Document:

Exhibit 4.2

	
  

  	
  016570|
  003590|127C|RESTRICTED||4|057-423  THIS CERTIFIES THAT  is the owner of CUSIP DATED  COUNTERSIGNED AND REGISTERED:  COMPUTERSHARE
  TRUST COMPANY, N.A.  TRANSFER AGENT AND REGISTRAR,  FULLY-PAID AND NON-ASSESSABLE
  SHARES OF THE COMMON STOCK, $0.001 PAR VALUE PER SHARE, OF  ARYx Therapeutics, Inc. (hereinafter called the “Company”), transferable on the books of the Company in  person or by duly authorized
  attorney, upon surrender of this Certificate properly endorsed. This
  Certificate and  the shares represented hereby, are issued and shall be held
  subject to all of the provisions of the Certificate of  Incorporation, as amended, and
  the By-Laws, as amended, of the Company (copies of which are on file with the  Company and with the Transfer
  Agent), to all of which each holder, by acceptance hereof, assents. This  Certificate is not valid unless
  countersigned and registered by the Transfer Agent and Registrar.  Witness the facsimile
  seal of the Company and the facsimile signatures of its duly authorized
  officers.  COMMON STOCK  PAR VALUE $0.001  COMMON STOCK  THIS CERTIFICATE IS TRANSFERABLE IN  CANTON, MA AND JERSEY CITY, NJ  SEE REVERSE FOR CERTAIN
  DEFINITIONS  Certificate  Number  Shares  ARYx THERAPEUTICS, INC.  INCORPORATED UNDER THE LAWS OF THE
  STATE OF DELAWARE  Chairman of
  the Board  Secretary  By  AUTHORIZED SIGNATURE 043387 10 9 <<Month Day, Year>>  * s p e c i m e n * * * *  * * s p e c i m e n * * *  * * * s p e c i m e n * *  * * * * s p e c i m e n *  * * * * * s p e c i m e n  ****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen  **specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen**  **specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**  specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****  specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**sp  ecimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****sp  ecimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**spec  imen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****speci  men**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specim  en****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specim  en**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specime  ****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen  **specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen**  **specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**  specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****  specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**sp  ecimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****sp  ecimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**spec  imen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****speci  men**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specim  en****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specim  en**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specimen****specimen**specime  ***SPECIMEN***SPECIMEN  ***SPECIMEN***SPECIMEN  SPECIMEN * SPECIMEN * SPECIMEN  * SPECIMEN * SPECIMEN *  ZQ 000000

  

	
  

  	
  The following
  abbreviations, when used in the inscription on the face of this Certificate,
  shall be construed as though they were written out in full  according to applicable laws or
  regulations:  TEN
  COM - as tenants in common UNIF GIFT MIN ACT- . . . . . . . . . .Custodian .
  . . . . . . . . . . . . . .  TEN ENT - as tenants by the entireties under Uniform Gifts to
  Minors Act . . . . . . . . . . . . .  JT TEN - as joint tenants with right of survivorship UNIF TRF
  MIN ACT . . . . . . . . . . . . . . .Custodian (until age. . . ). . . . . . .
  . . . .  and
  not as tenants in common (Cust) (Minor)  under Uniform Transfers to Minors
  Act. . . . . . . . . .  (State)  Additional abbreviations may also be used though not in the
  above list.  For
  value received, ____________________________hereby sell, assign and transfer
  unto  __
  Shares  ____
  Attorney  Dated:
  ____________20__________________  Signature:
  ____________________________________________________________  Signature: ____________________________________________________________  Notice: The signature to this
  assignment must correspond with the name  as written upon the face of the
  Certificate, in every particular,  without alteration or enlargement, or any change whatever.  (Cust) (Minor)  (State)  PLEASE INSERT SOCIAL SECURITY OR
  OTHER IDENTIFYING NUMBER OF ASSIGNEE  (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL
  ZIP CODE, OF ASSIGNEE)  of the common stock represented by the within Certificate, and
  do hereby irrevocably constitute and appoint  to transfer the said stock on the
  books of the within-named Company with full power of substitution in the
  premises.  .  ARYx THERAPEUTICS, INC.  THE COMPANY WILL FURNISH WITHOUT
  CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS, A SUMMARY OF THE POWERS,
  DESIGNATIONS,  PREFERENCES
  AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS
  OF STOCK OF THE COMPANY AND THE  QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES
  AND RIGHTS, AND THE VARIATIONS IN RIGHTS, PREFERENCES AND  LIMITATIONS DETERMINED FOR EACH
  SERIES, WHICH ARE FIXED BY THE CERTIFICATE OF INCORPORATION OF THE COMPANY,
  AS AMENDED, AND  THE
  RESOLUTIONS OF THE BOARD OF DIRECTORS OF THE COMPANY, AND THE AUTHORITY OF
  THE BOARD OF DIRECTORS TO DETERMINE  VARIATIONS FOR FUTURE SERIES. SUCH REQUEST MAY BE MADE TO THE
  OFFICE OF THE SECRETARY OF THE COMPANY OR TO THE TRANSFER  AGENT. THE BOARD OF DIRECTORS MAY
  REQUIRE THE OWNER OF A LOST OR DESTROYED STOCK CERTIFICATE, OR HIS LEGAL  REPRESENTATIVES, TO GIVE THE COMPANY
  A BOND TO INDEMNIFY IT AND ITS TRANSFER AGENTS AND REGISTRARS AGAINST ANY
  CLAIM THAT  MAY
  BE MADE AGAINST THEM ON ACCOUNT OF THE ALLEGED LOSS OR DESTRUCTION OF ANY
  SUCH CERTIFICATE.  Signature(s) Guaranteed: Medallion Guarantee Stamp  THE SIGNATURE(S) SHOULD BE
  GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (Banks,  Stockbrokers, Savings and Loan
  Associations and Credit Unions) WITH MEMBERSHIP IN AN APPROVED  SIGNATURE GUARANTEE MEDALLION
  PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15.Exhibit
4.6

 

ARYX
THERAPEUTICS

AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

 

October
22, 2007

 

 

Table
of Contents

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  SECTION 1.

  	
  GENERAL

  	
  1

  
	
   

  	
   

  	
   

  
	
  1.1

  	
  Amendment and Restatement of Prior
  Agreement

  	
  1

  
	
   

  	
   

  	
   

  
	
  1.2

  	
  Definitions

  	
  1

  
	
   

  	
   

  	
   

  
	
  SECTION 2.

  	
  REGISTRATION; RESTRICTIONS ON TRANSFER

  	
  3

  
	
   

  	
   

  	
   

  
	
  2.1

  	
  Restrictions
  on Transfer

  	
  3

  
	
   

  	
   

  	
   

  
	
  2.2

  	
  Demand
  Registration

  	
  4

  
	
   

  	
   

  	
   

  
	
  2.3

  	
  Piggyback
  Registrations

  	
  7

  
	
   

  	
   

  	
   

  
	
  2.4

  	
  Form S-3
  Registration

  	
  8

  
	
   

  	
   

  	
   

  
	
  2.5

  	
  Expenses
  of Registration

  	
  9

  
	
   

  	
   

  	
   

  
	
  2.6

  	
  Obligations
  of the Company

  	
  10

  
	
   

  	
   

  	
   

  
	
  2.7

  	
  Termination
  of Registration Rights

  	
  11

  
	
   

  	
   

  	
   

  
	
  2.8

  	
  Delay of
  Registration; Furnishing Information

  	
  11

  
	
   

  	
   

  	
   

  
	
  2.9

  	
  Indemnification

  	
  12

  
	
   

  	
   

  	
   

  
	
  2.10

  	
  Assignment
  of Registration Rights

  	
  14

  
	
   

  	
   

  	
   

  
	
  2.11

  	
  Amendment
  of Registration Rights

  	
  14

  
	
   

  	
   

  	
   

  
	
  2.12

  	
  “Market
  Stand-Off” Agreement; Agreement to Furnish Information

  	
  14

  
	
   

  	
   

  	
   

  
	
  2.13

  	
  Limitations
  on Subsequent Registration Rights

  	
  15

  
	
   

  	
   

  	
   

  
	
  2.14

  	
  Exchange
  Act Reporting

  	
  15

  
	
   

  	
   

  	
   

  
	
  SECTION 3.

  	
  COVENANTS OF THE COMPANY AND THE INVESTORS

  	
  16

  
	
   

  	
   

  	
   

  
	
  3.1

  	
  Basic
  Financial Information and Reporting

  	
  16

  
	
   

  	
   

  	
   

  
	
  3.2

  	
  Inspection
  Rights

  	
  17

  
	
   

  	
   

  	
   

  
	
  3.3

  	
  Confidentiality
  of Records

  	
  17

  
	
   

  	
   

  	
   

  
	
  3.4

  	
  Reservation
  of Common Stock

  	
  17

  
	
   

  	
   

  	
   

  
	
  3.5

  	
  Key Man
  Insurance

  	
  17

  
	
   

  	
   

  	
   

  
	
  3.6

  	
  Stock
  Vesting

  	
  17

  
	
   

  	
   

  	
   

  
	
  3.7

  	
  Proprietary
  Information and Inventions Agreement

  	
  18

  
	
   

  	
   

  	
   

  
	
  3.8

  	
  Assignment
  of Right of First Refusal

  	
  18

  
	
   

  	
   

  	
   

  
	
  3.9

  	
  Use of
  Proceeds

  	
  18

  
	
   

  	
   

  	
   

  
	
  3.10

  	
  Termination
  of Covenants

  	
  18

  
	
   

  	
   

  	
   

  
	
  3.11

  	
  Visitation
  Rights

  	
  18

  
	
   

  	
   

  	
   

  
	
  3.12

  	
  Transactions
  with Investors

  	
  19

  
	
   

  	
   

  	
   

  

 

i

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  3.13

  	
  Modification
  of Capital Stock

  	
  19

  
	
   

  	
   

  	
   

  
	
  3.14

  	
  Quorum of
  the Board

  	
  19

  
	
   

  	
   

  	
   

  
	
  3.15

  	
  Public Non-Disclosure

  	
  20

  
	
   

  	
   

  	
   

  
	
  SECTION 4.

  	
  RIGHTS OF FIRST
  REFUSAL

  	
  21

  
	
   

  	
   

  	
   

  
	
  4.1

  	
  Subsequent
  Offerings

  	
  21

  
	
   

  	
   

  	
   

  
	
  4.2

  	
  Exercise
  of Rights

  	
  21

  
	
   

  	
   

  	
   

  
	
  4.3

  	
  Issuance
  of Equity Securities to Other Persons

  	
  21

  
	
   

  	
   

  	
   

  
	
  4.4

  	
  Termination
  and Waiver of Rights of First Refusal

  	
  21

  
	
   

  	
   

  	
   

  
	
  4.5

  	
  Transfer
  of Rights of First Refusal

  	
  22

  
	
   

  	
   

  	
   

  
	
  4.6

  	
  Excluded
  Securities

  	
  22

  
	
   

  	
   

  	
   

  
	
  SECTION 5.

  	
  MISCELLANEOUS

  	
  23

  
	
   

  	
   

  	
   

  
	
  5.1

  	
  Governing
  Law

  	
  23

  
	
   

  	
   

  	
   

  
	
  5.2

  	
  Survival

  	
  23

  
	
   

  	
   

  	
   

  
	
  5.3

  	
  Successors
  and Assigns

  	
  23

  
	
   

  	
   

  	
   

  
	
  5.4

  	
  Entire
  Agreement

  	
  23

  
	
   

  	
   

  	
   

  
	
  5.5

  	
  Severability

  	
  23

  
	
   

  	
   

  	
   

  
	
  5.6

  	
  Amendment
  and Waiver

  	
  23

  
	
   

  	
   

  	
   

  
	
  5.7

  	
  Delays or
  Omissions

  	
  24

  
	
   

  	
   

  	
   

  
	
  5.8

  	
  Notices

  	
  24

  
	
   

  	
   

  	
   

  
	
  5.9

  	
  Aggregation
  of Stock

  	
  25

  
	
   

  	
   

  	
   

  
	
  5.10

  	
  Attorneys’
  Fees

  	
  25

  
	
   

  	
   

  	
   

  
	
  5.11

  	
  Titles
  and Subtitles

  	
  25

  
	
   

  	
   

  	
   

  
	
  5.12

  	
  Counterparts

  	
  25

  

 

ii

 

ARYX THERAPEUTICS, INC.

 

AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

 

This
Amended and Restated Investor Rights Agreement (the “Agreement”)
is entered into as of the 22nd day of October, 2007, by and among Aryx Therapeutics, Inc., a Delaware corporation (the “Company”)
and the holders of the Company’s Preferred Stock set forth on Exhibit A
hereto (collectively, the “Investors” and each individually an “Investor”).

 

RECITALS

 

Whereas,
the Investors and the Company are parties to an Amended and
Restated Investor Rights Agreement dated January 27, 2006 (the “Prior
Agreement”);

 

Whereas,
the parties to the Prior Agreement desire to amend and restate the
Prior Agreement and accept the rights and covenants hereof in lieu of their
rights and covenants under the Prior Agreement; and

 

Whereas,
the Company and the Investors have agreed to the registration
rights, information rights, and other rights as set forth below.

 

Now,
Therefore, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement, the parties
mutually agree as follows:

 

SECTION
1.         GENERAL

 

1.1          Amendment
and Restatement of Prior Agreement.  The Prior Agreement is hereby
amended in its entirety and restated herein. Such amendment and restatement is
effective because this Agreement has been executed by the Company and the
holders of at least sixty-three percent (66 2/3%) of the Registrable Securities
(as defined herein) held by the Investors outstanding as of the date of this
Agreement. All provisions of, rights granted and covenants made in the Prior
Agreement are hereby waived, released and superseded in their entirety and
shall have no further force or effect, and each of the Investors hereby
irrevocably waives, and releases the Company from, any and all claims such
Investor has or may have against the Company arising out or as a result of (a)
the Prior Agreement or (b) the amendment and restatement of the Prior Agreement
as provided for under this Section 1.1.

 

1.2          Definitions. As
used in this Agreement the following terms shall have the following respective
meanings:

 

(a)           “Common Stock”  means shares of the Company’s common stock.

 

(b)           “Equity Securities”  means
(i) any Common Stock, Preferred Stock or other security of the Company,
(ii) any security convertible, with or without consideration, into any
Common Stock, Preferred Stock or other security (including any option to
purchase such a convertible security), (iii) any security carrying any
warrant or right to subscribe to or purchase

 

 

any Common Stock,
Preferred Stock or other security or (iv) any such warrant or right, in
each case, whether authorized or not.

 

(c)           “Exchange Act”  means the
Securities Exchange Act of 1934, as amended.

 

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

 

(e)           “Holder”  means any
person owning of record Registrable Securities that have not been sold to the
public or any assignee of record of such Registrable Securities in accordance
with Section 2.10 hereof.

 

(f)            “Initial Offering”  means the
Company’s first firm commitment underwritten public offering of its Common
Stock registered under the Securities Act.

 

(g)           “Register,” “registered,”  and “registration”  refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of
effectiveness of such registration statement or document.

 

(h)           “Registrable Securities” means (a)
Common Stock of the Company issuable or issued upon conversion of the Shares;
(b) any Common Stock of the Company issued as (or issuable upon the conversion
or exercise of any warrant, right or other security which is issued as) a
dividend or other distribution with respect to, or in exchange for or in
replacement of, such above-described securities; and (c) except for the
purposes of Section 4, the Shares (or any Common Stock issued or issuable upon
conversion of the Shares) issuable upon exercise of any and all warrants issued
by the Company to Lighthouse Capital Partners V, L.P. and/or its affiliates or
any Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of,
such securities. Notwithstanding the foregoing, Registrable Securities shall
not include any securities sold by a person to the public pursuant to a
registration statement or Rule 144 or sold in a private transaction in which
the transferor’s rights under Section 2 of this Agreement are not assigned.

 

(i)            “Registrable Securities then outstanding”  shall be the
number of shares determined by calculating the total number of shares of the
Company’s Common Stock that are Registrable Securities and either (a) are then
issued and outstanding or (b) are issuable pursuant to then exercisable or
convertible securities.

 

(j)            “Registration Expenses”  shall mean all
expenses incurred by the Company in complying with Sections 2.2, 2.3 and 2.4
hereof, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel for the Company,
reasonable fees and disbursements not to exceed twenty-five thousand dollars
($25,000) of a single special counsel for the Holders, blue sky fees and
expenses and the expense of any special audits incident to or required by any
such registration (but excluding the compensation of regular employees of the
Company which shall be paid in any event by the Company).

 

2

 

(k)           “SEC”  or “Commission”  means the Securities and Exchange
Commission.

 

(l)            “Securities Act”  shall mean the
Securities Act of 1933, as amended.

 

(m)          “Selling Expenses”  shall mean all
underwriting discounts and selling commissions applicable to the sale.

 

(n)           “Shares” shall mean the Company’s
Series A Stock, Series B Stock, Series C Stock, Series D Stock and Series E
Stock held by the Investors listed on Exhibit A  hereto
(or any shares acquired pursuant to the exercise of warrants to purchase such
securities) and their permitted assigns pursuant to Section 2.10.

 

(o)           “Special Registration Statement”
shall mean (i) a registration statement relating to any employee benefit plan
or (ii) with respect to any corporate reorganization or transaction under
Rule 145 of the Securities Act, including any registration statements
related to the issuance or resale of securities issued in such a transaction or
(iii) a registration related to stock issued upon conversion of debt securities.

 

SECTION
2.         REGISTRATION; RESTRICTIONS ON TRANSFER

 

2.1          Restrictions on Transfer. Each
Holder agrees not to make any disposition of all or any portion of the Shares
or Registrable Securities unless and until:

 

(i)            There is then in
effect a registration statement under the Securities Act covering such proposed
disposition and such disposition is made in accordance with such registration
statement; or

 

(ii)           (A) The transferee
has agreed in writing to be bound by the terms of this Agreement, (B) such
Holder shall have notified the Company of the proposed disposition and shall
have furnished the Company with a detailed statement of the circumstances
surrounding the proposed disposition, and (C) if reasonably requested by the
Company, such Holder shall have furnished the Company with an opinion of
counsel, reasonably satisfactory to the Company, that such disposition will not
require registration of such shares under the Securities Act. It is agreed that
the Company will not require opinions of counsel for transactions made pursuant
to Rule 144 except in unusual circumstances.

 

(iii)         Notwithstanding the
provisions of paragraphs (i) and (ii) above, no such registration statement or
opinion of counsel shall be necessary for a transfer by a Holder which is (A) a
partnership to its partners or former partners in accordance with partnership
interests or to the estate of any such partner or former partner or the
transfer by gift, will or intestate succession of any partner to his or her
spouse or to the siblings, lineal descendants or ancestors of such partner or
his or her spouse, (B) a corporation to its shareholders in accordance with
their interest in the corporation, (C) a limited liability company to its
members or former members in accordance with their interest in the limited
liability company, or (D) to the Holder’s family member, former spouse or trust
for the benefit of an individual Holder, Holder’s family

 

3

 

member or former spouse; provided, that in each case the transferee
will be subject to the terms of this Agreement to the same extent as if he were
an original Holder hereunder.

 

(b)           Each certificate
representing Shares or Registrable Securities shall (unless otherwise permitted
by the provisions of the Agreement) be stamped or otherwise imprinted with a
legend substantially similar to the following (in addition to any legend
required under applicable state securities laws):

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”) AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS
NOT REQUIRED.

 

(c)           The Company shall
be obligated to reissue promptly unlegended certificates at the request of any
holder thereof if the holder shall have obtained an opinion of counsel (which
counsel may be counsel to the Company) reasonably acceptable to the Company to
the effect that the securities proposed to be disposed of may lawfully be so
disposed of without registration, qualification or legend.

 

(d)           Any legend endorsed
on an instrument pursuant to applicable state securities laws and the
stop-transfer instructions with respect to such securities shall be removed
upon receipt by the Company of an order of the appropriate blue sky authority
authorizing such removal.

 

2.2          Demand Registration.

 

(a)           Subject to the
conditions of this Section 2.2 and after the effective date of the
registration statement pertaining to the Initial Offering, if at any time the
Company shall receive a written request from the Holders of (i) at least a
majority of the Registrable Securities held by the Holders of the Series A
Stock, Series B Stock, Series C Stock and Series E Stock, in the aggregate,
(ii) at least thirty-three percent (33%) of the Registrable Securities held by
the Holders of the Series D Stock or (iii) at least thirty-six percent (36%) of
the Registrable Securities held by the Holders of the Series E Stock (in each
case, the “Initiating Holders”) that the Company file a registration
statement under the Securities Act covering the registration of Registrable
Securities then outstanding that have an aggregate offering price, net of
underwriting discount and commissions, that exceeds $7,500,000, then the
Company shall, within thirty (30) days of the receipt thereof, give written
notice of such request to all Holders, and subject to the limitations of this
Section 2.2, effect, as expeditiously as reasonably possible, the
registration under the Securities Act of all Registrable Securities that all
Holders request to be registered.

 

If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request

 

4

 

made pursuant to
this Section 2.2 or any request pursuant to Section 2.4 and the Company
shall include such information in the written notice referred to in
Section 2.2(a) or Section 2.4(a), as applicable. In such event, the
right of any Holder to include its Registrable Securities in such registration
shall be conditioned upon such 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 enter into an underwriting agreement
in customary form with the underwriter or underwriters selected for such
underwriting by a majority in interest of the Initiating Holders (which
underwriter or underwriters shall be reasonably acceptable to the Company) (provided,
that in no event shall any Holder be required to provide any
representations and warranties regarding the Company and/or its business and/or
any other person other than its affiliates, which in no event shall be deemed
to be the Company or any other Holder that may be deemed to be an affiliate
solely by virtue of such Holder’s interest in the Company). Notwithstanding any
other provision of this Section 2.2 or Section 2.4, if the
underwriter advises the Company that marketing factors require a limitation of
the number of securities to be underwritten (including Registrable Securities)
then the Company shall so advise all Holders of Registrable Securities which
would otherwise be underwritten pursuant hereto, and the number of shares that
may be included in the underwriting shall be allocated to the Holders of such
Registrable Securities on a pro rata
basis based on the number of Registrable Securities held by all such Holders
(including the Initiating Holders); provided,
however, that the number of shares of Registrable Securities to be
included in such underwriting and registration shall not be reduced unless all
other securities to be sold for the account of the Company and any
securityholder other than the holders of Registrable Securities are first
entirely excluded from the underwriting and registration. If any Holder
disapproves of the terms of any such underwriting, such Holder may elect to
withdraw therefrom by written notice to the Company and the underwriter,
delivered at least ten (10) business days prior to the effective date of the
registration statement. Any Registrable Securities excluded or withdrawn from
such underwriting shall be withdrawn from the registration.

 

(b)           Subject to the
final sentence of this Section 2.2(b), the Company shall not be required to
effect a registration pursuant to this Section 2.2:

 

(i)            prior to one
hundred eighty (180) days following the effective date of the registration
statement pertaining to the Initial Offering;

 

(ii)           with respect to a
request pursuant to Section 2.2(a)(i), after the Company has effected two
(2) registrations requested pursuant to Section 2.2(a)(i), and with respect to
a request pursuant to Section 2.2(a)(ii), after the Company has effected two
(2) registrations requested pursuant to Section 2.2(a)(ii) (in each case,
the “Initiating Holders Demand Registration”), and such registrations
have been declared or ordered effective;

 

(iii)         during the period
starting with the date of filing of, and ending on the date one hundred eighty
(180) days following the effective date of the registration statement
pertaining to a public offering, other than pursuant to a Special Registration
Statement; provided, that the
Company makes reasonable good faith efforts to cause such registration
statement to become effective and provided, in the case of a public offering
other than the Initial Offering, that the Initiating Holders were permitted to
register such shares as requested to be registered pursuant to Section 2.3
hereof without reduction by the underwriter thereof;

 

5

 

(iv)          if within twenty
(20) days of receipt of a written request from Initiating Holders pursuant to
Section 2.2(a), the Company gives notice to the Holders of the Company’s
bona fide intention to file a registration statement for a public offering on
its own behalf for its own account, other than pursuant to a Special
Registration Statement, within forty-five (45) days;

 

(v)            if the Company
shall furnish to Holders requesting a registration statement pursuant to this
Section 2.2, a certificate signed by the Chairman of the Board stating
that in the good faith judgment of the Board of Directors of the Company (the “Board”),
it would be materially detrimental to the Company and its shareholders for such
registration statement to be effected at such time because such action (x)
would materially interfere with a significant acquisition, corporate
reorganization or financing or other similar transaction involving the Company,
(y) would require premature disclosure of material information that the Company
has a bona fide business purpose for preserving as confidential (provided, that no such information will be
disclosed to such Holders) or (z) would render the Company unable to comply
with requirements under the Securities Act or Exchange Act, in which event the
Company shall have the right to defer such filing for a period of not more than
one hundred twenty (120) days after receipt of the request of the Initiating
Holders, provided, that such
right to delay a request shall be exercised by the Company not more than once
in any twelve (12) month period; provided,  further, that the Company shall not register any securities for the
account of itself or any other shareholder during such one hundred twenty (120)
day period (other than pursuant to a Special Registration Statement);

 

(vi)          if the Initiating
Holders propose to dispose of shares of Registrable Securities that may be
immediately registered on Form S-3 pursuant to a request made pursuant to
Section 2.4 below; or

 

(vii)         in any particular
jurisdiction in which the Company would be required to qualify to do business
or to execute a general consent to service of process in effecting such
registration, qualification or compliance unless the Company is already subject
to service in such jurisdiction and except as may be required under the
Securities Act.

 

Notwithstanding the
foregoing and without limitation to the generality of Section 2.6(a), a
registration shall not constitute a valid demand under Section 2.2 until
the registration statement relating to such registration has been declared
effective by the SEC and has remained continuously effective for the lesser of
(i) the period during which all Registrable Securities registered in such
demand registration are sold and (ii)  180 days; provided,
however, that a registration
shall not constitute a valid demand registration pursuant to this
Section 2.2 if (x) after the registration statement relating to such
registration has been declared effective, such registration or the related
offer, sale or distribution of Registrable Securities thereunder is interfered
with by any stop order, injunction or other order or requirement of the SEC or
other governmental agency or court for any reason attributable to the Company
and not primarily attributable to any Holder, and such interference is not
thereafter promptly eliminated, or (y) the conditions specified in the
underwriting agreement, if any, entered into in connection with such demand
registration are not satisfied or waived, by reason of a failure by the Company
and not primarily by any Holder. Further, a registration shall not constitute
an effective registration under Section 2.2 if more than 50% of the Registrable
Securities so requested to be registered by

 

6

 

the Initiating Holders are excluded from an offering under Section 2.2(a)
(a “Reload Event”), then the Holders shall have the right to one
additional demand registration under Sections 2.2(a), upon the occurrence of
each Reload Event.

 

2.3          Piggyback Registrations. The Company shall notify all Holders of Registrable Securities
in writing at least fifteen (15) days prior to the filing of any registration
statement under the Securities Act for purposes of a public offering of securities
of the Company (including, but not limited to, registration statements relating
to secondary offerings of securities of the Company, but excluding Special
Registration Statements) and will afford each such Holder an opportunity to
include in such registration statement all or part of such Registrable
Securities held by such Holder. Each Holder desiring to include in any such
registration statement all or any part of the Registrable Securities held by it
shall, within fifteen (15) days after the above-described notice from the
Company, so notify the Company in writing. Such notice shall state the intended
method of disposition of the Registrable Securities by such Holder. If a Holder
decides not to include all of its Registrable Securities in any registration
statement thereafter filed by the Company, such Holder shall nevertheless
continue to have the right to include any Registrable Securities in any
subsequent registration statement or registration statements as may be filed by
the Company with respect to offerings of its securities, all upon the terms and
conditions set forth herein.

 

(a)           Underwriting. If the registration statement under which
the Company gives notice under this Section 2.3 is for an underwritten
offering, the Company shall so advise the Holders of Registrable Securities. In
such event, the right of any such Holder to be included in a registration
pursuant to this Section 2.3 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 Registrable Securities through such underwriting
shall enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by the Company
(which underwriter or underwriters shall be reasonably acceptable to a majority
of the Initiating Holders initiating such request for registration) (provided,
that in no event shall any Holder be required to provide any
representations and warranties regarding the Company and/or its business and/or
any other person other than its affiliates, which in no event shall be deemed
to be the Company or any other Holder that may be deemed to be an affiliate
solely by virtue of such Holder’s interest in the Company). Notwithstanding any
other provision of this Section 2.3, if the underwriter determines in good
faith that marketing factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the underwriting
shall be allocated, first, to the Company; second, to the Holders on a pro rata basis based on the total number
of Registrable Securities held by the Holders; and third, to any shareholder of
the Company (other than a Holder) on a pro
rata basis. Notwithstanding the foregoing, in no event shall the
amount of securities of the selling Holders included in the offering be reduced
below twenty-five percent (25%) of
the total amount of securities included in such offering, unless such offering
is the initial public offering of the Company’s securities, in which case the
selling Holders may be excluded if the underwriters make the determination
described above and no other shareholder’s securities are included. No such
reduction shall reduce the securities being offered by the Company for its own
account to be included in the registration and underwriting. If any Holder
disapproves of the terms of any such underwriting, such Holder may elect to
withdraw therefrom by written notice to the Company and the

 

7

 

underwriter, delivered at
least ten (10) business days prior to the effective date of the registration
statement. Any Registrable Securities excluded or withdrawn from such
underwriting shall be excluded and withdrawn from the registration. For any
Holder which is a partnership or corporation, the partners, retired partners
and shareholders of such Holder, or the estates and family members of any such
partners and retired partners and any trusts for the benefit of any of the
foregoing person shall be deemed to be a single “Holder,” and any pro rata reduction with respect to such “Holder”
shall be based upon the aggregate amount of shares carrying registration rights
under this Agreement owned by all entities and individuals included in such “Holder,”
as defined in this sentence.

 

(b)           Right to Terminate Registration. The Company shall have
the right to terminate or withdraw any registration initiated by it under this
Section 2.3 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration. The Registration
Expenses of such withdrawn registration shall be borne by the Company in
accordance with Section 2.5 hereof.

 

2.4          Form S-3 Registration. In case the Company shall receive from any Holder or Holders of
Registrable Securities a written request or requests that the Company effect a
registration on Form S-3 (or any successor to Form S-3) or any similar short-form
registration statement and any related qualification or compliance with respect
to all or a part of the Registrable Securities owned by such Holder or Holders,
the Company will:

 

(a)           promptly give
written notice of the proposed registration, and any related qualification or
compliance, to all other Holders of Registrable Securities; and

 

(b)           as soon as
practicable, effect such registration and all such qualifications and
compliances as may be so requested and as would permit or facilitate the sale
and distribution of all or such portion of such Holder’s or Holders’
Registrable Securities as are specified in such request, together with all or
such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within
fifteen (15) days after receipt of such written notice from the Company; provided, however,
that the Company shall not be obligated to effect any such registration,
qualification or compliance pursuant to this Section 2.4:

 

(i)            if Form S-3 (or
any successor or similar form) is not available for such offering by the
Holders;

 

(ii)           if the Holders,
together with the holders of any other securities of the Company entitled to
inclusion in such registration, propose to sell Registrable Securities and such
other securities (if any) at an aggregate price to the public of less than
three million dollars ($3,000,000);

 

(iii)         if within twenty (20)
days of receipt of a written request from a Holder or Holders pursuant to this
Section, the Company gives notice to the Holders of the Company’s bona fide
intention to make a public offering on its own behalf and for its own account,
other than pursuant to a Special Registration Statement, within forty-five (45)
days;

 

8

 

(iv)          if the Company shall
furnish to the Holders a certificate signed by the Chairman of the Board
stating that in the good faith judgment of the Board, it would be materially
detrimental to the Company and its shareholders for such Form S-3 registration
to be effected at such time because such action (x) would materially interfere
with a significant acquisition, corporate reorganization or other similar
transaction involving the Company, (y) would require premature disclosure of
material information that the Company has a bona fide business purpose for
preserving as confidential or (z) would render the Company unable to comply
with requirements under the Securities Act or Exchange Act, in which event the
Company shall have the right to defer the filing of the Form S-3 registration
statement for a period of not more than ninety (90) days after receipt of the
request of the Holder or Holders under this Section 2.4; provided, that such right to delay a
request shall be exercised by the Company not more than once in any twelve (12)
month period; provided,  further, that the Company shall not register any securities for the account of itself or any
other shareholder during such ninety (90) day period (other than pursuant to a
Special Registration Statement); or

 

(v)            in any particular
jurisdiction in which the Company would be required to qualify to do business
or to execute a general consent to service of process in effecting such
registration, qualification or compliance unless the Company is already subject
to service in such jurisdiction and except as may be required under the
Securities Act.

 

(c)           Subject to the
foregoing, the Company shall file a Form S-3 registration statement covering
the Registrable Securities and other securities so requested to be registered
as soon as practicable after receipt of the request or requests of the Holders.

 

(d)           Registrations effected pursuant to this
Section 2.4 shall not be counted as demands for registration or registrations
effected pursuant to Section 2.2.

 

2.5          Expenses of Registration. Except as specifically provided herein, all Registration
Expenses incurred in connection with any registration, qualification or
compliance pursuant to Section 2.2 or any registration under Section 2.3 or
Section 2.4 herein shall be borne by the Company. All Selling Expenses incurred
in connection with any registrations hereunder, shall be borne by the holders
of the securities so registered pro rata
on the basis of the number of shares so registered. The Company shall not,
however, be required to pay for expenses of any registration proceeding begun
pursuant to Section 2.2 or Section 2.4, the request of which has been
subsequently withdrawn by the Initiating Holders unless (a) the withdrawal is
based upon material adverse information concerning the Company of which the
Initiating Holders were not aware at the time of such request or (b) the
Holders of a majority of Registrable Securities requested to be registered
agree to forfeit their right to one requested registration pursuant to Section
2.2 in which event such right shall be forfeited by all Holders; provided, however,
that in the case of a registration request initiated pursuant to Section 2.2 by
the Initiating Holders, the registration right to be forfeited shall be an
Initiating Holders Demand Registration. If the Holders are required to pay the
Registration Expenses, such expenses shall be borne by the holders of
securities (including Registrable Securities) requesting such registration in
proportion to the number of shares for which registration was requested. If the
Company is required to pay the Registration Expenses of a withdrawn offering
pursuant to clause (a) above, then the Holders shall not forfeit their rights
pursuant to Section 2.2 or Section 2.4 to a registration.

 

9

 

2.6          Obligations of the Company. Whenever required to effect the registration of any Registrable
Securities, the Company shall, as expeditiously as reasonably possible:

 

(a)           Prepare and file
with the SEC a registration statement with respect to such Registrable
Securities and use all reasonable efforts to cause such registration statement
to become effective, and, upon the request of the Holders of a majority of the
Registrable Securities registered thereunder, keep such registration statement
effective for up to one hundred and eighty (180) days or, if earlier, until the
Holder or Holders have completed the distribution related thereto. The Company
shall not be required to file, cause to become effective or maintain the
effectiveness of any registration statement that contemplates a distribution of
securities on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act.

 

(b)           Prepare and file
with the SEC such amendments and supplements to such registration statement and
the prospectus used in connection with such registration statement as may be
necessary to comply with the provisions of the Securities Act with respect to
the disposition of all securities covered by such registration statement for
the period set forth in paragraph (a) above.

 

(c)           Furnish to the
Holders such number of copies of a prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and such
other documents as they may reasonably request in order to facilitate the
disposition of Registrable Securities owned by them.

 

(d)           Use its reasonable
best efforts to register and qualify the securities covered by such
registration statement under such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably requested by the Holders; provided,
that the Company shall not be required in connection therewith or as
a condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions unless the Company is
already subject to service in such jurisdiction and except as may be required
under the Securities Act.

 

(e)           In the event of any
underwritten public offering, (i) enter into and perform its obligations
under an underwriting agreement, in usual and customary form, with the managing
underwriter(s) of such offering and (ii) provide reasonable cooperation,
including causing appropriate officers and other members of management to
attend and participate in “road shows” and other information meetings organized
by any underwriter. Each Holder participating in such underwriting shall also
enter into and perform its obligations under such an underwriting agreement (provided,
that in no event shall any Holder be required to provide any
representations and warranties regarding the Company and/or its business and/or
any other person other than its affiliates, which in no event shall be deemed
to be the Company or any other Holder that may be deemed to be an affiliate
solely by virtue of such Holder’s interest in the Company).

 

(f)            Notify each Holder
of Registrable Securities covered by such registration statement at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits

 

10

 

to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing.

 

(g)           Cause all such
Registrable Securities registered pursuant to this Section 2 to be listed on a
national exchange or trading system and on each securities exchange and trading
system on which similar securities issued by the Company are then listed.

 

(h)           Provide a transfer
agent and registrar for all Registrable Securities registered pursuant
hereunder and a CUSIP number for all such Registrable Securities, in each case
not later than the effective date of such registration.

 

(i)            Use its best
efforts to furnish, on the date that such Registrable Securities are delivered
to the underwriters for sale, if such securities are being sold through
underwriters, (i) an opinion, dated as of such date, of the counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and (ii) a “comfort” letter
dated as of such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering addressed
to the underwriters.

 

2.7          Termination of Registration Rights. A Holder’s registration rights
granted under this Section 2 shall terminate and be of no further force
and effect ten (10) years after the date of the Initial Offering or expire if
(a) the Company has completed its Initial Offering and is subject to the
provisions of the Exchange Act, and (b) all Registrable Securities held by and
issuable to such Holder (and its affiliates, partners, former partners, members
and former members) may be sold under Rule 144 during any ninety (90) day
period. Notwithstanding the foregoing, if a Holder owns more than ten percent
(10%) of the Equity Securities of the Company, such Holder shall continue to
have registration rights beyond the ten (10) year limitation set forth above
until (i) the Equity Securities held by such Holder (and its affiliates,
managers, partners, former partners, members and former members) may be sold
under Rule 144(k), or (ii) such Holder owns less than ten percent (10%) of the
Equity Securities of the Company.

 

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

 

(a)           It shall be a
condition precedent to the obligations of the Company to take any action
pursuant to Section 2.2, 2.3 or 2.4 that the selling Holders shall furnish to
the Company such information regarding themselves, the Registrable Securities
held by them and the intended method of disposition of such securities as shall
be required to effect the registration of their Registrable Securities.

 

(b)           The Company shall
have no obligation with respect to any registration requested pursuant to
Section 2.2 or Section 2.4 if, due to the operation of subsection 2.2(a), the
number of shares or the anticipated aggregate offering price of the Registrable
Securities to be

 

11

 

included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company’s
obligation to initiate such registration as specified in Section 2.2 or Section
2.4, whichever is applicable. If the Company does not complete a registration
requested pursuant to Section 2.2 as a result of the preceding sentence, the
Holders shall continue to have the same number of demand registrations pursuant
to Section 2.4 as such Holders were entitled to prior to the initiation of the
incomplete registration.

 

2.9          Indemnification.
In the event any Registrable Securities are included in a registration
statement under Sections 2.2, 2.3 or 2.4:

 

(a)           To the extent
permitted by law, the Company will indemnify and hold harmless each Holder, the
partners, managers, members, officers and directors of each Holder, any
underwriter (as defined in the Securities Act) for such Holder and each person,
if any, who controls such Holder or underwriter within the meaning of the
Securities Act or the Exchange Act, against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon any of the following statements, omissions or
violations (collectively a “Violation”) by the Company: (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or
(iii) any violation or alleged violation by the Company of the Securities
Act, the Exchange Act, any state securities law or any rule or regulation
promulgated under the Securities Act, the Exchange Act or any state securities
law in connection with the offering covered by such registration statement; and
the Company will pay as incurred to each such Holder, partner, member, officer,
director, underwriter or controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided,  however, that
the indemnity agreement contained in this Section 2.9(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Company, which
consent shall not be unreasonably withheld, nor shall the Company be liable in
any such case for any such loss, claim, damage, liability or action to the
extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly
for use in connection with such registration by such Holder, partner, manager,
member, officer, director, underwriter or controlling person of such Holder.

 

(b)           To the extent
permitted by law, a Holder will severally and not jointly, if Registrable
Securities held by such Holder are included in the securities as to which such
registration, qualifications or compliance is being effected, indemnify and
hold harmless the Company, each of its directors, its officers who have signed
the registration statement and each person, if any, who controls the Company
within the meaning of the Securities Act, any underwriter and any other Holder
selling securities under such registration statement or any of such other
Holder’s partners, directors or officers or any person who controls such
Holder, against any losses, claims, damages or liabilities (joint or several)
to which the Company or any such director, officer, controlling person,
underwriter, controlling person of such underwriter, or

 

12

 

other such Holder, or
partner, director, officer or controlling person of such other Holder may
become subject under the Securities Act, the Exchange Act or other federal or
state law, insofar as such losses, claims, damages or liabilities (or actions
in respect thereto) arise out of or are based upon any Violation, in each case
to the extent (and only to the extent) that such Violation occurs in reliance
upon and in conformity with written information furnished by such Holder under
an instrument duly executed by such Holder and stated to be specifically for
use in connection with such registration; and each such Holder will pay as
incurred any legal or other expenses reasonably incurred by the Company or any
such director, officer, controlling person, underwriter or other Holder, or
partner, manager, member, officer, director or controlling person of such other
Holder in connection with investigating or defending any such loss, claim,
damage, liability or action if it is judicially determined that there was such
a Violation; provided, however, that the indemnity agreement contained in this
Section 2.9(b) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Holder, which consent shall not be unreasonably withheld; provided,
further, that in no event shall any
indemnity under this Section 2.9 exceed the net proceeds from the offering
received by such Holder.

 

(c)           Promptly after
receipt by an indemnified party under this Section 2.9 of notice of the
commencement of any action (including any governmental action), such
indemnified party will, if a claim in respect thereof is to be made against any
indemnifying party under this Section 2.9, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the parties; provided, however,
that an indemnified party shall have the right to retain its own counsel, with
the fees and expenses to be paid by the indemnifying party, if representation
of such indemnified party by the counsel retained by the indemnifying party
would be inappropriate due to actual or potential differing interests between
such indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action, if materially
prejudicial to its ability to defend such action, shall relieve such
indemnifying party of liability to the indemnified party under this Section 2.9
to the extent of such prejudice, but the omission so to deliver written notice
to the indemnifying party will not relieve it of any liability that it may have
to any indemnified party otherwise than under this Section 2.9.

 

(d)           If the
indemnification provided for in this Section 2.9 is held by a court of
competent jurisdiction to be unavailable to an indemnified party with respect
to any losses, claims, damages, liabilities or expenses referred to herein, the
indemnifying party, in lieu of indemnifying such indemnified party thereunder,
shall to the extent permitted by applicable law contribute to the amount paid
or payable by such indemnified party as a result of such loss, claim, damage,
liability or expense in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation(s) that resulted in such
loss, claim, damage, liability or expense, as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and of
the indemnified party shall be determined by a court of law by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the indemnifying party

 

13

 

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 (i) in no event shall
any contribution by a Holder hereunder exceed the net proceeds from the
offering received by such Holder and (ii) no person or entity guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) will be entitled to contribution from any person or entity who
was not guilty of such fraudulent misrepresentation.

 

(e)           The obligations of
the Company and Holders under this Section 2.9 shall survive completion of any
offering of Registrable Securities in a registration statement and the
termination of this agreement. No indemnifying party, in the defense of any
such claim or litigation, shall, except with the consent of each indemnified
party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation.

 

2.10        Assignment of Registration Rights. The rights to cause
the Company to register Registrable Securities pursuant to this Section 2 may
be assigned by a Holder to a transferee or assignee of Registrable Securities
which (a) is a subsidiary, parent, general partner, limited partner, retired
partner, member or retired member or affiliate of a Holder, (b) is a Holder’s
family member, former spouse or trust for the benefit of an individual Holder,
Holder’s family member, or former spouse, (c) acquires at least fifty thousand
(50,000) shares of Registrable Securities (as adjusted for stock splits and
combinations); or (d) is an entity affiliated by common control with such
Holder; provided, however, (i) the transferor shall, within ten (10) days
after such transfer, furnish to the Company written notice of the name and
address of such transferee or assignee and the securities with respect to which
such registration rights are being assigned and (ii) such transferee shall
agree to be subject to all restrictions set forth in this Agreement.

 

2.11        Amendment of Registration Rights. Any provision of this
Section 2 may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Holders of
at least sixty-six and two-thirds percent (66 2/3%) of the Registrable
Securities then outstanding. Any amendment or waiver effected in accordance
with this Section 2.11 shall be binding upon each Holder and the Company. By
acceptance of any benefits under this Section 2, Holders of Registrable
Securities hereby agree to be bound by the provisions hereunder.

 

2.12        “Market Stand-Off” Agreement; Agreement to Furnish Information. Each Holder hereby agrees that such
Holder shall not, without the prior written consent of the managing
underwriters, sell or otherwise transfer or dispose of any Common Stock (or
other securities) of the Company held by such Holder immediately prior to the
effective date of the registration statement (other than those included in the
registration) for a period specified by the representative of the underwriters
of Common Stock (or other securities) of the Company not to exceed one hundred
eighty (180) days following the effective date of a registration statement of
the Company filed under the Securities Act; provided,  that:

 

(i)            such agreement
shall apply only to the Company’s Initial Offering; and

 

14

 

(ii)           all officers,
directors and one percent (1%) or greater shareholders of the Company are
subject to similar agreements.

 

Each Holder agrees to
execute and deliver such other agreements as may be reasonably requested by the
Company or the underwriter which are consistent with the foregoing or which are
necessary to give further effect thereto. The obligations described in this
Section 2.12 shall not apply to a registration relating solely to employee
benefit plans on Form S-1 or Form S-8 or similar forms that may be promulgated
in the future, or a registration relating solely to a Commission Rule 145
transaction on Form S-4 or similar forms that may be promulgated in the future.
The Company may impose stop-transfer instructions with respect to the shares of
Common Stock (or other securities) subject to the foregoing restriction until
the end of said one hundred eighty (180) day period.

 

2.13        Limitations on Subsequent Registration Rights. From and after the date of this
Agreement, the Company shall not, without the prior written consent of the
Holders of at least sixty-six and two-thirds percent (66 2/3%) of the
Registrable Securities, enter into any agreement with any holder or prospective
holder of any securities of the Company that would allow such holder or
prospective holder (a) to include such securities in any registration
filed under Section 2.2, Section 2.3 or Section 2.4 hereof, unless
under the terms of such agreement, such holder or prospective holder may
include such securities in any such registration only to the extent that the
inclusion of such securities will not reduce the amount of the Registrable
Securities of the Holders that are included or (b) to demand registration
of their securities.

 

2.14        Exchange Act Reporting. With a view to making available to the Holders the benefits of
certain rules and regulations of the SEC which may permit the sale of the
Registrable Securities to the public without registration or pursuant to a
registration on Form S-3, the Company agrees to use its best efforts to:

 

(a)           Make and keep
public information available, as those terms are understood and defined in SEC
Rule 144 or any similar or analogous rule promulgated under the Securities Act,
at all times after the effective date of the first registration filed by the
Company for an offering of its securities to the general public;

 

(b)           File with the SEC,
in a timely manner, all reports and other documents required of the Company
under the Securities Act and the Exchange Act; and

 

(c)           So long as a Holder
owns any Registrable Securities, furnish to such Holder forthwith upon
request:  a written statement by the
Company as to its compliance with the reporting requirements of said Rule 144
of the Securities Act, and of the Exchange Act (at any time after it has become
subject to such reporting requirements) whether or not it qualifies as a
registrant whose securities may be resold pursuant to Form S-3; a copy of the
most recent annual or quarterly report of the Company; and such other reports
and documents as a Holder may reasonably request in availing itself of any rule
or regulation of the SEC allowing it to sell any such securities without
registration.

 

15

 

SECTION
3.         COVENANTS OF THE COMPANY AND THE INVESTORS

 

3.1          Basic Financial Information and
Reporting. The Company will maintain true books and records
of account in which full and correct entries will be made of all its business
transactions pursuant to a system of accounting established and administered in
accordance with generally accepted accounting principles (“GAAP”)
consistently applied, and will set aside on its books all such proper accruals
and reserves as shall be required under GAAP consistently applied.

 

(b)           The Company will
furnish each Investor, as soon as practicable after the end of each fiscal year
of the Company, and in any event within one hundred twenty (120) days
thereafter, the Company will furnish each Investor a balance sheet of the
Company, as at the end of such fiscal year, and a statement of income and a
statement of cash flows of the Company, for such year, all audited and prepared
in accordance with GAAP consistently applied and setting forth in each case in
comparative form the figures for the previous fiscal year, all in reasonable
detail. Such financial statements shall be accompanied by a report and opinion
thereon by independent public accountants of national standing selected by the
Board.

 

(c)           The Company will
furnish each Investor, as soon as practicable, but in any event within
forty-five (45) days after the end of each of the first three (3) quarters of
each fiscal year of the Company, an unaudited income statement, statement of
cash flows for such fiscal quarter and an unaudited balance sheet as of the end
of such fiscal quarter, together with a comparison to the Company’s budget.

 

(d)           So long as an
Investor (with its affiliates) shall own not less than five hundred thousand
(500,000) shares of Registrable Securities (as adjusted for stock splits and
combinations) or own any shares of Series D Stock or Series E Stock (a “Major
Investor”), to the extent requested by such Major Investor, the Company
will furnish each such Major Investor, as soon as practicable after the end of
the month, and in any event within thirty (30) days thereafter, an unaudited
balance sheet of the Company as of the end of the month, and a statement of
income and a statement of cash
flows of the Company for such month, together with a comparison to the Company’s
budget.

 

(e)           With respect to the
financial statements called for in subsections (b) and (c) of this
Section 3.1, an instrument executed by the Chief Financial Officer or
Chief Executive Officer of the Company certifying that such financials were
prepared in accordance with GAAP consistently applied with prior practice for
earlier periods (with the exception of footnotes that may be required by GAAP)
and fairly present the financial condition of the Company and its results of
operation for the period specified, subject to year-end audit adjustment.

 

(f)            To the extent
requested by a Major Investor, the Company will furnish to such Major Investor,
as soon as practicable, other financial information that such Major Investor
may reasonably request.

 

(g)           The Company shall
furnish each Investor who owns shares of Series D Stock, or Series E Stock, and
each member of the Board of Directors, with: (i) prior to the beginning of
each fiscal year an annual budget for such fiscal year; (ii) notification
of material litigations where the Company is a party to the lawsuits; and (iii)
upon request and as soon as practicable, copies of all filings made with SEC,
unless such filings are submitted confidentially.

 

16

 

3.2          Inspection Rights. Each Major Investor shall have the right to visit and inspect
any of the properties of the Company or any of its subsidiaries, and to discuss
the affairs, finances and accounts of the Company or any of its subsidiaries
with its officers, and to review such information as is reasonably requested
all at such reasonable times and as often as may be reasonably requested; provided, however,
that the Company shall not be obligated under this Section 3.2 with
respect to a competitor of the Company (provided,
that no Investor shall be deemed to be a competitor of the Company) or with
respect to information which is attorney-client privileged and cannot,
therefore, be disclosed without causing such privilege to be waived.

 

3.3          Confidentiality of Records. Each Investor agrees to use, and to use its commercially
reasonable efforts to insure that its authorized representatives use, the same
degree of care as such Investor uses to protect its own confidential
information to keep confidential any information furnished to it which the
Company identifies in writing as being confidential or proprietary (so long as
such information is not in the public domain), except that such Investor may
disclose such proprietary or confidential information to its attorneys,
accountants, consultants, or other professionals, any partner, manager,
subsidiary or parent of such Investor for the purpose of evaluating its
investment in the Company as long as such attorney, accountant, consultant,
other professional, partner, manager, subsidiary or parent is advised of the confidentiality
provisions of this Section 3.3, or as may otherwise be required by law. The
Company acknowledges that at least some of the Investors are in the business of
venture capital investing and therefore review the business plans and related
proprietary information of many enterprises, including enterprises which may
have products or services which compete directly or indirectly with those of
the Company. Nothing in this Agreement shall preclude or in any way restrict
the Investors from investing or participating in any particular enterprise
whether or not such enterprise has products or services which compete with
those of the Company provided each Investor abides by the provisions of this
Section 3.3.

 

3.4          Reservation of Common Stock. The Company will at all times reserve and keep available, solely
for issuance and delivery upon the conversion of the Preferred Stock, all
Common Stock issuable from time to time upon such conversion.

 

3.5          Key Man Insurance. Unless otherwise canceled by the Board, the Company will use its
best efforts to obtain and maintain in full force and effect term life
insurance in the amount of one million ($1,000,000) dollars on the lives of
each of Paul Goddard, Peter G. Milner and Pascal Druzgala, naming the Company
as beneficiary.

 

3.6          Stock Vesting. Unless
otherwise approved by the Board, all stock options and other stock equivalents
issued after the date of this Agreement to employees, directors, consultants
and other service providers shall be subject to vesting as follows:  (a) twenty-five percent (25%) of such
stock shall vest at the end of the first year following the earlier of the date
of issuance or such person’s services commencement date with the company, and
(b) seventy-five percent (75%) of such stock shall vest monthly over the
following 36 months, with 1/48th of the stock vesting on the last
day of each month. In the event of a Change in Control (as defined in Section
3.10 below), each holder of the stock options or other stock equivalents shall
receive full acceleration of any unvested options, share of capital stock or
other stock equivalents unless the vesting rights of such unvested stock
options or repurchase options of such other stock equivalents are assigned to
or assumed by a successor company.

 

17

 

3.7          Proprietary Information and Inventions Agreement. The Company shall require all
employees and consultants to execute and deliver a Proprietary Information and
Inventions Agreement in the Company’s standard form.

 

3.8          Assignment of Right of First Refusal. In the event the Company elects not
to exercise any right of first refusal or right of first offer the Company may
have on a proposed transfer of certain outstanding capital stock pursuant to
stock purchase agreements to which the Company is entitled the right of first
refusal or right of first offer, by contract or otherwise, the Company shall,
to the extent it may do so, assign such right of first refusal or right of
first offer to each Investor. Such assignment shall be made as soon as
practicable, but in no case later than five (5) days after the Company receives
notice from a holder of capital stock of an offer to sell his or her shares of
capital stock. In the event of such assignment, each Investor shall have a
right to purchase its pro rata
portion of the capital stock proposed to be transferred. Each Investor’s pro
rata portion shall be equal to the product obtained by multiplying (i) the
aggregate number of shares proposed to be transferred by (ii) a fraction, the
numerator of which is the number of shares of Registrable Securities held by
such Investor at the time of the proposed transfer and the denominator of which
is the total number of Registrable Securities held by all Investors at the time
of such proposed transfer.

 

3.9          Use of Proceeds.
The proceeds of the Financing shall be used for working capital,
clinical research and product development, and other general corporate
purposes.

 

3.10        Termination of Covenants. All covenants of the Company contained in Section 3 of this
Agreement shall expire and terminate as to each Investor upon the earlier of
(i) the effective date of the registration statement pertaining to the Initial
Offering or (ii) upon (a) the acquisition of all or substantially all of the assets
of the Company or (b) an acquisition of the Company by another corporation or
entity by consolidation, merger or other reorganization in which the holders of
the Company’s outstanding voting stock as constituted immediately prior to such
transaction own, immediately after such transaction, securities representing
less than fifty percent (50%) of the voting power of the corporation or other
entity surviving such transaction (a “Change in Control”); provided, however,  that such covenants shall not terminate
under this subsection (ii) unless the consideration received by the Investors
in such Change in Control consists solely of cash and/or publicly traded equity
securities.

 

3.11        Visitation Rights.

 

(a)           Ascent Biomedical
Ventures I, L.P. (“Ascent”) shall have such visitation rights and additional
rights as set forth in that certain Management Rights Agreement between Ascent
and the Company.

 

(b)           The Company shall
allow one representative designated by Nomura Phase4 Ventures L.P. (“Nomura”)
to attend all meetings, in person or by phone, of the Board in a nonvoting
capacity, and in connection therewith, the Company shall give such
representative copies of all notices, minutes, consents and other materials,
financial or otherwise, which the Company provides to its Board; provided, however,
that the Company reserves the right to exclude such representative from access
to any material or meeting or portion thereof if the Company believes upon
advice of counsel that such exclusion is reasonably necessary to

 

18

 

preserve the
attorney-client privilege; provided, further, that in the event that the Company reasonably
determines that disclosure of any information to the Nomura representative
would likely result in the loss of attorney-client privilege with respect to
such information, the Company will use commercially reasonable efforts to
structure a method of disclosure that will permit the Nomura representative to
receive some or all of such information, in a manner that will preserve the
attorney-client privilege for such information. The decision of the Board with
respect to the privileged nature of such information shall be final and binding
subject to the foregoing sentence.

 

3.12        Transactions with Investors. Except for transactions
contemplated by the Purchase Agreement and the agreements and instruments to be
entered into by the Company and the Purchasers (as set forth on Exhibit A of
the Purchase Agreement), or any of them, pursuant to the express terms of the
Purchase Agreement or transactions set forth on Item 10 of Section 3.6 of the
Schedule of Exceptions to the Purchase Agreement as in effect on the date
hereof or as otherwise approved by each other Investor holding at least
1,400,000 shares of Preferred Stock (as adjusted for stock splits, dividends
and the like), neither the Company nor any of its subsidiaries shall enter into
any transaction with an Investor, any affiliate of an Investor, any director,
officer or employee of an Investor or any such affiliate (or (i) any member or
manager or an Investor or affiliate organized as a limited liability company
and (ii) any general partner of an Investor or affiliate organized as a
partnership) or any entity in which one or more of any such officer, director,
employee, member, manager or general partner owns, collectively, in excess of
10% of the equity interests. For purposes of this Section 3.12, an entity will
not be deemed to be affiliated with an Investor solely by reason of an officer
or director of such Investor serving as an independent director of such entity.
Notwithstanding the foregoing, this Section 3.12 shall not apply to
transactions with an Investor that, together with its affiliates, holds less
than an aggregate of 250,000 shares of Preferred Stock (as adjusted for stock
splits, dividends and the like).

 

3.13        Modification of Capital Stock.
Except as otherwise approved by each Investor holding at least 1,400,000 shares
of Preferred Stock (as adjusted for stock splits, dividends and the like), (i)
no change will be effected to the terms of any class or series of the Company’s
capital stock unless such change is effected with respect to all shares of such
class or series, and (ii) except for the repurchases of an employee’s capital
stock in connection with the termination of such employee’s employment
relationship with the Company, no offer will be made to exchange or redeem
shares of any class or series of the Company’s capital stock unless such offer
is made available, on identical terms, to all holders of such class or series
on a pro rata basis.

 

3.14        Quorum of the Board. At all times when both of the
directors elected by the Series C Stock and both of the directors elected by
the Series D Stock are actually serving on the Board, a quorum of the Board shall
consist of a majority of the directors including at least one of the directors
appointed by the holders of each of the Series C Stock and Series D Stock. If
at any time, less than both of the directors elected by the Series C Stock and
both of the directors elected by the Series D Stock are actually serving on the
Board, a quorum of the Board shall consist of a majority of the directors,
including at least 50% of the actually serving directors appointed by the
Series C Stock and Series D Stock together.

 

19

 

3.15        Public Non-Disclosure.
Neither the terms of this Agreement nor any other document required to be
executed in connection with the Financing, nor any termination of this
Agreement or the related agreements (except for the Restated Certificate) shall
be publicly disseminated by the parties hereto without the prior written
approval thereof, which approval shall not be unreasonably withheld, except (i)
as may otherwise be required by law or governmental authority, (ii) as may be
necessary or appropriate in connection with the enforcement of this Agreement,
(iii) information disclosed to legal or financial advisors (and in the case of
a Investor which is an investment fund, to the members of such fund, including
general and limited partners and to its management company) in the ordinary
course of evaluating this investment (provided such third parties agree not to
disclose or further disseminate such information or are bound not to do so by
the confidential nature of the relationship), or (iv) to the extent such
information was in the public domain when received or thereafter enters the
public domain other than because of disclosure by the other party in
contravention of this Agreement.

 

20

 

SECTION
4.         RIGHTS OF FIRST REFUSAL

 

4.1          Subsequent Offerings. Subject to applicable securities laws, each Investor shall have
a right of first refusal to purchase its pro
rata share of all Equity Securities, as defined below, that the
Company may, from time to time, propose to sell and issue after the date of
this Agreement, other than the Equity Securities excluded by Section 4.6 hereof.
Each Investor’s pro rata share is
equal to the ratio of (a) the number of shares of the Registrable
Securities which such Investor is deemed to be a holder immediately prior to
the issuance of such Equity Securities to (b) the total number of shares
of the Company’s outstanding Common Stock (including all shares of Common Stock
issuable or issued upon conversion of the Shares) immediately prior to the
issuance of the Equity Securities. For purposes of this Section 4.1, the
term “Investor” includes any general partners and affiliates of an Investor. An
Investor shall be entitled to apportion the right of first offer hereby granted
it among itself and its partners and affiliates in such proportions as it deems
appropriate

 

4.2          Exercise of Rights. If the Company proposes to issue any Equity Securities, it shall
give each Investor written notice of its bona fide intention, describing the
Equity Securities, the price and the terms and conditions upon which the
Company proposes to issue the same. Each Investor shall have fifteen (15) days from the giving of such notice
to agree to purchase its pro rata
share of the Equity Securities for the price and upon the terms and conditions
specified in the notice by giving written notice to the Company and stating
therein the quantity of Equity Securities to be purchased. Notwithstanding the
foregoing, the Company shall not be required to offer or sell such Equity
Securities to any Investor who would cause the Company to be in violation of
applicable federal securities laws by virtue of such offer or sale.

 

4.3          Issuance of Equity Securities to Other Persons. If not
all of the Investors elect to purchase their pro
rata share of the Equity Securities, then the Company shall promptly
notify in writing the Investors who do so elect and shall offer such Investors
the right to acquire such unsubscribed shares. The Investors shall have five
(5) days after receipt of such notice to notify the Company of its election to
purchase all or a portion thereof of their pro
rata share of the unsubscribed shares. If the Investors fail to
exercise in full the rights of first refusal, the Company shall have ninety
(90) days thereafter to sell the Equity Securities in respect of which the
Investor’s rights were not exercised, at a price and upon general terms and
conditions not materially more favorable to the purchasers thereof than specified
in the Company’s notice to the Investors pursuant to Section 4.2 hereof. If
the Company has not sold such Equity Securities within ninety (90) days of the
notice provided pursuant to Section 4.2, the Company shall not thereafter
issue or sell any Equity Securities, without first offering such securities to
the Investors in the manner provided above.

 

4.4          Termination and Waiver of Rights of First Refusal. The rights of first refusal
established by this Section 4 shall not apply to, and shall terminate upon the
earlier of (i) the effective date of the registration statement pertaining
to the Initial Offering or (ii) a Change in Control; provided, however,  that this Section 4 shall not terminate
under this subsection (ii) unless the consideration received by the Investors
in such Change in Control consists solely of cash and/or publicly traded equity
securities. The rights of first refusal established by this Section 4 may be
amended, or any provision waived with the written consent of Investors

 

21

 

holding at least sixty-six
and two thirds percent (66 2/3%) of the Registrable Securities held by all
Investors, or as permitted by Section 5.6.

 

4.5          Transfer of Rights of First Refusal. The rights of first refusal of each
Investor under this Section 4 may be transferred to the same parties,
subject to the same restrictions as any transfer of registration rights
pursuant to Section 2.10.

 

4.6          Excluded Securities. The rights of first refusal established by this Section 4 shall
have no application to any of the following Equity Securities:

 

(a)           Up to 9,460,000
shares (the “Option Plan Threshold”) of Common Stock and/or options,
warrants or other Common Stock purchase rights, or such higher number of shares
as approved by the Preferred Stock pursuant to Article III.C.2.b(xiii) of the
Company’s Restated Articles of Incorporation, and the Common Stock issued
pursuant to such options, warrants or other rights (as adjusted for any stock
dividends, combinations, splits, recapitalizations and the like after the
filing of the Company’s Restated Articles of Incorporation) to be issued after
the Original Issue Date (as defined in the Company’s Restated Articles of
Incorporation) to employees, officers or directors of, or consultants or
advisors to the Company or any subsidiary, pursuant to stock purchase or stock
option plans or other arrangements that are approved by the Board; provided, that without increasing the
Option Plan Threshold, any shares that revert back or are otherwise available
for reissuance in connection with the expiration or termination of any option
shall be available for issuance by the Company and not be subject to the right
of first refusal established by this Section 4;

 

(b)           stock issued or
issuable pursuant to any rights or agreements, options, warrants or convertible
securities outstanding as of the date of this Agreement; and stock issued
pursuant to any such rights or agreements granted after the date of this
Agreement, so long as the rights of first refusal established by this
Section 4 were complied with or were inapplicable pursuant to any
provision of this Section 4.6 with respect to the initial sale or grant by the
Company of such rights or agreements;

 

(c)           any Equity
Securities issued for consideration other than cash pursuant to a bona fide
merger, consolidation, acquisition or similar business combination, in each
case, as approved by the Board;

 

(d)           shares of Common
Stock issued in connection with any stock split, stock dividend or
recapitalization by the Company;

 

(e)           shares of Common
Stock issued upon conversion of shares of the Company’s Preferred Stock;

 

(f)            any Equity
Securities issued pursuant to any equipment loan or leasing arrangement, real
property leasing arrangement, or debt financing from a bank or similar
financial or lending institution, in each case if approved by the Board;

 

(g)           any Equity
Securities that are issued by the Company pursuant to a registration statement
filed under the Securities Act that results in the conversion of all Preferred
Stock into Common Stock; and

 

22

 

(h)           any Equity
Securities issued in connection with strategic transactions involving the
Company and other entities, including (i) joint ventures, manufacturing,
marketing or distribution arrangements or (ii) technology transfer or
development arrangements; provided,
that the issuance of shares therein has been approved by the Board.

 

SECTION
5.         MISCELLANEOUS

 

5.1          Governing Law. This
Agreement shall be governed by and construed under the laws of the State of
California as applied to agreements among California residents entered into and
to be performed entirely within California.

 

5.2          Survival. The
representations, warranties, covenants, and agreements made herein shall
survive any investigation made by any Holder and the closing of the
transactions contemplated hereby. All statements as to factual matters
contained in any certificate or other instrument delivered by or on behalf of
the Company pursuant hereto in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties by the Company
hereunder solely as of the date of such certificate or instrument.

 

5.3          Successors and Assigns. Except as otherwise expressly provided herein, the provisions
hereof shall inure to the benefit of, and be binding upon, the successors,
assigns, heirs, executors, and administrators of the parties hereto and shall
inure to the benefit of and be enforceable by each person who shall be a holder
of Registrable Securities from time to time; provided,
however, that prior to the receipt by the Company of adequate
written notice of the transfer of any Registrable Securities specifying the
full name and address of the transferee, the Company may deem and treat the
person listed as the holder of such shares in its records as the absolute owner
and holder of such shares for all purposes, including the payment of dividends
or any redemption price.

 

5.4          Entire Agreement.
This Agreement, the Exhibits and Schedules hereto, the Purchase
Agreement and the other documents delivered pursuant thereto constitute the
full and entire understanding and agreement between the parties with regard to
the subjects hereof, terminates the Prior Agreement in its entirety, and no
party shall be liable or bound to any other in any manner by any
representations, warranties, covenants and agreements except as specifically
set forth herein and therein.

 

5.5          Severability. In
case any provision of the Agreement shall be invalid, illegal, or
unenforceable, the validity, legality, and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.

 

5.6          Amendment and Waiver.

 

(a)           Except as otherwise
expressly provided, this Agreement may be amended or modified only upon the
written consent of the Company and the holders of at least sixty-six and
two-thirds percent (66 2/3%) of the Registrable Securities.

 

23

 

(b)           Except as otherwise
expressly provided, the obligations of the Company and the rights of the
Holders under this Agreement may be waived only with the written consent of the
holders of at least sixty-six and two-thirds percent (66 2/3%) of the
Registrable Securities.

 

(c)           Notwithstanding the
foregoing, this Agreement may be amended with only the written consent of the
Company to include additional purchasers of shares of Series E Stock pursuant
to the Purchase Agreement as “Investors,” “Holders” and parties hereto.

 

(d)           Notwithstanding the
foregoing, this Agreement may not be amended or terminated and the observance
of any term of this Agreement may not be waived with respect to any Holder
without the written consent of such Holder unless such amendment, termination
or waiver applies to all Holders, as the case may be, in the same fashion (it
being agreed that a waiver of the provisions of Section 4 with respect to a
particular transaction shall be deemed to apply to all Holders in the same
fashion if such waiver does so by its terms, notwithstanding the fact that
certain Holders may nonetheless, by agreement with the Company, purchase
securities in such transaction). No delay or failure on the part of any party
hereto in exercising any right, power or privilege under this Agreement or
under any other instruments given in connection with or pursuant to this
Agreement shall impair any such right, power or privilege or be construed as a
waiver of any such right, power or privilege. No single or partial exercise of
any such right, power or privilege shall preclude the further exercise of such
right, power or privilege, or the exercise of any other right, power or
privilege.

 

5.7          Delays or Omissions. It is agreed that no delay or omission to exercise any right,
power, or remedy accruing to any Holder, upon any breach, default or
noncompliance of the Company under this Agreement shall impair any such right,
power, or remedy, nor shall it be construed to be a waiver of any such breach,
default or noncompliance, or any acquiescence therein, or of any similar
breach, default or noncompliance thereafter occurring. It is further agreed
that any waiver, permit, consent, or approval of any kind or character on any
Holder’s part of any breach, default or noncompliance under the Agreement or
any waiver on such Holder’s part of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, by law, or otherwise afforded to Holders, shall be cumulative and
not alternative.

 

5.8          Notices. All
notices required or permitted hereunder shall be in writing and shall be deemed
effectively given:  (a) upon
personal delivery to the party to be notified, (b) when sent by confirmed
telex or facsimile if sent during normal business hours of the recipient; if
not, then on the next business day, (c) five (5) days after having been sent by
registered or certified mail, return receipt requested, postage prepaid, provided, that this clause (c) shall
only apply if the notice is being sent to an address within the United States,
or (d) one (1) business day after deposit with a nationally recognized
overnight courier, specifying next day delivery, with written verification of
receipt. All communications shall be sent to the party to be notified at the
address set forth in the Company’s records or at such other address as such
party may designate by ten (10) days advance written notice to the other
parties hereto (it being understood that as of the date hereof, the addresses
attached to the Purchase Agreement are the current addresses of record for the
Investors).

 

24

 

5.9          Aggregation of Stock. All shares of Registrable Securities held or acquired by
affiliated entities (including affiliated venture capital funds) or persons
shall be aggregated together for the purpose of determining the availability of
any rights under this Agreement, and all such affiliated entities or persons
shall be considered one Holder for the purpose of meeting any threshold
hereunder.

 

5.10        Attorneys’ Fees.
In the event that any dispute among the parties to this Agreement should
result in litigation, the prevailing party in such dispute shall be entitled to
recover from the losing party all fees, costs and expenses of enforcing any
right of such prevailing party under or with respect to this Agreement,
including without limitation, such reasonable fees and expenses of attorneys
and accountants, which shall include, without limitation, all fees, costs and
expenses of appeals.

 

5.11        Titles and Subtitles. The titles of the sections and subsections of this Agreement are
for convenience of reference only and are not to be considered in construing
this Agreement.

 

5.12        Counterparts. This
Agreement may be executed in any number of counterparts, each of which shall be
an original, but all of which together shall constitute one instrument.

 

25

 

In
Witness Whereof, the parties hereto have executed this Amended and Restated Investor
Rights Agreement as of the date set forth in the first paragraph
hereof.

 

 

	
  COMPANY:

  
	
   

  
	
  ARYX THERAPEUTICS,
  INC.

  
	
   

  
	
   

  
	
  By:

  	
  /s/ David Nagler

  	
   

  
	
   

  	
  David Nagler

  
	
   

  	
  Vice President, Corporate Affairs

  
	
   

  	
  and Secretary

  
				

 

ARYX
THERAPEUTICS

AMENDED
AND RESTATED INVESTOR RIGHTS AGREEMENT

SIGNATURE
PAGE

 

 

	
   

  	
  INVESTOR(S):

  
	
   

  	
   

  
	
   

  	
  NOMURA PHASE4
  VENTURES L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Nomura Phase4
  Ventures Limited as manager on

  
	
   

  	
   

  	
  behalf of Nomura
  Phase4 Ventures L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Dr. Denise Pollard-Knight

  	
   

  
	
   

  	
  Name:

  	
  Dr. Denise
  Pollard-Knight

  
	
   

  	
  Title:

  	
  Head of Nomura Phase4 Ventures

  
					

 

 

ARYX THERAPEUTICS

AMENDED AND RESTATED INVESTOR
RIGHTS AGREEMENT

SIGNATURE PAGE

 

 

	
   

  	
  INVESTOR(S):

  
	
   

  	
   

  	
   

  
	
   

  	
  MPM
  BIOVENTURES III, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  MPM BioVentures
  III GP, L.P., its General 

  
	
   

  	
  Partner

  
	
   

  	
  By:

  	
  MPM BioVentures
  III LLC, its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Nicholas
  Simon

  	
   

  
	
   

  	
  Name:

  	
  Nicholas Simon

  
	
   

  	
  Title:

  	
  Series A Member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MPM
  BIOVENTURES III-QP, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  MPM BioVentures
  III GP, L.P., its General 

  
	
   

  	
  Partner

  
	
   

  	
  By:

  	
  MPM BioVentures
  III LLC, its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Nicholas
  Simon

  	
   

  
	
   

  	
  Name:

  	
  Nicholas Simon

  
	
   

  	
  Title:

  	
  Series A Member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MPM
  BIOVENTURES III GMBH & CO. 

  BETEILIGUNGS KG

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  MPM BioVentures
  III GP, L.P., in its capacity as 

  
	
   

  	
  the Managing
  Limited Partner

  
	
   

  	
  By:

  	
  MPM BioVentures
  III LLC, its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Nicholas
  Simon

  	
   

  
	
   

  	
  Name:

  	
  Nicholas Simon

  
	
   

  	
  Title:

  	
  Series A Member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MPM
  BIOVENTURES III PARALLEL FUND, 

  L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  MPM BioVentures
  III GP, L.P., its General 

  
	
   

  	
  Partner

  
	
   

  	
  By:

  	
  MPM BioVentures
  III LLC, its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Nicholas
  Simon

  	
   

  
	
   

  	
  Name:

  	
  Nicholas Simon

  
	
   

  	
  Title:

  	
  Series A Member

  
						

 

ARYX THERAPEUTICS

AMENDED AND RESTATED INVESTOR
RIGHTS AGREEMENT

SIGNATURE PAGE

 

 

	
   

  	
  INVESTOR(S):

  
	
   

  	
   

  
	
   

  	
  MPM
  ASSET MANAGEMENT INVESTORS 2002 

  BVIII LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Nicholas
  Simon

  	
   

  
	
   

  	
  Name:

  	
  Nicholas Simon

  
	
   

  	
  Title:

  	
  Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MPM
  BIOVENTURES STRATEGIC FUND, L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  MPM BioVentures
  III GP, L.P., its General 

  
	
   

  	
  Partner

  
	
   

  	
  By:

  	
  MPM BioVentures
  III LLC, its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Nicholas
  Simon

  	
   

  
	
   

  	
  Name:

  	
  Nicholas Simon

  
	
   

  	
  Title:

  	
  Series A Member

  
					

 

ARYX THERAPEUTICS

AMENDED AND RESTATED INVESTOR
RIGHTS AGREEMENT

SIGNATURE PAGE

 

 

	
   

  	
  INVESTOR(S):

  
	
   

  	
   

  
	
   

  	
  CADUCEUS PRIVATE INVESTMENTS, LP

  
	
   

  	
   

  	
   

  
	
   

  	
  By: OrbiMed
  Capital LLC, its General Partner

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Eric A.
  Bittelman

  	
   

  
	
   

  	
  Name:

  	
  Eric A. Bittelman

  
	
   

  	
  Title:

  	
  Chief Financial
  Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  ORBIMED ASSOCIATES LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By: OrbiMed
  Advisors, LLC, its Managing Member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Eric A. Bittelman

  	
   

  
	
   

  	
  Name:

  	
  Eric A. Bittelman

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  UBS JUNIPER CROSSOVER
  FUND, L.L.C.

  
	
   

  	
   

  
	
   

  	
  By: OrbiMed
  Advisors Inc., Member of PW Juniper 

  Crossover Management, L.L.C. , which is the 

  Managing Member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Eric A. Bittelman

  	
   

  
	
   

  	
  Name:

  	
  Eric A. Bittelman

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  
								

 

ARYX THERAPEUTICS

AMENDED AND RESTATED INVESTOR
RIGHTS AGREEMENT

SIGNATURE PAGE

 

 

	
   

  	
  INVESTOR(S):

  
	
   

  	
   

  
	
   

  	
  MONTREUX EQUITY PARTNERS II SBIC, LP

  
	
   

  	
   

  
	
   

  	
  By: Montreux
  Equity Management II SBIC, LLC, its 

  General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ [illegible]

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
  Managing Member

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MONTREUX EQUITY PARTNERS III SBIC, LP

  
	
   

  	
   

  
	
   

  	
  By: Montreux
  Equity Management III SBIC, LLC, its 

  General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ [illegible]

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
  Managing Member

  
					

 

ARYX THERAPEUTICS

AMENDED AND RESTATED INVESTOR
RIGHTS AGREEMENT

SIGNATURE PAGE

 

	
   

  	
  INVESTOR(S):

  
	
   

  	
   

  
	
   

  	
  LIGHTHOUSE
  CAPITAL PARTNERS V, L.P.

  
	
   

  	
   

  
	
   

  	
  By: LIGHTHOUSE MANAGEMENT PARTNERS V, 

  L.L.C., its general partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						

 

ARYX THERAPEUTICS

AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

SIGNATURE PAGE

 

 

	
   

  	
  INVESTOR(S):

  
	
   

  	
   

  
	
   

  	
  ASCENT
  BIOMEDICAL VENTURES I, L.P.

  
	
   

  	
   

  
	
   

  	
  By:
  ABV, LLC, its General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Geoffrey W. Smith

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  Geoffrey W. Smith

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  Director

  	
   

  
						

 

ARYX THERAPEUTICS

AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

SIGNATURE PAGE

 

 

	
   

  	
  INVESTOR(S):

  
	
   

  	
   

  
	
   

  	
  GC&H INVESTMENTS1

  
	
   

  	
  GC&H INVESTMENTS, LLC2

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John L. Cardoza

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  John L. Cardoza

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  Executive Partner1

  	
   

  
	
   

  	
   

  	
  Managing Member2

  	
   

  
						

 

ARYX THERAPEUTICS

AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

SIGNATURE PAGE

 

 

	
   

  	
  INVESTOR(S):

  
	
   

  	
   

  
	
   

  	
  PAUL AND JACQUELINE GODDARD FAMILY LIVING 

  TRUST

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Paul Goddard, Trustee

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  Paul Goddard

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  Trustee

  	
   

  
						

 

ARYX THERAPEUTICS

AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

SIGNATURE PAGE

 

	
   

  	
  INVESTOR(S):

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Peter Milner

  	
   

  
	
   

  	
   

  	
  PETER MILNER

  	
   

  
					

 

ARYX THERAPEUTICS

AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

SIGNATURE PAGE

 

 

	
   

  	
  INVESTOR(S):

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Print name of entity, if
  applicable)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
  (If applicable)

  	
   

  
								

 

ARYX THERAPEUTICS

AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

SIGNATURE PAGE

 

 

EXHIBIT A

 

SCHEDULE OF INVESTORS

 

Ascent Biomedical Ventures I, L.P.

ARA Overseas, Ltd.

Corrina von Schonau-Riedweg

Hamilton Investment Partners, LLC

MPH Enterprises, LLC

Jay Furman

Stonegate Capital, LLC

ATEL Ventures, Inc.

Austin Jieh

Avi Sochaczevski

UBS Juniper Crossover Fund, L.L.C.

PW Juniper Crossover Fund, L.L.C.

Cameron Geoffrey McDonough

Charles Conroy

Clark Jensen

Cleve Partners

Dr. Lloyd-Harris

Ellen Milner

Gary Bloom

GC&H Investments LLC

Geoffrey W. Smith

Goodwin Trust

Janetta Napp

Jason Allen Field Trust

JLS Associates V

JLS Associates VIII

Ellen Milner

John Garrett

Lighthouse Capital Partners V, L.P. (own warrants only and shall not
have the rights set forth in Section 4 herein)

Koren Lee

Larry Abrams

Lisa Kay Field Trust

Louis Field Trust

Mark G. Midei

Matthew Frank

Merlin BioMed Private Equity Fund, L.P.

Merlin Nexus I, L.P.

Merlin Nexus II, L.P.

Michael Garmaise

Michelle Louise Garrett

MPM Asset Management Investors 2002 BVIII LLC

MPM BioVentures III GmbH & Co. Beteiligungs KG

MPM BioVentures III Parallel Fund, L.P.

MPM BioVentures III, L.P.

MPM BioVentures III-QP, L.P.

MPM BioVentures Strategic Fund, L.P.

Naomi Milner

Nicholas J. Simon III

Oliver D. Schein

Pascal Druzgala

Paul & Jaqueline Goddard Family Living Trust

Peter Constantino

Peter Milner

Peter Pelikan

Richard Miller

Robert C. McGann

Robert E. Childers Trust

Robert S. Spears Trust

Shapiro Trust

Sidney O. Gottlieb

Stephen Schiller

Steve Gidumal

Steven Hochberg

Tracy Lefteroff

Wen-Lu Chou & Hsiao-Min His

Yosef P. Krespi

Nomura Phase4 Ventures L.P.

JAFCO G-9 (A) Venture Capital Investment Limited Partnership

JAFCO G-9 (B) Venture Capital Investment Limited Partnership

Montreux Equity Partners II SBIC, LP

Montreux Equity Partners III SBIC, LP

Healthcare Private Equity LP (Scottish Widows)

Sagamore Bioventures, LLC

Itochu Corporation

 

A-1

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