Document:

EXHIBIT 10.4

 

CHANGE IN CONTROL SEVERANCE AGREEMENT

 

AGREEMENT made as of this 13th day of June,
2011 by and between Insignia Systems, Inc., a Minnesota corporation (the “Company”), and John Gonsior (the “Executive”).

 

WHEREAS, the Company, as a publicly
held corporation, recognizes the possibility of a change in control of the Company, and that such possibility and the uncertainty
and questions which it may raise could result in Executive leaving the Company or in distraction of Executive in the performance
of Executive’s duties to the detriment of the Company and its shareholders; and

 

WHEREAS, it is in the best interests
of the Company and its shareholders to encourage the availability of Executive’s services to parties who may in the future acquire
control of the Company and to provide an incentive for Executive to remain with the Company during any period of uncertainty leading
up to a change in control;

 

WHEREAS, based on the foregoing,
the Company wishes to provide that, in the event of a change in control of the Company, Executive will receive certain benefits
if Executive’s employment by the Company ceases for certain reasons within a specified period following the change in control;

 

NOW, THEREFORE, in consideration of the foregoing and
the provisions of this Agreement, the parties hereto agree as follows:

 

1.            General
Provisions.  This Company shall pay Executive a lump sum severance payment if Executive ceases to be employed by
the Company within two years following a Change in Control (as defined below) for certain reasons specified in this Agreement.
Nothing in this Agreement alters the “at will” nature of Executive’s employment by the Company. This means that either
before or after a Change in Control, either the Company or the Executive may terminate Executive’s employment by the Company, either
with or without cause, for any reason or no reason. This Agreement relates only to whether Executive shall be entitled to certain
severance payments following cessation of employment. No right to severance payments shall arise under this Agreement unless and
until there occurs a Change in Control.

 

2.            Definition
of Change in Control.  For purposes of this Agreement, a “Change in Control” shall be considered to occur
if any of the following occurs after the date of this Agreement:

 

		(1)	the closing of the sale of all or substantially all
of the assets of the Company;

 

		(2)	the closing of a merger, consolidation or corporate
reorganization of the Company which results in the stockholders of the Company immediately prior to such event owning less than
50% of the combined voting power of the Company’s capital stock immediately following such event;

 

		(3)	the acquisition by any person (or persons who would
be considered a group under the federal securities laws) who as of the date of this Agreement own less than 25% of the voting power
of the Company’s outstanding voting securities, of beneficial ownership of securities representing 40% or more of the combined
voting power or the Company’s then outstanding securities; or

 

    	 

    	 

    

 

		(4)	the election to the Company’s board of directors of
persons who constitute a majority of the board of directors and who were not nominated for election by the board of directors as
part of a management slate.

 

3.            Amount
of Severance Payment.  If a Change in Control occurs after the date of this Agreement and Executive subsequently
ceases to be employed by the Company prior to the second anniversary of the Change in Control, then the Company shall pay Executive
a lump sum severance payment equal to twenty-four (24) months of Executive’s base salary which was in effect immediately prior
to the Change in Control. The Company shall be entitled to deduct from the lump sum severance payment any amounts which the Company
is required by law to withhold from such a payment.

 

Payment due under this Agreement
shall be made on the 60th day after Executive’s termination of employment, except that if Executive is then a
“key employee” of the Company, as defined in Section 409A of the Internal Revenue Code, payment shall be made on the
date which is six months after termination of employment, or to his heirs upon his death if earlier; provided, however, that no
payment shall be made unless Executive has first delivered to the Company the Release described in Section 11, and the Release
has not been rescinded during any applicable rescission period.

 

4.            Circumstances
in Which Severance Shall Not Be Paid.  Notwithstanding the provisions of Section 3 above, the Company shall not be
obligated to make any lump sum severance payment under this Agreement if, following a Change in Control, Executive ceased to be
employed by the Company due to:

 

		(1)	Executive’s death or disability;

 

		(2)	termination of Executive by the Company for Cause (as
defined below); or

 

		(3)	resignation by Executive for any reason other than
a Good Reason (as defined below), including retirement.

 

For purposes of this Section 4, the following defined terms have the meanings
indicated:

 

“Cause” means termination
by the Company of Executive’s employment due to:

 

		(1)	conviction of a felony;

 

		(2)	the willful and continued failure of Executive to perform his essential duties; or

 

		(3)	gross misconduct which is materially injurious to the Company;

 

 

 

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provided, however, that the matters referred
to in clause (2) or (3) shall not be deemed to constitute “Cause” unless the Company has first given Executive written
notice specifying the conduct by Executive that constitutes such failure or gross misconduct and Executive has failed to remedy
the same to the reasonable satisfaction of the Company’s Board of Directors.

 

“Good Reason” shall mean any
of the following, unless Executive gives his or her prior written consent:

 

		(1)	the assignment to Executive of any duties inconsistent with Executive’s
status or position with the Company, or a substantial reduction in the nature or status of Executive’s responsibilities from those
in effect immediately prior to the Change in Control;

 

		(2)	a reduction by the Company in Executive’s annual base salary in effect
immediately prior to the Change in Control;

 

		(3)	the relocation of the Company’s principal executive offices to a
location more than fifty miles from Minneapolis, Minnesota or the Company requiring Executive to be based anywhere other than the
Company’s principal executive offices, except for required travel on the Company’s business to an extent substantially consistent
with Executive’s prior business travel obligations;

 

		(4)	the failure by the Company to continue to provide Executive
with benefits at least as favorable to those enjoyed by Executive under any of the Company’s pension, life insurance, medical,
health and accident, disability, deferred compensation, incentive awards, incentive stock options, or savings plans in which Executive
was participating at the time of the Change in Control, the taking of any action by the Company which would directly or indirectly
materially reduce any of such benefits or deprive Executive of any material fringe benefit enjoyed at the time of the Change in
Control, or the failure by the Company to provide Executive with the number of paid vacation days to which Executive is entitled
at the time of the Change in Control, provided, however, that the Company may amend any such plan or programs as long as such amendments
do not reduce any benefits to which Executive would be entitled upon termination; or

 

		(5)	any termination of Executive’s employment which is not made pursuant to a Notice of Termination
satisfying the requirements in Section 5 below.

 

5.           Notice
of Termination.  Any termination of Executive’s employment by the Company or by Executive shall be communicated by
written Notice of Termination to the other party hereto in accordance with the notice provisions of Section 6. For purposes of
this Agreement, a “Notice of Termination” shall mean a notice which indicates the specific facts and circumstances
claimed to provide the basis for termination.

 

 

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6.        Method
of Giving Notice.  All notices and all other communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United States registered or certified mail, return receipt
requested, postage pre-paid, addressed to the last known residence address of the Executive, or in the case of the Company, to
its principal office to the attention of each of the then directors of the Company with a copy to its Secretary, or to such other
address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address
shall be effective only upon receipt.

 

7.        Miscellaneous.  No
provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the parties. No waiver by either party thereto at any time of any breach by the other party to this Agreement,
or of compliance with any condition or provision of this Agreement to be performed by such other party, shall be deemed a waiver
of similar or dissimilar provisions or conditions at the same or at any prior or similar time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly
set forth in this Agreement. This Agreement shall be governed by the laws of the State of Minnesota. This Agreement supersedes
all prior agreements on this subject matter.

 

8.        Arbitration
of Disputes.  Any and all disputes between the parties relating to this Agreement or any alleged breach of this Agreement
shall be resolved by binding arbitration held in the City of Minneapolis pursuant to the Commercial Arbitration Rules of the American
Arbitration Association before a single arbitrator. In the event that Executive is determined by the arbitrator to be the prevailing
party in such an arbitration, the arbitrator shall award Executive, as an additional element of damages, his or her attorneys’
fees and legal expenses actually incurred in the enforcement of this Agreement and in the arbitration proceeding. Judgment on the
arbitration award may be entered by any court having jurisdiction.

 

9.        Successors.  This
Agreement shall be binding upon and inure to the benefit of the respective heirs, personal representatives, successors and assigns
of the parties hereto.

 

10.      Exclusive
Benefits.  The benefits provided by this Agreement are in lieu of all other severance, change in control, or similar
benefits payable to Executive due to termination following a Change in Control.

 

11.      Release.  As
a condition to receiving any benefits under this Agreement, Executive shall be required to deliver a standard release to the Company
releasing the Company and its shareholder, directors, officers, employees, agents and affiliates from any and all claims relating
to Executive’s employment and termination of employment.

 

 

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

 

	EXECUTIVE:	 	INSIGNIA SYSTEMS, INC.
	 	 	 	 	 
	 	 	 	 	 
	/s/ John Gonsior	 	By	/s/ Scott Drill
	 	 	 	 
	 	 	 	Its  	CEO

 

 

 

 

 

 

 

 

 

 

 

 

    	5Exhibit 4.2

 

EXECUTION COPY

 

PTC THERAPEUTICS, INC.

SECOND AMENDED AND RESTATED 
 INVESTORS’ RIGHTS AGREEMENT

 

Dated as of March 7, 2013

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    	
 
    
	
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
    	
 
    	
8
    
	
 
    	
2.6.
    	
Expenses of Registration
    	
 
    	
9
    
	
 
    	
2.7.
    	
Delay of Registration
    	
 
    	
9
    
	
 
    	
2.8.
    	
Indemnification
    	
 
    	
9
    
	
 
    	
2.9.
    	
Reports Under Exchange Act
    	
 
    	
11
    
	
 
    	
2.10.
    	
Limitations on Subsequent Registration Rights
    	
 
    	
12
    
	
 
    	
2.11.
    	
“ Market Stand-off” Agreement
    	
 
    	
12
    
	
 
    	
2.12.
    	
Restrictions on Transfer
    	
 
    	
13
    
	
 
    	
2.13.
    	
Termination of Registration Rights
    	
 
    	
15
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
3.
    	
Information and Observer Rights
    	
 
    	
15
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
3.1.
    	
Delivery of Financial Statements
    	
 
    	
15
    
	
 
    	
3.2.
    	
Inspection
    	
 
    	
16
    
	
 
    	
3.3.
    	
Observer Rights
    	
 
    	
16
    
	
 
    	
3.4.
    	
Termination of Information and Observer Rights
    	
 
    	
17
    
	
 
    	
3.5.
    	
Confidentiality
    	
 
    	
17
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
4.
    	
Rights to Future Stock Issuances
    	
 
    	
17
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
4.1.
    	
Right of First Offer
    	
 
    	
17
    
	
 
    	
4.2.
    	
Termination
    	
 
    	
19
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
5.
    	
Additional Covenants
    	
 
    	
19
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
5.1.
    	
Confidentiality and Assignment of Invention   Provisions
    	
 
    	
19
    
	
 
    	
5.2.
    	
Use of Name
    	
 
    	
20
    
	
 
    	
5.3.
    	
Termination of Covenants
    	
 
    	
20
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
6.
    	
Miscellaneous
    	
 
    	
20
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
6.1.
    	
Successors and Assigns
    	
 
    	
20
    

 

i

 

	
 
    	
6.2.
    	
Governing Law
    	
 
    	
21
    
	
 
    	
6.3.
    	
Counterparts
    	
 
    	
21
    
	
 
    	
6.4.
    	
Titles and Subtitles
    	
 
    	
21
    
	
 
    	
6.5.
    	
Notices
    	
 
    	
21
    
	
 
    	
6.6.
    	
Amendments and Waivers
    	
 
    	
22
    
	
 
    	
6.7.
    	
Severability
    	
 
    	
23
    
	
 
    	
6.8.
    	
Aggregation of Stock
    	
 
    	
23
    
	
 
    	
6.9.
    	
Additional Investors
    	
 
    	
23
    
	
 
    	
6.10.
    	
Entire Agreement
    	
 
    	
23
    
	
 
    	
6.11.
    	
Dispute Resolution
    	
 
    	
24
    
	
 
    	
6.12.
    	
Delays or Omissions
    	
 
    	
24
    
	
 
    	
6.13.
    	
Acknowledgment
    	
 
    	
23
    

 

Schedule A                                   -                    Schedule of Investors

Schedule B                                                           Schedule of New Investors

 

ii

 

SECOND AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

THIS SECOND AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT, is entered into as of March 7, 2013 (this “Agreement”), among PTC THERAPEUTICS, INC., a Delaware corporation (the “Company”), and each of the investors listed on Schedule A and Schedule B hereto (each of which is referred to in this Agreement as an “Investor”).

 

RECITALS

 

WHEREAS, Concurrently with the execution of this Agreement, the Company and certain of the Investors are entering into a Subscription Agreement (the “Subscription Agreement”) providing for the sale and issuance of shares of the Series Four Senior Preferred Stock to such Investors; and

 

WHEREAS, The Company and certain of its securityholders are parties to the Amended and Restated Investors’ Rights Agreement, dated as of May 29, 2012 (the “Prior IRA”), and desire to amend and restate the Prior IRA in its entirety and accept the rights created pursuant to this Agreement in lieu of the rights granted to them under the Prior IRA;

 

NOW, THEREFORE, the parties to this Agreement further 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, and such term shall include, without limitation, any general partner, managing member, officer or director of such Person or any venture capital or other investment fund now or hereafter existing that is controlled by one or more general partners or managing members of, or shares the same management company or investment adviser with, such Person (whether or not such other Person would be an “affiliate” of such Person under the Securities Act or the Exchange Act).

 

1.2.                            “Common Stock” means shares of the Company’s common stock, $0.001 par value per share.

 

1.3.                            “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 thereunder.

 

1

 

1.4.                            “Designated Investors” means each of Delphi Ventures V, L.P., Novo A/S, The Column Group, L.P. and Section Six Partners, L.P.

 

1.5.                            “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.

 

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

 

1.7.                            “Excluded Registration” means (i) a registration relating  to the sale of securities to employees of the Company or a subsidiary pursuant to a stock option, stock purchase, 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.

 

1.8.                            “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.

 

1.9.                            “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 incorporation of substantial information by reference to other documents filed by the Company with the SEC.

 

1.10.                     “GAAP” means generally accepted accounting principles in the United States.

 

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

 

1.12.                     “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, or domestic partner of a natural person referred to herein.

 

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

 

1.14.                     “IPO” means the Company’s first underwritten public offering of its Common Stock under the Securities Act.

 

1.15.                     “Key Employee” means any executive-level employee (including division director and vice president-level positions) as well as any employee who, either alone or in concert with others, develops, invents, programs, or designs any Company Intellectual Property (as defined in the Subscription Agreement).

 

2

 

1.16.                     “Major Investor” means any Investor that, individually or together with such Investor’s Affiliates, holds Series Four Senior Preferred Stock and/or Series Five Junior Preferred Stock, in the aggregate, convertible into at least 3,696 shares of Common Stock (as such number is adjusted for any stock split, stock dividend, combination, or other recapitalization or reclassification effected after the date hereof).

 

1.17.                     “Minimum Threshold” means (a) for Delphi Ventures V, L.P., Preferred Stock convertible into at least 143,365 shares of Common Stock; (b) for Novo A/S, Preferred Stock convertible into at least 89,604 shares of Common Stock; (c) for The Column Group, L.P., Preferred Stock convertible into at least 79,973 shares of Common Stock; and (d) for Section Six Partners, L.P., Preferred Stock convertible into at least 114,605 shares of Common Stock.

 

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.                     “Preferred Stock” means, collectively, shares of the Company’s Series Four Senior Preferred Stock and Series Five Junior Preferred Stock.

 

1.21.                     “Registrable Securities” means (i) the Common Stock issuable or issued upon conversion of the  Preferred Stock; (ii) any Common Stock, or any Common Stock  issued or issuable  (directly or indirectly)  upon conversion and/or exercise of  any other  securities  of the Company, acquired by the Investors after the date hereof; and (iii) any Common Stock issued as (or issuable upon the conversion or exercise of any warrant, right, or other security that is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the shares referenced in clauses (i) and (ii) above; 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.

 

1.22.                     “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 then exercisable and/or convertible securities that are Registrable Securities.

 

1.23.                     “Restricted Securities” means the securities of the Company required to bear the legend set forth in Subsection 2.12(b) hereof or for which the Company has committed to providing the notation set forth in Subsection 2.12(c) hereof in any notice containing information required to be set forth pursuant to Section 202(a) of the General Corporation Law of the State of Delaware.

 

1.24.                     “SEC” means the Securities and Exchange Commission.

 

3

 

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

 

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

 

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

 

1.28.                     “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.

 

1.29.                     “Series Five Junior Preferred Stock” means shares of the Company’s Series Five Junior Preferred Stock, $0.001 par value per share.

 

1.30.                     “Series Four Senior Preferred Stock” means shares of the Company’s Series Four Senior Preferred Stock, $0.001 par value 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 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 twenty percent (20%) of the Registrable Securities then outstanding that the Company file a Form S-1 registration statement  with respect to at least twenty percent (20%) of the Registrable Securities then outstanding, the anticipated aggregate offering proceeds, net of Selling Expenses, of which would exceed $10 million, then the Company shall (i) 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 (ii) 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 Subsection 2.1(c) and Subsection 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 Registrable Securities 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

 

4

 

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 Subsection 2.1(c) and Subsection 2.3.

 

(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 Company’s Board of Directors it would be seriously detrimental to the Company and its stockholders for a registration statement to be filed in the near future, 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; provided, further, however, that it shall be considered seriously detrimental to the Company and its stockholders for a registration statement to be filed in the near future if the Company shall be preparing in good faith to commence any offering of securities at the time any such request by the Initiating Holders is made.

 

(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 (2) 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 four prior (4) registrations pursuant to Subsection 2.1(b).  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).

 

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 Common Stock 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

 

5

 

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.

 

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 Company and 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 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

 

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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 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 percent (20%) 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.

 

(c)          For purposes of Subsection 2.1, a registration shall not be counted as “effected” if, as a result of an exercise of the underwriter’s cutback provisions in Subsection 2.3(a), fewer than fifty percent (50%) of the total number of Registrable Securities that Holders have requested to be included in such registration statement are actually included.

 

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 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;

 

(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

 

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as the Holders may reasonably request in order to facilitate their disposition of their Registrable Securities;

 

(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.

 

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

 

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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 $50,000 (per registration), of one outside 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 Subsection 2.1(a) or Subsection 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 with reasonable promptness 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 Subsection 2.1(a) or Subsection 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.

 

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, accountants and investment advisers 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

 

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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.

 

(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.

 

(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

 

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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; provided, however, that the failure of the underwriting agreement to provide for or address a matter provided for or addressed by the foregoing provisions shall not be a conflict between the foregoing provisions and the provisions in the underwriting agreement and, in such event, the foregoing provisions  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.

 

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;

 

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(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), 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 the reporting requirements under the Exchange Act) 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 (i) prior to the IPO, (A) Holders of a majority of the Series Four Senior Preferred Stock then held by all Holders and (B) Holders of a majority of the Series Five Junior Preferred Stock then held by all Holders, in the case of each of clauses (A) and (B), consenting as separate classes, and (ii) following the IPO, 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 (i) provide to such holder the right to include securities in any registration on other than either a pro rata basis with respect to the Registrable Securities or on a subordinate basis after all Holders have had the opportunity to include in the registration and offering all shares of Registrable Securities that they wish to so include or (ii) allow such holder or prospective holder to initiate a demand for registration of any securities held by such holder or prospective holder; provided that this limitation shall not apply to any additional Investor who becomes a party to this Agreement in accordance with Subsection 6.9.

 

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 IPO and ending on the date specified by the Company and the managing underwriter (such period not to exceed one hundred eighty (180) days, 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 NASD Rule 2711(f)(4) of the Financial Industry Regulatory Authority or NYSE Rule 472(f)(4), or any successor provisions or amendments thereto, in each case, to the extent then in effect), (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

 

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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 apply only to the IPO, 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 executive officers and directors of the Company are subject to the same restrictions and the Company uses commercially reasonable efforts to obtain a similar agreement from all stockholders individually owning more than five percent (5%) of the Company’s outstanding Common Stock (after giving effect to conversion into Common Stock of all outstanding convertible securities).  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 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 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.

 

(b)         Each certificate or instrument representing (i) the Preferred Stock, (ii) the Registrable Securities, and (iii) any other securities issued in respect of the securities referenced in 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(e)) be stamped or otherwise imprinted 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

 

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AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.

 

(c)          Each notice containing information required to be set forth pursuant to Section 202(a) of the General Corporation Law of the State of Delaware with respect to (i) the Preferred Stock, (ii) the Registrable Securities, and (iii) any other securities issued in respect of the securities referenced in 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(e)) contain a notation substantially in the following form:

 

THE SECURITIES DESCRIBED HEREIN 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 DESCRIBED HEREIN 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.

 

(d)         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.

 

(e)          The holder of each certificate representing Restricted Securities, by acceptance thereof, and the holder in whose name each book-entry representing Restricted Securities is made in the Company’s stock ledger, by accepting the issuance and/or transfer thereof, agrees to comply in all respects with the provisions of this Section 2.12.  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”

 

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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 or instrument evidencing the Restricted Securities transferred as above provided shall bear, 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 shall not bear such restrictive legend if, in the opinion of counsel for such Holder and the Company, such legend is not required in order to establish compliance with any provisions of the Securities Act.

 

2.13.                     Termination of Registration Rights.  The right of any Holder to request registration or inclusion of Registrable Securities in any registration pursuant to Subsection 2.1 or Subsection 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 Company’s Certificate of Incorporation;

 

(b)         such time as SEC 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 and without the requirement that the Company have made the reports required to be filed under SEC Rule 144(c)(1); and

 

(c)          the third anniversary of the IPO resulting in the conversion of all outstanding shares of Preferred Stock.

 

3.                                      Information and Observer Rights.

 

3.1.                            Delivery of Financial Statements.  The Company shall deliver to each Major Investor:

 

(a)         as soon as available and in any event within 45 days after the end of each of the first three quarters of each fiscal year of the Company, a consolidated balance sheet of the Company and its subsidiaries as of the end of such quarter and the related statements of income and stockholders’ equity and of cash flows of the Company for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, setting forth in each case in comparative form the corresponding figures for the corresponding period of the preceding fiscal year and the budget for such current year, all in reasonable detail and prepared in accordance with GAAP consistently applied, and duly certified (subject to year-end audit adjustments) by the chief financial officer of the Company;

 

(b)         as soon as available and in any event within 120 days after the end of each fiscal year of the Company, a copy of the annual audit report for such year for the Company, including therein a consolidated balance sheet of the Company and its subsidiaries as of the end of such fiscal year and statements of income and stockholders’ equity and of cash flows of the Company for such fiscal year, setting forth in each case in comparative form the corresponding figures for the preceding fiscal year, all duly certified by independent public accountants of recognized standing acceptable to the Major Investors holding a majority of the Registrable Securities then held by all Major Investors;

 

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(c)          promptly after sending or making available, and only to the extent available and requested in writing, such other reports and other financial statements as the Company shall send or make available to the management of the Company from time to time;

 

(d)         promptly upon receipt thereof, any written report submitted to the Company by independent public accountants in connection with an annual or interim audit of the books of the Company and its subsidiaries made by such accountants;

 

(e)          promptly after sending, making available, or filing the same, such reports and financial statements as the Company shall send or make available to the stockholders of the Company; and

 

(f)           as soon as available in the form approved by the Board of Directors, and in any event before the beginning of the fiscal year to which it applies, the annual budget and business plan of the Company.

 

Neither the foregoing provisions of this Section nor any other provision of this Agreement shall be in limitation of any rights which a Major Investor may have with respect to the books and records of the Company and its subsidiaries, or to inspect their properties or discuss their affairs, finances and accounts, under the laws of the jurisdictions in which they are incorporated.

 

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, at such Major Investor’s expense, to visit and inspect the Company’s properties; examine its books of account and records; and discuss the Company’s affairs, finances, and accounts with its executive 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 Company’s attorney-client privilege regarding communications between the Company and its counsel.

 

3.3.                            Observer Rights.  As long as any Designated Investor, together with such Designated Investor’s Affiliates, continues to own beneficially such Designated Investor’s Minimum Threshold of Preferred Stock, the Company shall invite a representative of such Designated Investor to attend all meetings of its Board of Directors in a nonvoting observer capacity and, in this respect, shall give such representative copies of all notices, minutes,

 

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consents, and other materials that it provides to its directors at the same time and in the same manner as provided to such 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, or if such Investor or its representative is a competitor of the Company.

 

3.4.                            Termination of Information and Observer Rights.  The covenants set forth in Subsection 3.1, Subsection 3.2 and Subsection 3.3 shall terminate and be of no further force or effect (i) immediately before the consummation of the IPO, (ii) when the Company first becomes 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 Company’s Certificate of Incorporation, whichever event occurs first.

 

3.5.                            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 3.5 by such Investor), (b) is or has been independently developed or conceived by the Investor without use of the Company’s confidential information, or (c) is or has been made known or disclosed to the 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, investment advisers 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 3.5;  (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, provided that the 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.  Each Major Investor shall be entitled to apportion its rights under this Section 4, in such proportions as it deems appropriate, among itself and its Affiliates.

 

(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

 

17

 

New Securities to be offered, and (iii) the price and terms, if any, upon which it proposes to offer such New Securities.

 

(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 set aside by the Board of Directors for purchase by the Major Investors (which portion shall be no less than eighty percent (80%) of such New Securities), which equals the proportion that the Preferred Stock (calculated on an as-converted to Common Stock basis) then held by such Major Investor bears to the total outstanding Preferred Stock (calculated on an as-converted to Common Stock basis) then held by all Major Investors.  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 Preferred Stock (calculated on an as-converted to Common Stock basis) then held by such Fully Exercising Investor bears to the total Preferred Stock (calculated on an as-converted to Common Stock basis) 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 Company’s Certificate of Incorporation); (ii) shares of Common Stock issued in the IPO; (iii) the issuance of shares of Series Four Senior Preferred Stock pursuant to the Subscription Agreement, (iv) the issuance of shares of Series Four Senior Preferred Stock pursuant to outstanding convertible promissory notes issued by the Company prior to the date of this Agreement; (v) the issuance of Former Preferred Stock, as such term is defined in the Company’s Certificate of Incorporation, upon the automatic exercise of outstanding warrants for the purchase of Former Preferred Stock issued by the Company prior to the date of this Agreement; and (vi) the Recapitalization, as such term is defined in the Company’s Certificate of Incorporation.

 

18

 

(e)          The rights of the Major Investors to purchase New Securities under this Section 4.1 may be waived in accordance with Section 6.6 hereof; provided, however, that in the event that the rights of Major Investors to purchase New Securities under this Section 4.1 are waived for a particular offering or sale of New Securities (a “Waived Offering”), the Company shall offer to each Major Investor the opportunity to purchase such Major Investor’s Ratable Share of the portion of New Securities, if any, that has been set aside by the Board of Directors for purchase by existing stockholders in such Waived Offering (the “Reserved New Securities”)); it being understood and agreed that this Section 4.1(e) shall apply if any existing stockholder is offered the right to participate as an investor in a Waived Offering.  Offers made by the Company pursuant to the proviso in the immediately preceding sentence shall be communicated by the Company by means of a written offer notice (a “Section 4.1(e) Notice”) containing information relating to (i) the number of New Securities (including the Reserved New Securities) being offered and (ii) the price and terms upon which the New Securities (including the Reserved New Securities) are being offered, and which Section 4.1(e) Notice shall indicate that it is being delivered in connection with a Waived Offering; provided, however, that a Major Investor exercising its right to purchase its Ratable Share of Reserved New Securities must do so by delivering written notice to the Company no later than 5:00 p.m., New York City time on the third (3rd) business day following receipt by such Major Investor of the applicable Section 4.1(e) Notice.  The Company may allocate any unsubscribed portion of Reserved New Securities in accordance with such procedures as it may agree to with the Major Investors that have elected to purchase or acquire their full Ratable Share of the Reserved New Securities.

 

For purposes of this Section 4.1(e), a Major Investor’s “Ratable Share” shall be a fraction equal to the proportion that the Preferred Stock (calculated on an as-converted to Common Stock basis) then held by such Major Investor bears to the total outstanding Preferred Stock (calculated on an as-converted to Common Stock basis) then held by all Major Investors.

 

(f)           The rights of first offer and other participation rights set forth in this Subsection 4.1 shall terminate with respect to any Major Investor who fails to purchase, in any transaction subject to this Subsection 4.1, all of such Major Investor’s pro rata amount of the New Securities allocated (or, if less than such Major Investor’s pro rata amount is offered by the Company, such lesser amount so offered) to such Major Investor pursuant to this Subsection 4.1.  Following any such termination, such Investor shall no longer be deemed a “Major Investor” for any purpose of this Subsection 4.1.

 

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 resulting in the conversion of all outstanding shares of Preferred Stock, (ii) when the Company first becomes 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 Company’s Certificate of Incorporation, whichever event occurs first and, as to each Major Investor, in accordance with Subsection 4.1(f).

 

5.                                      Additional Covenants.

 

5.1.                            Confidentiality and Assignment of Invention Provisions.  Other than as may be approved by the Board of Directors from time-to-time on a case-by-case basis, the

 

19

 

Company shall require all officers, employees, contractors and consultants who may have access to Company Intellectual Property (as defined in the Subscription Agreement) to execute and deliver an agreement providing for, inter alia, (i) the maintenance in confidence of all Company confidential information, (ii) the disclosure and assignment to the Company, or, in the case of consultants and contractors, the disclosure and assignment, licensing or optioning, of all inventions and other intellectual property developed by such person in the context of such person’s relationship with the Company or with use of any Company Intellectual Property or confidential information, (iii) the cooperation of such person with the Company in the protection of such inventions and intellectual property rights, and (iv) the naming of the Company or its officers as attorneys-in-fact to complete any documentation necessary for the above in the case of assignments, exclusive licenses or exclusive options; provided, however, that in the case of contractors or consultants who are universities, federal research institutes, or other entities that receive government funding, or individuals or entities working for such entities, the preceding terms may be limited to the extent necessary to comply with the applicable requirements imposed on such agreements by such entities in compliance with applicable law and regulation.

 

5.2.                            Use of Name.  Except where required by law or regulation, the Company shall not use the name of any Investor or any investment adviser of any Investor in any press release or other public disclosure without the advance written consent of the relevant Investor or investment adviser.  The foregoing notwithstanding, the previous sentence of this Subsection 5.2 shall not be interpreted to require the Company to obtain the advance consent of any Investor in order to identify to potential third party investors in a private offering in compliance with the Securities Act the fact that such Investor is an investor in the Company.

 

5.3.                            Termination of Covenants.  The covenants set forth in this Section 5 shall terminate and be of no further force or effect (i) immediately before the consummation of the IPO, (ii) when the Company first becomes 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 Company’s 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; (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; or (iii) after such transfer, holds at least a majority of such Registrable Securities (subject to appropriate adjustment for stock splits, stock dividends, combinations, and other recapitalizations); 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

 

20

 

transferring Holder; provided further that all transferees who would not qualify individually for assignment of rights shall have 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.

 

6.2.                            Governing Law.  This Agreement shall be governed by the internal laws of the State of Delaware.

 

6.3.                            Counterparts.  This Agreement may be executed in two 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 attachment) 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.  All notices, requests, consents and other communications hereunder shall be in writing, shall be addressed to the receiving party’s address set forth below or to such other address as a party may designate, and shall be either (i) delivered by hand, (ii) made by electronic mail or facsimile transmission, (iii) sent by nationally recognized overnight courier, or (iv) sent by registered or certified mail, return receipt requested, postage prepaid; provided, however, that if the notice being provided under this Section 6.5 is to an address outside of the United States, such notice shall be sent using the methods specified in (ii) and (iii) above.

 

	
If   to the Company:
    	
 
    	
PTC   Therapeutics, Inc.

100   Corporate Court

Middlesex   Business Center

South   Plainfield, NJ 07080-2449

Attn.:   Legal Department
    
	
 
    	
 
    	
 
    
	
with   a copy to (which copy shall not constitute notice):
    	
 
    	
Wilmer   Cutler Pickering Hale and Dorr LLP

7   World Trade Center

250   Greenwich Street

New   York, NY 10007

Attn:   Brian A. Johnson
    
	
 
    	
 
    	
 
    
	
and   an email copy to:
    	
 
    	
legal@ptcbio.com
    

 

21

 

	
If   to an Investor:
    	
 
    	
To   the addresses set forth on each Investor’s signature page attached hereto or   as has been otherwise provided to the Company in writing, and as the same may   be updated from time to time based on information provided by such Investor
    
	
 
    	
 
    	
 
    
	
with   a copy to (which copy shall not constitute notice):
    	
 
    	
Choate,   Hall & Stewart LLP

Two   International Place

Boston,   MA 02110

Attn:   Brian P. Lenihan
    
	
 
    	
 
    	
 
    
	
with   a copy to (which copy shall not constitute notice):
    	
 
    	
Cooley   LLP

3175   Hanover Street

Palo   Alto, CA 94304-1130

Attn:   Mehdi Khodadad
    

 

Following the IPO, for each Investor listed on Schedule B hereto (a “New Investor”), notices and other communications to such New Investor hereunder shall be sent solely to the person or department set forth on such New Investor’s signature page attached hereto (as the same may be updated from time to time) and the Company shall not send notices or communications to any other person on behalf of such New Investor without the prior written consent of such person or a member of such department; provided that the foregoing restriction on the Company shall not apply with respect to any New Investor (i) in the event that any electronic notice or communication from the Company directed to the applicable person or department set forth on such New Investor’s signature page attached hereto (as such information may be updated from time to time) fails or is returned undelivered or (ii) if, following a good faith effort by the Company to deliver any notice or communication to the applicable person or department set forth on such New Investor’s signature page attached hereto (as such information may be updated from time to time), the New Investor does not acknowledge receipt of such notice or communication or otherwise remains unresponsive for a period of five (5) business days.

 

6.6.                            Amendments and Waivers.  Any term of this Agreement may be amended 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 (i) prior to the IPO, (A) Holders of a majority of the Series Four Senior Preferred Stock and (B) Holders of a majority of the Series Five Junior Preferred Stock, in each case, then held by all Holders, in the case of each of clauses (A) and (B), consenting as separate classes, and (ii) following the IPO, Holders of a majority of the Registrable Securities then outstanding; provided that the Company may in its sole discretion waive compliance with Subsection 2.12(e) (and the Company’s failure to object promptly in writing after notification of a proposed assignment allegedly in violation of Subsection 2.12(e) 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, (i) this Agreement may not be amended 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, termination, or waiver applies to all Investors in the same fashion (it being agreed that, subject to Section 4.1(e) hereof, a waiver of the provisions of Section 4.1 with respect to a particular transaction shall be deemed to apply to all Investors in the same fashion if such waiver

 

22

 

does so by its terms, notwithstanding the fact that certain Investors may nonetheless, by agreement with the Company, purchase securities in such transaction), (ii) no provision of this Agreement providing rights solely to Major Investors may be amended or terminated nor shall the observance of any term thereof be waived without the prior written consent of Major Investors holding a majority of the Registrable Securities held by all Major Investors and (iii) Section 5.2 may not be amended or waived with respect to any Investor or its investment adviser without the consent of the relevant Investor if such Investor or its investment adviser will, as a result of such amendment or waiver, be named in any press release or other public disclosure.  The Company shall give prompt notice of any amendment or termination hereof or waiver hereunder to any party hereto that did not consent in writing to such amendment, termination, or waiver.  Any amendment, 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.

 

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 Preferred Stock after the date hereof, whether pursuant to the Subscription Agreement or otherwise, any purchaser of such shares of 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.  The Company hereby represents and warrants that it has obtained sufficient consents and signatures from its stockholders to amend and restate the Prior Agreement as set forth herein.  Upon the effectiveness of this Agreement, the Prior IRA shall be deemed amended and restated and superseded and replaced in its entirety by this Agreement, and shall be of no further force or effect.

 

23

 

6.11.                     Dispute Resolution.  The parties (a) hereby irrevocably and unconditionally submit to the jurisdiction of the state courts of the State 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 the State 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 AGREEMENT AND THE TRANSACTIONS ASSOCIATED HEREWITH, 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

 

Each party will bear its own costs in respect of any disputes arising under this Agreement.  Each of the parties to this Agreement consents to personal jurisdiction for any equitable action sought in the U.S. District Court for the District of Delaware or any court of the State of Delaware having subject matter jurisdiction.

 

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.

 

6.13.                     Acknowledgment.  The Company acknowledges that the Investors and/or such Investors’ investment advisers are in the business of making, selecting and/or managing venture capital and other investments and therefore review the business plans and related proprietary information of many enterprises, including enterprises which may have products or 

 

24

 

services which compete directly or indirectly with those of the Company.  Nothing in this Agreement shall preclude or in any way restrict the Investors and/or such Investors’ investment advisers from investing or participating in any particular enterprise whether or not such enterprise has products or services which compete with those of the Company.

 

[Remainder of Page Intentionally Left Blank]

 

25

 

IN WITNESS WHEREOF, the parties have executed this Second Amended and Restated Investors’ Rights Agreement as of the date first written above.

 

 

	
 
    	
 
    	
 
    	
PTC   THERAPEUTICS, INC.
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/   Stuart W. Peltz 
    
	
 
    	
 
    	
Name:
    	
Stuart   W. Peltz 
    
	
 
    	
 
    	
Title:
    	
Chief   Executive Officer
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
[Investors   executed by means of counterpart signature pages, the form of which is   attached hereto]
    

 

[Signature Page to Second Amended and Restated Investors’ Rights Agreement]

 

 

	
 
    	
 
    	
 
    	
INVESTOR:   
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
Title:
    	
 
    

 

[Signature Page to Second Amended and Restated Investors’ Rights Agreement]

 

 

SCHEDULE A

 

Investors

 

Credit Suisse First Boston Equity Partners, L.P. and affiliates

Section Six Partners, L.P.

HBM Healthcare Investments (Cayman) Ltd.

Vulcan Ventures Inc. and affiliates

Delphi Ventures and affiliates

Celgene European Investment Company and affiliates

The Bay City Capital Fund III, L.P. and affiliates

Birchmere Ventures III LP

Novo A/S

Healthcap 1999 KB and affiliates

Pfizer International LLC

The Column Group, LP

Genavent Partners LP

Gilead Palo Alto, Inc. (f/k/a/ CV Therapeutics, Inc.)

Amgen SF, LLC and affiliates

Manufacturers Life Insurance

General Electric Capital Corporation

Deutsche Bank Nominees (Jersey) Limited a/c HAML

Pictet Funds (LUX)

Coller International Partners IV Limited

CDIB Biotech USA Investment, Co., Ltd.

POSCO BioVentures I, L.P.

Agron Ltd. Inc.

Tenue Business S.A.

Plaza St Petersburg Holdings Ltd

Marbre Services Limited

Frederick Frank

Security Pacific Finance, Ltd.

Minglewood Management Ltd.

Edward Spencer-Churchill

Wolvercote Investments Limited (BVI )

Leman Management Nominees

The Swanson Family Fund, Ltd.

Stronghold Capital Ltd (formerly Three Crowns Capital (Cayman) Ltd.)

Mintz Levin Investments LLC

The Board of Trustees of the Leland Stanford Junior University (DAPER I)

HSBC Trustee (C.I.) Limited

Great China Trading Company

Tichenor Ventures, LLC

Novartis BioVentures Ltd.

Oxford Finance Funding I, LLC

Oxford Finance, LLC

Midcap Financial LLC

 

 

SCHEDULE B

 

New Investors

 

Brookside Mezzanine Capital Partners Fund, L.P.

Prudential Health Sciences Fund #296227

Jennison Global Healthcare Master Fund # 002414605

Longwood Fund LP

GHC Umbrella Trust - Global Health Care Opportunity Unit Trust

North River Partners, L.P.

North River Investors (Bermuda) L.P.

Salthill Partners, L.P.

Salthill Investors (Bermuda) L.P.

Hawkes Bay Master Investors (Cayman) LP

Adage Capital Partners, LP

Ayer Capital Partners Master Fund, L.P.

Ayer Capital Partners Kestrel Fund, LP

Epworth — Ayer Capital

Ayer Special Situations Fund I, LP

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