give a Demand
Notice to all Holders other than the Initiating Holders; and (ii) as soon as
practicable, and in any event within forty-five (45) days after the date such
request is given by the Initiating Holders, file a Form S-3 registration
statement under the Securities Act covering all Registrable Securities requested
to be included in such registration by any other Holders, as specified by notice
given by each such Holder to the Company within twenty (20) days of the date the
Demand Notice is given, and in each case, subject to the limitations of
Subsections 2.1(c) and 2.3.

 

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(c) Notwithstanding the foregoing obligations, if the Company furnishes to
Holders requesting a registration pursuant to this Subsection 2.1 a certificate
signed by the Company’s chief executive officer stating that in the good faith
judgment of the Board of Directors it would be materially detrimental to the
Company and its stockholders for such registration statement to be filed and it
is therefore necessary to defer the filing of such registration statement, then
the Company shall have the right to defer taking action with respect to such
filing, and any time periods with respect to filing or effectiveness thereof
shall be tolled correspondingly, for a period of not more than ninety (90) days
after the request of the Initiating Holders is given; provided, however, that
the Company may not invoke this right more than once in any twelve (12) month
period; and provided further that the Company shall not register any securities
for its own account or that of any other stockholder during such ninety (90) day
period other than an Excluded Registration.

 

(d) The Company shall not be obligated to effect, or to take any action to
effect, any registration pursuant to Subsection 2.1(a)(i) during the period that
is sixty (60) days before the Company’s good faith estimate of the date of
filing of, and ending on a date that is one hundred eighty (180) days after the
effective date of, a Company-initiated registration, provided that the Company
is actively employing in good faith commercially reasonable efforts to cause
such registration statement to become effective; (ii) after the Company has
effected two registrations pursuant to Subsection 2.1(a); or (iii) 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
Subsection 2.1(b). The Company shall not be obligated to effect, or to take any
action to effect, any registration pursuant to Subsection 2.1(b) (i) during the
period that is thirty (30) days before the Company’s good faith estimate of the
date of filing of, and ending on a date that is ninety (90) days after the
effective date of, a Company-initiated registration, provided that the Company
is actively employing in good faith commercially reasonable efforts to cause
such registration statement to become effective; or (ii) if the Company has
effected two registrations pursuant to Subsection 2.1(b) within the twelve (12)
month period immediately preceding the date of such request. A registration
shall not be counted as “effected” for purposes of this Subsection 2.1(d) until
such time as the applicable registration statement has been declared effective
by the SEC, unless the Initiating Holders withdraw their request for such
registration, elect not to pay the registration expenses therefor, and forfeit
their right to one demand registration statement pursuant to Subsection 2.6, in
which case such withdrawn registration statement shall be counted as “effected”
for purposes of this Subsection 2.1(d); provided, that if such withdrawal is
during a period the Company has deferred taking action pursuant to Subsection
2.1(c), then the Initiating Holders may withdraw their request for registration
and such registration will not be counted as “effected” for purposes of this
Subsection 2.1(d).

 

2.2 Company Registration. If the Company proposes to register (including, for
this purpose, a registration effected by the Company for stockholders other than
the Holders) any of its securities under the Securities Act in connection with
the public offering of such securities solely for cash (other than in an
Excluded Registration), the Company shall, at such time, promptly give each
Holder notice of such registration. Upon the request of each Holder given within
twenty (20) days after such notice is given by the Company, the Company shall,
subject to the provisions of Subsection 2.3, cause to be registered all of the
Registrable Securities that each such Holder has requested to be included in
such registration. The Company shall have the right to terminate or withdraw any
registration initiated by it under this Subsection 2.2 before the effective date
of such registration, whether or not any Holder has elected to include
Registrable Securities in such registration. The expenses (other than Selling
Expenses) of such withdrawn registration shall be borne by the Company in
accordance with Subsection 2.6.

 

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2.3 Underwriting Requirements.

 

(a) If, pursuant to Subsection 2.1, 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
Subsection 2.1, and the Company shall include such information in the Demand
Notice. The underwriter(s) will be selected by the Company and shall be
reasonably acceptable to a majority in interest of the Initiating Holders. In
such event, the right of any Holder to include such Holder’s Registrable
Securities in such registration shall be conditioned upon such Holder’s
participation in such underwriting and the inclusion of such Holder’s
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
(together with the Company as provided in Subsection 2.4(e)) enter into an
underwriting agreement in customary form with the underwriter(s) selected for
such underwriting. Notwithstanding any other provision of this Subsection 2.3,
if the managing underwriter(s) advise(s) the Initiating Holders in writing that
marketing factors require a limitation on the number of shares to be
underwritten, then the Initiating Holders shall so advise all Holders of
Registrable Securities that otherwise would be underwritten pursuant hereto, and
the number of Registrable Securities that may be included in the underwriting
shall be allocated among such Holders of Registrable Securities, including the
Initiating Holders, in proportion (as nearly as practicable) to the number of
Registrable Securities owned by each Holder or in such other proportion as shall
mutually be agreed to by all such selling Holders; provided, however, that the
number of Registrable Securities held by the Holders to be included in such
underwriting shall not be reduced unless all other securities are first entirely
excluded from the underwriting. To facilitate the allocation of shares in
accordance with the above provisions, the Company or the underwriters may round
the number of shares allocated to any Holder to the nearest one hundred (100)
shares.

 

(b) In connection with any offering involving an underwriting of shares of the
Company’s capital stock pursuant to Subsection 2.2, the Company shall not be
required to include any of the Holders’ Registrable Securities in such
underwriting unless the Holders accept the terms of the underwriting as agreed
upon between the Company and its underwriters, and then only in such quantity as
the underwriters in their sole discretion determine will not jeopardize the
success of the offering by the Company. If the total number of securities,
including Registrable Securities, requested by stockholders to be included in
such offering exceeds the number of securities to be sold (other than by the
Company) that the underwriters in their reasonable discretion determine is
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Securities, which the underwriters and the Company in their sole
discretion determine will not jeopardize the success of the offering. If the
underwriters determine that less than all of the Registrable Securities
requested to be registered can be included in such offering, then the
Registrable Securities that are included in such offering shall be allocated
among the selling Holders in proportion (as nearly as practicable to) the number
of Registrable Securities owned by each selling Holder or in such other
proportions as shall mutually be agreed to by all such selling Holders. To
facilitate the allocation of shares in accordance with the above provisions, the
Company or the underwriters may round the number of shares allocated to any
Holder to the nearest one hundred (100) shares. Notwithstanding the foregoing,
in no event shall (i) the number of Registrable Securities included in the
offering be reduced unless all other securities (other than securities to be
sold by the Company) are first entirely excluded from the offering, or (ii) the
number of Registrable Securities included in the offering be reduced below
twenty-five percent (25%) of the total number of securities included in such
offering, unless such offering is the IPO, in which case the selling Holders may
be excluded further if the underwriters make the determination described above
and no other stockholder’s securities are included in such offering. For
purposes of the provision in this Subsection 2.3(b) concerning apportionment,
for any selling Holder that is a partnership, limited liability company, or
corporation, the partners, members, retired partners, retired members,
stockholders, and Affiliates of such Holder, or the estates and Immediate Family
Members of any such partners, retired partners, members, and retired members and
any trusts for the benefit of any of the foregoing Persons, shall be deemed to
be a single “selling Holder,” and any pro rata reduction with respect to such
“selling Holder” shall be based upon the aggregate number of Registrable
Securities owned by all Persons included in such “selling Holder,” as defined in
this sentence.

 

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2.4 Obligations of the Company. Whenever required under this Section 2 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 its commercially 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 a period of up to one hundred twenty (120)
days or, if earlier, until the distribution contemplated in the registration
statement has been completed; provided, however, that (i) such one hundred
twenty (120) day period shall be extended for a period of time equal to the
period the Holder refrains, at the request of an underwriter of Common Stock (or
other securities) of the Company, from selling any securities included in such
registration, and (ii) in the case of any registration of Registrable Securities
on Form S-3 that are intended to be offered on a continuous or delayed basis,
subject to compliance with applicable SEC rules, such one hundred twenty (120)
day period shall be extended for up to ninety (90) days, if necessary, to keep
the registration statement effective until all such Registrable Securities are
sold;

 

(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 Securities Act in
order to enable the disposition of all securities covered by such registration
statement;

 

(c) furnish to the selling Holders such numbers of copies of a prospectus,
including a preliminary prospectus, as required by the Securities Act, and such
other documents as the Holders may reasonably request in order to facilitate
their disposition of their Registrable Securities;

 

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(d) use its commercially 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
selling Holders; provided that the Company shall not be required to qualify to
do business or to file a general consent to service of process in any such
states or jurisdictions, unless the Company is already subject to service in
such jurisdiction and except as may be required by the Securities Act;

 

(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 underwriter(s) of such offering;

 

(f) use its commercially reasonable efforts to cause all such Registrable
Securities covered by such registration statement to be listed on a national
securities exchange or trading system and each securities exchange and trading
system (if any) on which similar securities issued by the Company are then
listed;

 

(g) provide a transfer agent and registrar for all Registrable Securities
registered pursuant to this Agreement and provide a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration;

 

(h) promptly make available for inspection by the selling Holders, any managing
underwriter(s) participating in any disposition pursuant to such registration
statement, and any attorney or accountant or other agent retained by any such
underwriter or selected by the selling Holders, all financial and other records,
pertinent corporate documents, and properties of the Company, and cause the
Company’s officers, directors, employees, and independent accountants to supply
all information reasonably requested by any such seller, underwriter, attorney,
accountant, or agent, in each case, as necessary or advisable to verify the
accuracy of the information in such registration statement and to conduct
appropriate due diligence in connection therewith;

 

(i) notify each selling Holder, promptly after the Company receives notice
thereof, of the time when such registration statement has been declared
effective or a supplement to any prospectus forming a part of such registration
statement has been filed; and

 

(j) after such registration statement becomes effective, notify each selling
Holder of any request by the SEC that the Company amend or supplement such
registration statement or prospectus.

 

In addition, the Company shall ensure that, at all times after any registration
statement covering a public offering of securities of the Company under the
Securities Act shall have become effective, its insider trading policy shall
provide that the Company’s directors may implement a trading program under Rule
10b5-1 of the Exchange Act.

 

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2.5 Furnish Information. It shall be a condition precedent to the obligations of
the Company to take any action pursuant to this Section 2 with respect to the
Registrable Securities of any selling Holder that such Holder shall furnish to
the Company such information regarding itself, the Registrable Securities held
by it, and the intended method of disposition of such securities as is
reasonably required to effect the registration of such Holder’s Registrable
Securities.

 

2.6 Expenses of Registration. All expenses (other than Selling Expenses)
incurred in connection with registrations, filings, or qualifications pursuant
to Section 2, including all registration, filing, and qualification fees;
printers’ and accounting fees; fees and disbursements of counsel for the
Company; and the reasonable fees and disbursements, not to exceed $10,000, of
one counsel for the selling Holders (“Selling Holder Counsel”), shall be borne
and paid by the Company; provided, however, that the Company shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to Subsection 2.1 if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Registrable Securities to be
registered (in which case all selling Holders shall bear such expenses pro rata
based upon the number of Registrable Securities that were to be included in the
withdrawn registration), unless the Holders of a majority of the Registrable
Securities agree to forfeit their right to one registration pursuant to
Subsections 2.1(a) or 2.1(b), as the case may be; provided further that if, at
the time of such withdrawal, the Holders shall have learned of a material
adverse change in the condition, business, or prospects of the Company from that
known to the Holders at the time of their request and have withdrawn the request
within three (3) business days after learning of such information then the
Holders shall not be required to pay any of such expenses and shall not forfeit
their right to one registration pursuant to Subsections 2.1(a) or 2.1(b). All
Selling Expenses relating to Registrable Securities registered pursuant to this
Section 2 shall be borne and paid by the Holders pro rata on the basis of the
number of Registrable Securities registered on their behalf. All Selling
Expenses relating to Registrable Securities registered pursuant to this Section
2 shall be borne and paid by the Holders pro rata on the basis of the number of
Registrable Securities registered on their behalf.

 

2.7 Delay of Registration. No Holder shall have any right to obtain or seek an
injunction restraining or otherwise delaying any registration pursuant to this
Agreement as the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 2.

 

2.8 Indemnification. If any Registrable Securities are included in a
registration statement under this Section 2:

 

(a) To the extent permitted by law, the Company will indemnify and hold harmless
each selling Holder, and the partners, members, officers, directors, and
stockholders of each such Holder; legal counsel and accountants for each such
Holder; any underwriter (as defined in the Securities Act) for each 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 Damages, and the
Company will pay to each such Holder, underwriter, controlling Person, or other
aforementioned Person any legal or other expenses reasonably incurred thereby in
connection with investigating or defending any claim or proceeding from which
Damages may result, as such expenses are incurred; provided, however, that the
indemnity agreement contained in this Subsection 2.8(a) shall not apply to
amounts paid in settlement of any such claim or proceeding if such settlement is
effected without the consent of the Company, which consent shall not be
unreasonably withheld, nor shall the Company be liable for any Damages to the
extent that they arise out of or are based upon actions or omissions made in
reliance upon and in conformity with written information furnished by or on
behalf of any such Holder, underwriter, controlling Person, or other
aforementioned Person expressly for use in connection with such registration.

 

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(b) To the extent permitted by law, each selling Holder, severally and not
jointly, will indemnify and hold harmless the Company, and each of its
directors, each of its officers who has signed the registration statement, each
Person (if any), who controls the Company within the meaning of the Securities
Act, legal counsel and accountants for the Company, any underwriter (as defined
in the Securities Act), any other Holder selling securities in such registration
statement, and any controlling Person of any such underwriter or other Holder,
against any Damages, in each case only to the extent that such Damages arise out
of or are based upon actions or omissions made in reliance upon and in
conformity with written information furnished by or on behalf of such selling
Holder expressly for use in connection with such registration; and each such
selling Holder will pay to the Company and each other aforementioned Person any
legal or other expenses reasonably incurred thereby in connection with
investigating or defending any claim or proceeding from which Damages may
result, as such expenses are incurred; provided, however, that the indemnity
agreement contained in this Subsection 2.8(b) shall not apply to amounts paid in
settlement of any such claim or proceeding if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably
withheld; and provided further that in no event shall the aggregate amounts
payable by any Holder by way of indemnity or contribution under Subsections
2.8(b) and 2.8(d) exceed the proceeds from the offering received by such Holder
(net of any Selling Expenses paid by such Holder), except in the case of fraud
or willful misconduct by such Holder.

 

(c) Promptly after receipt by an indemnified party under this Subsection 2.8 of
notice of the commencement of any action (including any governmental action) for
which a party may be entitled to indemnification hereunder, such indemnified
party will, if a claim in respect thereof is to be made against any indemnifying
party under this Subsection 2.8, give the indemnifying party notice of the
commencement thereof. The indemnifying party shall have the right to participate
in such action and, to the extent the indemnifying party so desires, participate
jointly with any other indemnifying party to which notice has been given, and to
assume the defense thereof with counsel mutually satisfactory to the parties;
provided, however, that an indemnified party (together with all other
indemnified parties that may be represented without conflict by one counsel)
shall have the right to retain one separate counsel, with the fees and expenses
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 action. The failure to
give 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 Subsection 2.8, to the extent that
such failure materially prejudices the indemnifying party’s ability to defend
such action. The failure to give notice to the indemnifying party will not
relieve it of any liability that it may have to any indemnified party otherwise
than under this Subsection 2.8.

 

10

 

 

(d) To provide for just and equitable contribution to joint liability under the
Securities Act in any case in which either: (i) any party otherwise entitled to
indemnification hereunder makes a claim for indemnification pursuant to this
Subsection 2.8 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 Subsection 2.8
provides for indemnification in such case, or (ii) contribution under the
Securities Act may be required on the part of any party hereto for which
indemnification is provided under this Subsection 2.8, then, and in each such
case, such parties will contribute to the aggregate losses, claims, damages,
liabilities, or expenses to which they may be subject (after contribution from
others) in such proportion as is appropriate to reflect the relative fault of
each of the indemnifying party and the indemnified party in connection with the
statements, omissions, or other actions that resulted in such loss, claim,
damage, liability, or expense, as well as to reflect any other relevant
equitable considerations. The relative fault of the indemnifying party and of
the indemnified party shall be determined by reference to, among other things,
whether the untrue or allegedly untrue statement of a material fact, or the
omission or alleged omission of 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, however, that, in any such case (x) no
Holder will be required to contribute any amount in excess of the public
offering price of all such Registrable Securities offered and sold by such
Holder pursuant to such registration statement, and (y) no Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) will be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation; and provided further that in no
event shall a Holder’s liability pursuant to this Subsection 2.8(d), when
combined with the amounts paid or payable by such Holder pursuant to Subsection
2.8(b), exceed the proceeds from the offering received by such Holder (net of
any Selling Expenses paid by such Holder), except in the case of willful
misconduct or fraud by such Holder.

 

(e) Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in the underwriting agreement entered
into in connection with the underwritten public offering are in conflict with
the foregoing provisions, the provisions in the underwriting agreement shall
control.

 

(f) Unless otherwise superseded by an underwriting agreement entered into in
connection with the underwritten public offering, the obligations of the Company
and Holders under this Subsection 2.8 shall survive the completion of any
offering of Registrable Securities in a registration under this Section 2, and
otherwise shall survive the termination of this Agreement.

 

11

 

 

2.9 Reports Under Exchange Act. With a view to making available to the Holders
the benefits of SEC Rule 144 and any other rule or regulation of the SEC that
may at any time permit a Holder to sell securities of the Company to the public
without registration or pursuant to a registration on Form S-3, the Company
shall:

 

(a) make and keep available adequate current public information, as those terms
are understood and defined in SEC Rule 144, at all times after the effective
date of the registration statement filed by the Company for the IPO;

 

(b) use commercially reasonable efforts to file with the SEC in a timely manner
all reports and other documents required of the Company under the Securities Act
and the Exchange Act (at any time after the Company has become subject to such
reporting requirements); and

 

(c) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) to the extent accurate, a written
statement by the Company that it has complied with the reporting requirements of
SEC Rule 144 (at any time after ninety (90) days after the effective date of the
registration statement filed by the Company for the IPO), the Securities Act,
and the Exchange Act (at any time after the Company has become subject to such
reporting requirements following the effectiveness of the registration statement
filed by the Company for the IPO), or that it qualifies as a registrant whose
securities may be resold pursuant to Form S-3 (at any time after the Company so
qualifies) and (ii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC that permits the
selling of any such securities without registration (at any time after the
Company has become subject to such reporting requirements following the
effectiveness of the registration statement filed by the Company for the IPO) or
pursuant to Form S-3 (at any time after the Company so qualifies to use such
form).

 

2.10 Limitations on Subsequent Registration Rights. From and after the date of
this Agreement, the Company shall not, without the prior written consent of the
Holders of a majority of the Registrable Securities then outstanding, enter into
any agreement with any holder or prospective holder of any securities of the
Company that would allow such holder or prospective holder to include such
securities in any registration unless, under the terms of such agreement, such
holder or prospective holder may include such securities in any such
registration only to the extent that the inclusion of such securities will not
reduce the number of the Registrable Securities of the Holders that are
included; provided that this limitation shall not apply to Registrable
Securities acquired by any additional Investor that becomes a party to this
Agreement in accordance with Subsection 6.9.

 

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2.11 “Market Stand-off” Agreement. Each Holder hereby agrees that it will not,
without the prior written consent of the managing underwriter, during the period
commencing on the date of the final prospectus relating to the registration by
the Company of shares of its Common Stock or any other equity securities under
the Securities Act on a registration statement on Form S-1 or Form S-3, and
ending on the date specified by the Company and the managing underwriter (such
period not to exceed one hundred eighty (180) days in the case of the IPO , or
such other period as may be requested by the Company or an underwriter to
accommodate regulatory restrictions on (1) the publication or other distribution
of research reports, and (2) analyst recommendations and opinions, including,
but not limited to, the restrictions contained in applicable FINRA rules, or any
successor provisions or amendments thereto), or ninety (90) days in the case of
any registration other than the IPO , or such other period as may be requested
by the Company or an underwriter to accommodate regulatory restrictions on (1)
the publication or other distribution of research reports and (2) analyst
recommendations and opinions, including, but not limited to, the restrictions
contained in applicable FINRA rules, or any successor provisions or amendments
thereto), (i) lend; offer; pledge; sell; contract to sell; sell any option or
contract to purchase; purchase any option or contract to sell; grant any option,
right, or warrant to purchase; or otherwise transfer or dispose of, directly or
indirectly, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable (directly or indirectly) for Common Stock (whether
such shares or any such securities are then owned by the Holder or are
thereafter acquired) or (ii) enter into any swap or other arrangement that
transfers to another, in whole or in part, any of the economic consequences of
ownership of such securities, whether any such transaction described in clause
(i) or (ii) above is to be settled by delivery of Common Stock or other
securities, in cash, or otherwise. The foregoing provisions of this Subsection
2.11 shall not apply to the sale of any shares to an underwriter pursuant to an
underwriting agreement, or the transfer of any shares to any trust for the
direct or indirect benefit of the Holder or the immediate family of the Holder,
provided that the trustee of the trust agrees to be bound in writing by the
restrictions set forth herein, and provided further that any such transfer shall
not involve a disposition for value, and shall be applicable to the Holders only
if all officers and directors are subject to the same restrictions. The
underwriters in connection with such registration are intended third-party
beneficiaries of this Subsection 2.11 and shall have the right, power and
authority to enforce the provisions hereof as though they were a party hereto.
Each Holder further agrees to execute such agreements as may be reasonably
requested by the underwriters in connection with such registration that are
consistent with this Subsection 2.11 or that are necessary to give further
effect thereto.

 

2.12 Restrictions on Transfer.

 

(a) The Series A Preferred Stock and the Registrable Securities shall not be
sold, pledged, or otherwise transferred, and the Company shall not recognize and
shall issue stop-transfer instructions to its transfer agent with respect to any
such sale, pledge, or transfer, except upon the conditions specified in this
Agreement, which conditions are intended to ensure compliance with the
provisions of the Securities Act. A transferring Holder will cause any proposed
purchaser, pledgee, or transferee of the Series A Preferred Stock and the
Registrable Securities held by such Holder to agree to take and hold such
securities subject to the provisions and upon the conditions specified in this
Agreement.

 

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(b) Each certificate, instrument, or book entry representing (i) the Series A
Preferred Stock, (ii) the Registrable Securities, and (iii) any other securities
issued in respect of the securities referenced in the foregoing clauses (i) and
(ii), upon any stock split, stock dividend, recapitalization, merger,
consolidation, or similar event, shall (unless otherwise permitted by the
provisions of Subsection 2.12(c)) be notated with a legend substantially in the
following form:

 

THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH SHARES MAY NOT BE SOLD,
PLEDGED, OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR A VALID EXEMPTION
FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.

 

THE SECURITIES REPRESENTED HEREBY MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE
TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY OF WHICH
IS ON FILE WITH THE SECRETARY OF THE COMPANY.

 

The Holders consent to the Company making a notation in its records and giving
instructions to any transfer agent of the Restricted Securities in order to
implement the restrictions on transfer set forth in this Subsection 2.12.

 

(c) The holder of such Restricted Securities, by acceptance of ownership
thereof, agrees to comply in all respects with the provisions of this Section 2.
Before any proposed sale, pledge, or transfer of any Restricted Securities,
unless there is in effect a registration statement under the Securities Act
covering the proposed transaction, the Holder thereof shall give notice to the
Company of such Holder’s intention to effect such sale, pledge, or transfer.
Each such notice shall describe the manner and circumstances of the proposed
sale, pledge, or transfer in sufficient detail and, if reasonably requested by
the Company, shall be accompanied at such Holder’s expense by either (i) a
written opinion of legal counsel who shall, and whose legal opinion shall, be
reasonably satisfactory to the Company, addressed to the Company, to the effect
that the proposed transaction may be effected without registration under the
Securities Act; (ii) a “no action” letter from the SEC to the effect that the
proposed sale, pledge, or transfer of such Restricted Securities without
registration will not result in a recommendation by the staff of the SEC that
action be taken with respect thereto; or (iii) any other evidence reasonably
satisfactory to counsel to the Company to the effect that the proposed sale,
pledge, or transfer of the Restricted Securities may be effected without
registration under the Securities Act, whereupon the Holder of such Restricted
Securities shall be entitled to sell, pledge, or transfer such Restricted
Securities in accordance with the terms of the notice given by the Holder to the
Company. The Company will not require such a legal opinion or “no action” letter
(x) in any transaction in compliance with SEC Rule 144; or (y) in any
transaction in which such Holder distributes Restricted Securities to an
Affiliate of such Holder for no consideration; provided that each transferee
agrees in writing to be subject to the terms of this Subsection 2.12. Each
certificate, instrument, or book entry representing the Restricted Securities
transferred as above provided shall be notated with, except if such transfer is
made pursuant to SEC Rule 144, the appropriate restrictive legend set forth in
Subsection 2.12(b), except that such certificate instrument, or book entry shall
not be notated with such restrictive legend if, in the opinion of counsel for
such Holder and the Company, such legend is not required in order to establish
compliance with any provisions of the Securities Act.

 

14

 

 

2.13 Termination of Registration Rights. The right of any Holder to request
registration or inclusion of Registrable Securities in any registration pursuant
to Subsections 2.1 or 2.2 shall terminate upon the earliest to occur of:

 

(a) the closing of a Deemed Liquidation Event, as such term is defined in the
Certificate of Incorporation;

 

(b) such time after consummation of the IPO as Rule 144 or another similar
exemption under the Securities Act is available for the sale of all of such
Holder’s shares without limitation during a three-month period without
registration; or

 

(c) the five (5) year anniversary of the date of this Agreement.

 

3. Information Rights.

 

3.1 Delivery of Financial Statements. The Company shall deliver to each Major
Investor, provided that the Board of Directors has not reasonably determined
that such Major Investor is a competitor of the Company:

 

(a) as soon as practicable, but in any event within ninety (90) days after the
end of each fiscal year of the Company (i) a balance sheet as of the end of such
year, (ii) statements of income and of cash flows for such year, and (iii) a
statement of stockholders’ equity as of the end of such year, all of which shall
be audited and certified by independent public accountants of nationally
recognized standing selected by the Company, which initially shall be Wolf &
Company, P.C.;

 

(b) as soon as practicable, but in any event within forty-five (45) days after
the end of each of the first three (3) quarters of each fiscal year of the
Company, unaudited statements of income and cash flows for such fiscal quarter,
and an unaudited balance sheet as of the end of such fiscal quarter, all
prepared in accordance with GAAP (except that such financial statements may (i)
be subject to normal year-end audit adjustments; and (ii) not contain all notes
thereto that may be required in accordance with GAAP);

 

(c) to the extent requested by a Major Investor, as soon as practicable, but in
any event within thirty (30) days of the end of each month, an unaudited income
statement for such month, and an unaudited balance sheet as of the end of such
month, all prepared in accordance with GAAP (except that such financial
statements (i) may be subject to normal year- end audit adjustments and (ii) may
not contain all notes thereto that may be required in accordance with GAAP);

 

(d) as soon as practicable, but in any event before the end of each fiscal year,
an annual budget and business plan for the next fiscal year (collectively, the
“Budget”);

 

provided, however, that the Company shall not be obligated under this Subsection
3.1 to provide information (i) that the Company reasonably determines in good
faith to be a trade secret or confidential information (unless covered by an
enforceable confidentiality agreement, in a form acceptable to the Company); or
(ii) the disclosure of which would adversely affect the attorney-client
privilege between the Company and its counsel.

 

15

 

 

If, for any period, the Company has any subsidiary whose accounts are
consolidated with those of the Company, then in respect of such period the
financial statements delivered pursuant to the foregoing sections shall be the
consolidated and consolidating financial statements of the Company and all such
consolidated subsidiaries.

 

Notwithstanding anything else in this Subsection 3.1 to the contrary, the
Company may cease providing the information set forth in this Subsection 3.1
during the period starting with the date sixty (60) days before the Company’s
good-faith estimate of the date of filing of a registration statement if it
reasonably concludes it must do so to comply with the SEC rules applicable to
such registration statement and related offering; provided that the Company’s
covenants under this Subsection 3.1 shall be reinstated at such time as the
Company is no longer actively employing its commercially reasonable efforts to
cause such registration statement to become effective.

 

3.2 Inspection. The Company shall permit each Major Investor (provided that the
Board of Directors has not reasonably determined that such Major Investor is a
competitor of the Company), at such Major Investor’s expense, to (i) visit and
inspect the Company’s properties; (ii) examine its books of account and records;
and (iii) discuss the Company’s affairs, finances, and accounts with its
officers, during normal business hours of the Company as may be reasonably
requested by the Major Investor; provided, however, that the Company shall not
be obligated pursuant to this Subsection 3.2 to provide access to any
information that it reasonably and in good faith considers to be a trade secret
or confidential information (unless covered by an enforceable confidentiality
agreement, in form acceptable to the Company) or the disclosure of which would
adversely affect the attorney-client privilege between the Company and its
counsel.

 

3.3 Termination of Information and Inspection Rights. The covenants set forth in
Subsection 3.1 and Subsection 3.2 shall terminate and be of no further force or
effect (i) immediately before the consummation of the IPO, (ii) when the Company
becomes subject to the periodic reporting requirements of Section 12(b), 12(g)
or 15(d) of the Exchange Act following the date on which the Company deregisters
or is otherwise no longer subject to the periodic reporting requirements of
Section 12(g) or 15(d) of the Exchange Act, or (iii) upon the closing of a
Deemed Liquidation Event, as such term is defined in the Certificate of
Incorporation, whichever event occurs first.

 

16

 

 

3.4 Confidentiality. Each Investor agrees that such Investor will keep
confidential and will not disclose, divulge, or use for any purpose (other than
to monitor its investment in the Company) any confidential information obtained
from the Company pursuant to the terms of this Agreement (including notice of
the Company’s intention to file a registration statement), unless such
confidential information (a) is known or becomes known to the public in general
(other than as a result of a breach of this Subsection 3.4 by such Investor),
(b) is or has been independently developed or conceived by such Investor without
use of the Company’s confidential information, or (c) is or has been made known
or disclosed to such Investor by a third party without a breach of any
obligation of confidentiality such third party may have to the Company;
provided, however, that an Investor may disclose confidential information (i) to
its attorneys, accountants, consultants, and other professionals to the extent
necessary to obtain their services in connection with monitoring its investment
in the Company; (ii) to any prospective purchaser of any Registrable Securities
from such Investor, if such prospective purchaser agrees to be bound by the
provisions of this Subsection 3.4; (iii) to any Affiliate, partner, member,
stockholder, or wholly owned subsidiary of such Investor in the ordinary course
of business, provided that such Investor informs such Person that such
information is confidential and directs such Person to maintain the
confidentiality of such information; or (iv) as may otherwise be required by
law, regulation, rule, court order or subpoena, provided that such Investor
promptly notifies the Company of such disclosure and takes reasonable steps to
minimize the extent of any such required disclosure.

 

4. Rights to Future Stock Issuances.

 

4.1 Right of First Offer. Subject to the terms and conditions of this Subsection
4.1 and applicable securities laws, if the Company proposes to offer or sell any
New Securities, the Company shall first offer such New Securities to each Major
Investor. A Major Investor shall be entitled to apportion the right of first
offer hereby granted to it in such proportions as it deems appropriate, among
(i) itself, (ii) its Affiliates and (iii) its beneficial interest holders, such
as limited partners, members or any other Person having “beneficial ownership,”
as such term is defined in Rule 13d-3 promulgated under the Exchange Act, of
such Major Investor (“Investor Beneficial Owners”); provided that each such
Affiliate or Investor Beneficial Owner (x) is not a competitor of the Company or
FOIA Party, unless such party’s purchase of New Securities is otherwise
consented to by the Board of Directors, (y) agrees to enter into this Agreement
and each of the Voting Agreement and the Right of First Refusal and Co-Sale
Agreement of even date herewith among the Company, one or more Investors and the
other parties named therein, as an “Investor” under each such agreement
(provided that any competitor of the Company or FOIA Party shall not be entitled
to any rights as a Major Investor under Subsections 3.1, 3.2 and 4.1 hereof),
and (z) agrees to purchase at least such number of New Securities as are
allocable hereunder to the Major Investor holding the fewest number of Series A
Preferred Stock and any other Derivative Securities.

 

(a) The Company shall give notice (the “Offer Notice”) to each Major Investor,
stating (i) its bona fide intention to offer such New Securities, (ii) the
number of such New Securities to be offered, and (iii) the price and terms, if
any, upon which it proposes to offer such New Securities.

 

17

 

 

(b) By notification to the Company within twenty (20) days after the Offer
Notice is given, each Major Investor may elect to purchase or otherwise acquire,
at the price and on the terms specified in the Offer Notice, up to that portion
of such New Securities which equals the proportion that the Common Stock then
held by such Major Investor (including all shares of Common Stock then issuable
(directly or indirectly) upon conversion and/or exercise, as applicable, of the
Series A Preferred Stock and any other Derivative Securities then held by such
Major Investor) bears to the total Common Stock of the Company then outstanding
(assuming full conversion and/or exercise, as applicable, of all Series A
Preferred Stock and any other Derivative Securities then outstanding). At the
expiration of such twenty (20) day period, the Company shall promptly notify
each Major Investor that elects to purchase or acquire all the shares available
to it (each, a “Fully Exercising Investor”) of any other Major Investor’s
failure to do likewise. During the ten (10) day period commencing after the
Company has given such notice, each Fully Exercising Investor may, by giving
notice to the Company, elect to purchase or acquire, in addition to the number
of shares specified above, up to that portion of the New Securities for which
Major Investors were entitled to subscribe but that were not subscribed for by
the Major Investors which is equal to the proportion that the Common Stock
issued and held, or issuable (directly or indirectly) upon conversion and/or
exercise, as applicable, of Series A Preferred Stock and any other Derivative
Securities then held, by such Fully Exercising Investor bears to the Common
Stock issued and held, or issuable (directly or indirectly) upon conversion
and/or exercise, as applicable, of the Series A Preferred Stock and any other
Derivative Securities then held, by all Fully Exercising Investors who wish to
purchase such unsubscribed shares. The closing of any sale pursuant to this
Subsection 4.1(b) shall occur within the later of one hundred and twenty (120)
days of the date that the Offer Notice is given and the date of initial sale of
New Securities pursuant to Subsection 4.1(c).

 

(c) If all New Securities referred to in the Offer Notice are not elected to be
purchased or acquired as provided in Subsection 4.1(b), the Company may, during
the ninety (90) day period following the expiration of the periods provided in
Subsection 4.1(b), offer and sell the remaining unsubscribed portion of such New
Securities to any Person or Persons at a price not less than, and upon terms no
more favorable to the offeree than, those specified in the Offer Notice. If the
Company does not enter into an agreement for the sale of the New Securities
within such period, or if such agreement is not consummated within thirty (30)
days of the execution thereof, the right provided hereunder shall be deemed to
be revived and such New Securities shall not be offered unless first reoffered
to the Major Investors in accordance with this Subsection 4.1.

 

(d) The right of first offer in this Subsection 4.1 shall not be applicable to
(i) Exempted Securities (as defined in the Certificate of Incorporation); (ii)
shares of Common Stock issued in the IPO; and (iii) the issuance of shares of
Series A Preferred Stock to Additional Purchasers pursuant to Subsection 1.3 of
the Purchase Agreement.

 

4.2 Termination. The covenants set forth in Subsection 4.1 shall terminate and
be of no further force or effect (i) immediately before the consummation of the
IPO, (ii) when the Company becomes subject to the periodic reporting
requirements of Section 12(b), 12(g) or 15(d) of the Exchange Act following the
date on which the Company deregisters or is otherwise no longer subject to the
periodic reporting requirements of Section 12(g) or 15(d) of the Exchange Act,
or (iii) upon the closing of a Deemed Liquidation Event, as such term is defined
in the Certificate of Incorporation, whichever event occurs first.

 

18

 

 

5. Additional Covenants.

 

5.1 Board Matters. Unless otherwise determined by the vote of a majority of the
directors then in office, the Board of Directors shall meet at least quarterly
in accordance with an agreed-upon schedule. The Company shall reimburse the
directors and nonvoting observers for all reasonable out-of-pocket travel
expenses incurred (consistent with the Company’s travel policy) in connection
with attending meetings of the Board of Directors.

 

5.2 Successor Indemnification. If the Company or any of its successors or
assignees consolidates with or merges into any other Person and is not the
continuing or surviving corporation or entity of such consolidation or merger,
then to the extent necessary, proper provision shall be made so that the
successors and assignees of the Company assume the obligations of the Company
with respect to indemnification of members of the Board of Directors as in
effect immediately before such transaction, whether such obligations are
contained in the Company’s Amended and Restated Bylaws, the Certificate of
Incorporation, or elsewhere, as the case may be.

 

5.3 Termination of Covenants. The covenants set forth in this Section 5, except
for Subsection 5.2, shall terminate and be of no further force or effect (i)
immediately before the consummation of the IPO, (ii) when the Company becomes
subject to the periodic reporting requirements of Section 12(b), 12(g) or 15(d)
of the Exchange Act following the date on which the Company deregisters or is
otherwise no longer subject to the periodic reporting requirements of Section
12(g) or 15(d) of the Exchange Act, or (iii) upon a Deemed Liquidation Event, as
such term is defined in the Certificate of Incorporation, whichever event occurs
first.

 

6. Miscellaneous.

 

6.1 Successors and Assigns. The rights under this Agreement may be assigned (but
only with all related obligations) by a Holder to a transferee of Registrable
Securities that (i) is an Affiliate of a Holder; or (ii) is a Holder’s Immediate
Family Member or trust for the benefit of an individual Holder or one or more of
such Holder’s Immediate Family Members; provided, however, that (x) the Company
is, within a reasonable time after such transfer, furnished with written notice
of the name and address of such transferee and the Registrable Securities with
respect to which such rights are being transferred; and (y) such transferee
agrees in a written instrument delivered to the Company to be bound by and
subject to the terms and conditions of this Agreement, including the provisions
of Subsection 2.11. For the purposes of determining the number of shares of
Registrable Securities held by a transferee, the holdings of a transferee (1)
that is an Affiliate or stockholder of a Holder; (2) who is a Holder’s Immediate
Family Member; or (3) that is a trust for the benefit of an individual Holder or
such Holder’s Immediate Family Member shall be aggregated together and with
those of the transferring Holder; provided further that all transferees who
would not qualify individually for assignment of rights shall, as a condition to
the applicable transfer, establish a single attorney-in-fact for the purpose of
exercising any rights, receiving notices, or taking any action under this
Agreement. The terms and conditions of this Agreement inure to the benefit of
and are binding upon the respective successors and permitted assignees of the
parties. Nothing in this Agreement, express or implied, is intended to confer
upon any party other than the parties hereto or their respective successors and
permitted assignees any rights, remedies, obligations or liabilities under or by
reason of this Agreement, except as expressly provided herein.

 

19

 

 

6.2 Governing Law. This Agreement shall be governed by the internal law of the
State of Delaware, without regard to conflict of law principles that would
result in the application of any law other than the law of the State of
Delaware.

 

6.3 Counterparts. This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Counterparts may be
delivered via facsimile, electronic mail (including pdf or any electronic
signature complying with the U.S. federal ESIGN Act of 2000, e.g.,
www.docusign.com) or other transmission method and any counterpart so delivered
shall be deemed to have been duly and validly delivered and be valid and
effective for all purposes.

 

6.4 Titles and Subtitles. The titles and subtitles used in this Agreement are
for convenience only and are not to be considered in construing or interpreting
this Agreement.

 

6.5 Notices.

 

(a) All notices and other communications given or made pursuant to this
Agreement shall be in writing and shall be deemed effectively given upon the
earlier of actual receipt or (i) personal delivery to the party to be notified;
(ii) when sent, if sent by electronic mail or facsimile during the recipient’s
normal business hours, and if not sent during normal business hours, then on the
recipient’s next business day; (iii) five (5) days after having been sent by
registered or certified mail, return receipt requested, postage prepaid; or (iv)
one (1) business day after the business day of deposit with a nationally
recognized overnight courier, freight prepaid, specifying next-day delivery,
with written verification of receipt. All communications shall be sent to the
respective parties at their addresses as set forth on Schedule A hereto, or to
the principal office of the Company and to the attention of the Chief Executive
Officer, in the case of the Company, or to such email address, facsimile number,
or address as subsequently modified by written notice given in accordance with
this Subsection 6.5. If notice is given to the Company, a copy shall also be
sent to Mitchell Silberberg & Knupp LLP, 437 Madison Avenue, 25th Floor, New
York, NY 10022, Attention: Blake Baron, Esq., email: bjb@msk.com; and if notice
is given to the Investors, a copy shall also be given to Wilson Sonsini Goodrich
& Rosati, P.C.s, 650 Page Mill Road, Palo Alto, CA 94304, Attention: Elton
Satusky, Esq., email: esatusky@wsgr.com.

 

(b) Consent to Electronic Notice. Each Investor consents to the delivery of any
stockholder notice pursuant to the Delaware General Corporation Law (the
“DGCL”), as amended or superseded from time to time, by electronic transmission
pursuant to Section 232 of the DGCL (or any successor thereto) at the electronic
mail address or the facsimile number set forth below such Investor’s name on
Schedule A hereto, as updated from time to time by notice to the Company, or as
on the books of the Company. Each Investor agrees to promptly notify the Company
of any change in such Investor’s electronic mail address, and that failure to do
so shall not affect the foregoing.

 

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6.6 Amendments and Waivers. Any term of this Agreement may be amended, modified
or terminated and the observance of any term of this Agreement may be waived
(either generally or in a particular instance, and either retroactively or
prospectively) only with the written consent of the Company and the holders of
at least a majority of the Registrable Securities then outstanding; provided
that the Company may in its sole discretion waive compliance with Subsection
2.12(c) (and the Company’s failure to object promptly in writing after
notification of a proposed assignment allegedly in violation of Subsection
2.12(c) shall be deemed to be a waiver); and provided further that any provision
hereof may be waived by any waiving party on such party’s own behalf, without
the consent of any other party. Notwithstanding the foregoing, (a) this
Agreement may not be amended, modified or terminated and the observance of any
term hereof may not be waived with respect to any Investor without the written
consent of such Investor, unless such amendment, modification, termination, or
waiver applies to all Investors in the same fashion (it being agreed that a
waiver of the provisions of Section 4 with respect to a particular transaction
shall be deemed to apply to all Investors in the same fashion if such waiver
does so by its terms, notwithstanding the fact that certain Investors may
nonetheless, by agreement with the Company, purchase securities in such
transaction) and (b) Subsections 3.1 and 3.2, Section 4 and any other section of
this Agreement applicable to the Major Investors (including this clause (b) of
this Subsection 6.6) may not be amended, modified, terminated or waived without
the written consent of the holders of at least a majority of the Registrable
Securities then outstanding and held by the Major Investors. Notwithstanding the
foregoing, Schedule A hereto may be amended by the Company from time to time to
add transferees of any Registrable Securities in compliance with the terms of
this Agreement without the consent of the other parties; and Schedule A hereto
may also be amended by the Company after the date of this Agreement without the
consent of the other parties to add information regarding any additional
Investor who becomes a party to this Agreement in accordance with Subsection
6.9. The Company shall give prompt notice of any amendment, modification or
termination hereof or waiver hereunder to any party hereto that did not consent
in writing to such amendment, modification, termination, or waiver. Any
amendment, modification, termination, or waiver effected in accordance with this
Subsection 6.6 shall be binding on all parties hereto, regardless of whether any
such party has consented thereto. No waivers of or exceptions to any term,
condition, or provision of this Agreement, in any one or more instances, shall
be deemed to be or construed as a further or continuing waiver of any such term,
condition, or provision.

 

6.7 Severability. In case any one or more of the provisions contained in this
Agreement is for any reason held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality, or unenforceability shall not affect any
other provision of this Agreement, and such invalid, illegal, or unenforceable
provision shall be reformed and construed so that it will be valid, legal, and
enforceable to the maximum extent permitted by law.

 

21

 

 

6.8 Aggregation of Stock. All shares of Registrable Securities held or acquired
by Affiliates shall be aggregated together for the purpose of determining the
availability of any rights under this Agreement and such Affiliated persons may
apportion such rights as among themselves in any manner they deem appropriate.

 

6.9 Additional Investors. Notwithstanding anything to the contrary contained
herein, if the Company issues additional shares of the Company’s Series A
Preferred Stock after the date hereof, whether pursuant to the Purchase
Agreement or otherwise, any purchaser of such shares of Series A Preferred Stock
may become a party to this Agreement by executing and delivering an additional
counterpart signature page to this Agreement, and thereafter shall be deemed an
“Investor” for all purposes hereunder. No action or consent by the Investors
shall be required for such joinder to this Agreement by such additional
Investor, so long as such additional Investor has agreed in writing to be bound
by all of the obligations as an “Investor” hereunder.

 

6.10 Entire Agreement. This Agreement (including any Schedules and Exhibits
hereto) constitutes the full and entire understanding and agreement among the
parties with respect to the subject matter hereof, and any other written or oral
agreement relating to the subject matter hereof existing between the parties is
expressly canceled.

 

6.11 Dispute Resolution. The parties (a) hereby irrevocably and unconditionally
submit to the jurisdiction of the state courts of Delaware and to the
jurisdiction of the United States District Court for the District of Delaware
for the purpose of any suit, action or other proceeding arising out of or based
upon this Agreement, (b) agree not to commence any suit, action or other
proceeding arising out of or based upon this Agreement except in the state
courts of Delaware or the United States District Court for the District of
Delaware, and (c) hereby waive, and agree not to assert, by way of motion, as a
defense, or otherwise, in any such suit, action or proceeding, any claim that it
is not subject personally to the jurisdiction of the above-named courts, that
its property is exempt or immune from attachment or execution, that the suit,
action or proceeding is brought in an inconvenient forum, that the venue of the
suit, action or proceeding is improper or that this Agreement or the subject
matter hereof may not be enforced in or by such court.

 

WAIVER OF JURY TRIAL: EACH PARTY HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE OTHER
TRANSACTION DOCUMENTS, THE SECURITIES OR THE SUBJECT MATTER HEREOF OR THEREOF.
THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL
DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF
THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS
(INCLUDING NEGLIGENCE), BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND
STATUTORY CLAIMS. THIS SECTION HAS BEEN FULLY DISCUSSED BY EACH OF THE PARTIES
HERETO AND THESE PROVISIONS WILL NOT BE SUBJECT TO ANY EXCEPTIONS. EACH PARTY
HERETO HEREBY FURTHER WARRANTS AND REPRESENTS THAT SUCH PARTY HAS REVIEWED THIS
WAIVER WITH ITS LEGAL COUNSEL, AND THAT SUCH PARTY KNOWINGLY AND VOLUNTARILY
WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.

 

22

 

 

6.12 Delays or Omissions. No delay or omission to exercise any right, power, or
remedy accruing to any party under this Agreement, upon any breach or default of
any other party under this Agreement, shall impair any such right, power, or
remedy of such nonbreaching or nondefaulting party, nor shall it be construed to
be a waiver of or acquiescence to any such breach or default, or to any similar
breach or default thereafter occurring, nor shall any waiver of any single
breach or default be deemed a waiver of any other breach or default theretofore
or thereafter occurring. All remedies, whether under this Agreement or by law or
otherwise afforded to any party, shall be cumulative and not alternative.

 

[Remainder of Page Intentionally Left Blank]

 

23

 

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.

 

  COMPANY:         GI DYNAMICS, INC.         By:

/s/ Scott Schorer

  Name:   Scott Schorer   Title: Chief Executive Officer         INVESTORS:    
    CRYSTAL AMBER FUND LIMITED         By:

/s/ Mark Huntley

  Name:  

Mark Huntley

  Title:

Director

 

Executed by Crystal Amber Asset Management (Guernsey) Ltd. as Investment Manager
of Crystal Amber Fund Limited

 

Signature Page to Investors’ Rights Agreement 

 

 

 

 

SCHEDULE A

 

Investors

 

Crystal Amber Fund Limited

PO Box 286, Floor 2

Trafalgar Court

St.Peter Port

GY1 4LY

Guernsey