Document:

Exhibit 4.6

 

EXECUTION COPY

 

HDL THERAPEUTICS, INC.

 

REGISTRATION RIGHTS AND SECURITYHOLDER AGREEMENT

 

 

HDL THERAPEUTICS, INC.

 

REGISTRATION RIGHTS AND SECURITYHOLDER AGREEMENT

 

THIS  REGISTRATION RIGHTS AND SECURITYHOLDER AGREEMENT (the “Agreement”) is entered into as of the 28th day of April 2008, by and between HDL Therapeutics, Inc., a Delaware corporation (the “Company”) and Pfizer, Inc., referred to hereinafter as “Investor.”

 

RECITALS

 

WHEREAS, the Company has issued to Investor a Convertible Promissory Note (the “Note”) which Note is convertible into shares of Series A-1 Preferred Stock (“Series A-1 Preferred”), pursuant to that certain Note Purchase Agreement, of even date herewith (the “Note Agreement”); and

 

WHEREAS, in connection with the closing of the Note Agreement, the parties desire to enter into this Agreement in order to grant registration, information rights and other rights to the Investor as set forth below.

 

NOW, THEREFORE, in consideration of these premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

SECTION 1.                         GENERAL.

 

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

 

(a)                                 “Affiliate” shall have the meaning prescribed in Rule 12b-2 promulgated under the Exchange Act.

 

(b)                                 “Charter” means the Amended and Restated Certificate of Incorporation of the Company, as amended from time to time.

 

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

 

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

 

(e)                                  “Holder”  means any person or entity owning of record Registrable Securities that have not been sold to the public or any assignee of record of such Registrable Securities in accordance with Section 2.9 hereof.

 

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

 

 

(g)                                 “Major A-1 Investor” shall refer to Investor or any permitted transferee of Investor that owns at least twenty five percent (25%) of the Series A-1 Preferred.

 

(h)                                 “Qualified IPO” means an Initial Offering with gross proceeds of not less than twenty five million dollars ($25,000,000) before deduction of underwriters’ commissions and expenses.

 

(i)                                    “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.

 

(j)                                    “Registrable Securities”  means (a) Common Stock of the Company issuable or issued upon conversion of the Shares and (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. Notwithstanding the foregoing, Registrable Securities shall not include any securities (i) sold by a person to the public either pursuant to a registration statement or Rule 144 or (ii) sold in a private transaction in which the transferor’s rights under Section 2 of this Agreement are not assigned.

 

(k)                                 “Registrable Securities then outstanding”  shall be the 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.

 

(l)                                    “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, 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).

 

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

 

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

 

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

 

(p)                                 “Shares”  shall mean the Company’s Series A-1 Preferred held by Investor and its permitted assigns issuable upon exercise of the Note.

 

(q)                                 “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, 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.

 

(a)                                 Investor agrees not to make any disposition of all or any portion of the Shares or Registrable Securities unless and until:

 

(i)                                    following the Initial Offering, there is then in effect a registration statement under the Securities Act covering such proposed disposition with respect to the Shares or Registrable Securities and such disposition is made in accordance with such registration statement; or if no registration statement is then in effect, Investor provides to the Company an opinion of counsel that such disposition does not violate any applicable state or federal securities laws, provided, that the Company will not require such opinion of counsel if such disposition is made in compliance with Rule 144; or

 

(ii)                                (A) such disposition is made to a transferee that is an Affiliate of Investor, (B) such transferee has agreed in writing to be bound by the terms of this Agreement and the Voting Agreement (as defined below), (C) Investor shall have provided at least thirty (30) days prior written notice to the Company of the proposed disposition, and (D) such disposition is made in compliance with applicable state and federal securities laws.

 

For the avoidance of doubt, a “disposition” shall not include the conversion of the Note in accordance with its terms or the conversion of the Shares in accordance with Section 5 of Part IV. C. of the Charter.

 

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

 

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT TO THE SECURITY, FILED AND MADE EFFECTIVE UNDER THE SECURITIES ACT AND SUCH APPLICABLE STATE SECURITIES LAWS, OR UNLESS THE ISSUER RECEIVES AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER TO THE EFFECT THAT REGISTRATION UNDER SUCH ACT AND SUCH APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.

 

THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN REGISTRATION RIGHTS AND SECURITY-HOLDER AGREEMENT BY AND BETWEEN THE

 

 

STOCKHOLDER AND THE COMPANY.  COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY.

 

(c)                                  The Company shall be obligated to reissue promptly unlegended certificates at the request of any Holder thereof if the Company has completed its Initial Offering and the Holder shall have obtained an opinion of counsel (which counsel may be counsel to the Company) reasonably acceptable to the Company to the effect that the securities proposed to be disposed of may lawfully be so disposed of without registration, qualification and legend, provided that the second legend listed above shall be removed only at such time as the Holder of such certificate is no longer subject to any restrictions hereunder.

 

(d)                                 Any permitted transferee of Investor’s Series A-1 Preferred hereunder shall be bound by the obligations of that certain Voting Agreement by and among the Company and the parties listed on Exhibits A and B thereto, of even date herewith with respect to such shares of Series A-1 Preferred (the “Voting Agreement”).

 

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

 

2.2                               Demand Registration.

 

(a)                                 Subject to the conditions of this Section 2.2, if the Company shall receive a written request from the Holders holding a majority of the Registrable Securities (the “Initiating Holders”) that the Company file a registration statement under the Securities Act covering the registration of at least a majority of the Registrable Securities then outstanding  (or a lesser percent if the anticipated aggregate offering price, net of underwriting discounts and commissions, would exceed $10,000,000, 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, use its best efforts to effect, as expeditiously as reasonably possible, the registration under the Securities Act of all Registrable Securities that all Holders request to be registered.

 

(b)                                 If the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to this Section 2.2 or any request pursuant to Section 2.4 and the Company shall include such information in the written notice referred to in Section 2.2(a) or Section 2.4(a), as applicable.  In such event, the right of any Holder to include its Registrable Securities in such registration shall be conditioned upon such 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 the Holders of a majority of the Registrable Securities held by all Initiating Holders (which underwriter or underwriters shall be reasonably acceptable to the Company).  Notwithstanding any other provision of this Section 2.2 or

 

 

Section 2.4, if the underwriter advises the Company that marketing factors require a limitation of the number of securities to be underwritten (including Registrable Securities) then the Company shall so advise all Holders of Registrable Securities that would otherwise be underwritten pursuant hereto, and the number of shares that may be included in the underwriting shall be allocated to the Holders of such Registrable Securities on a pro rata basis based on the number of Registrable Securities held by all such Holders (including the Initiating Holders);  provided, however, that the number of shares of Registrable Securities to be included in such underwriting and registration shall not be reduced unless  no other party other than the Company and the Holders are included in  the underwriting and registration.  Any Registrable Securities excluded or withdrawn from such underwriting shall be withdrawn from the registration.

 

(c)                                  The Company shall not be required to effect a registration pursuant to this Section 2.2:

 

(i)                                    prior to the earlier of (A) the fourth anniversary of the date of this Agreement or (B) of the expiration of the restrictions on transfer set forth in Section 2.11 following the Initial Offering;

 

(ii)                                after the Company has effected two (2) registrations pursuant to this Section 2.2, 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 the Initial 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;

 

(iv)                             if within thirty (30) days of receipt of a written request from Initiating Holders pursuant to Section 2.2(a), the Company gives notice to the Holders of the Company’s intention to file within ninety (90) days a registration statement for a public offering, other than pursuant to a Special Registration Statement;

 

(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, it would be seriously detrimental to the Company and its stockholders for such registration statement to be effected at such time, in which event the Company shall have the right to defer such filing for a period of not more than ninety (90) 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 once in any twelve (12) month period;

 

(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.

 

 

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 of which the Company gives notice under this Section 2.3 is for an underwritten offering, the Company shall so advise the Holders of Registrable Securities.  In such event, the right of any such Holder to include Registrable Securities in a registration pursuant to this Section 2.3 shall be conditioned upon such 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.  Notwithstanding any other provision of this Agreement, 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 hereunder on a pari passu basis with each of the holders of Series A Preferred Stock meeting the definition of “Holder” (each a “Series A Holder”) set forth in that certain Investor Rights Agreement by and among the Company and the investors listed on Exhibit A thereto (the “Investor Rights Agreement”), on a pro rata basis based on the total number of Registrable Securities held by such Holder hereunder or the total number of “Registrable Securities” (as defined in the Investor Rights Agreement) (the “Series A Registrable Securities”) held by such Series A Holder, as applicable; and third, to any stockholder of the Company (other than a Holder or a Series A Holder) on a pro rata basis; provided, however, that no such reduction shall reduce the amount of securities of the selling Holders and Series A Holders included in the registration below thirty percent (30%) of the total amount of securities included in such registration, unless such offering is the Initial Offering and such registration does not include shares of any other selling stockholders, in which event any or all of the Registrable Securities of the Holders may be excluded in accordance with the immediately preceding clause.  In no event will shares of any other selling stockholder, be included in such registration that would reduce the number of shares which may be included by Holders without the written consent of Holders of not less than a majority of the Registrable Securities proposed to be sold in the offering.  If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to the Company and the underwriter, delivered at least ten (10) business days prior to the effective date of the registration statement.  Any Registrable Securities excluded or withdrawn from such

 

 

underwriting shall be excluded and withdrawn from the registration.  For any Holder which is a partnership, limited liability company or corporation, the partners, retired partners, members, retired members and stockholders of such Holder, or the estates and family members of any such partners, retired partners, members and retired members and any trusts for the benefit of any of the foregoing person shall be deemed to be a single “Holder,” and any pro rata reduction with respect to such “Holder” shall be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals included in such “Holder,” as defined in this sentence.

 

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

 

2.4                               Form S-3 Registration.  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 is not available for such offering by the Holders, or

 

(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  two million dollars ($2,000,000), or

 

(iii)                            if within thirty (30) days of receipt of a written request from  any Holder or Holders pursuant to this Section 2.4, the Company gives notice to such Holder or Holders of the Company’s intention to make  a public offering within ninety (90) days, other than pursuant to a Special Registration Statement;

 

(iv)                             if the Company shall furnish to the Holders a certificate signed by the Chairman of the Board of Directors of the Company stating that in the good faith judgment

 

 

of the Board of Directors of the Company, it would be seriously detrimental to the Company and its stockholders for such Form S-3 registration to be effected at such time, in which event the Company shall have the right to defer the filing of the Form S-3 registration statement for a period of not more than one hundred twenty (120) 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, or

 

(v)                                 if the Company has, within the twelve (12) month period preceding the date of such request,  already effected two (2) registrations on Form S-3 for the Holders pursuant to this Section 2.4, or

 

(vi)                             in any particular jurisdiction in which the Company would be required to qualify to do business or to execute a general consent to service of process in effecting such registration, qualification or compliance.

 

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

 

2.5                               Expenses of Registration.  Except as specifically provided herein, all Registration Expenses incurred in connection with any registration, qualification or compliance pursuant to Section 2.2,  2.3 or 2.4 herein shall be borne by the Company.  All Selling Expenses incurred in connection with any registrations hereunder, shall be borne by the holders of the securities so registered pro rata on the basis of the number of shares so registered.  The Company shall not, however, be required to pay for expenses of any registration proceeding begun pursuant to Section 2.2 or 2.4, the request of which has been subsequently withdrawn by the Initiating Holders unless (a) the withdrawal is based upon material adverse information concerning the Company of which the Initiating Holders were not aware at the time of such request or (b) the Holders of a majority of Registrable Securities agree to deem such registration to have been effected as of the date of such withdrawal for purposes of determining whether the Company shall be obligated pursuant to Section 2.2(c)(ii) or 2.4(b)(v), as applicable, to undertake any subsequent registration, in which event such right shall be forfeited by all Holders).  If the Holders are required to pay the Registration Expenses, such expenses shall be borne by the holders of securities (including Registrable Securities) requesting such registration in proportion to the number of shares for which registration was requested.  If the Company is required to pay the Registration Expenses of a withdrawn offering pursuant to clause (a) above, then such registration shall not be deemed to have been effected for purposes of determining whether the Company shall be obligated pursuant to Section 2.2(c)(ii) or 2.4(b)(v), as applicable, to undertake any subsequent registration.

 

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

 

(a)                                 prepare and file with the SEC a registration statement with respect to such Registrable Securities and use all reasonable efforts to cause such registration statement to become effective, and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for up to thirty (30) days or, if

 

 

earlier, until the Holder or Holders have completed the distribution related thereto; provided, however, that at any time, upon written notice to the participating Holders and for a period not to exceed sixty (60) days thereafter (the “Suspension Period”), the Company may delay the filing or effectiveness of any registration statement or suspend the use or effectiveness of any registration statement (and the Initiating Holders hereby agree not to offer or sell any Registrable Securities pursuant to such registration statement during the Suspension Period) if the Company reasonably believes that there is or may be in existence material nonpublic information or events involving the Company, the failure of which to be disclosed in the prospectus included in the registration statement could result in a Violation (as defined below).  In the event that the Company shall exercise its right to delay or suspend the filing or effectiveness of a registration hereunder, the applicable time period during which the registration statement is to remain effective shall be extended by a period of time equal to the duration of the Suspension Period.  No more than one (1) such Suspension Periods shall occur in any twelve (12) month period.  If so directed by the Company, all Holders registering shares under such registration statement shall (i) not offer to sell any Registrable Securities pursuant to the registration statement during the period in which the delay or suspension is in effect after receiving notice of such delay or suspension; and (ii) use their best efforts to deliver to the Company (at the Company’s expense) all copies, other than permanent file copies then in such Holders’ possession, of the prospectus relating to such Registrable Securities current at the time of receipt of such notice.  Notwithstanding the foregoing, the Company shall not be required to file, cause to become effective or maintain the effectiveness of any registration statement other than a registration statement on Form S-3 that contemplates a distribution of securities on a delayed or continuous basis pursuant to Rule 415 under the Securities Act.

 

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

 

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

 

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

 

(e)                                  In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter(s) of such offering.  Each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement.

 

 

(f)                                   Notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. The Company will use reasonable efforts to amend or supplement such prospectus in order to cause such prospectus not to include any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing.

 

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

 

2.7                               Delay of Registration; Furnishing Information.

 

(a)                                 No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 2.

 

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

 

(c)                                  The Company shall have no obligation with respect to any registration requested pursuant to Section 2.2 or  2.4 if the number of shares or the anticipated aggregate offering price of the Registrable Securities to be included in the registration does not equal or exceed the number of shares or the anticipated aggregate offering price required to originally trigger the Company’s obligation to initiate such registration as specified in Section 2.2 or Section 2.4, whichever is applicable.

 

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

 

(a)                                 To the extent permitted by law, the Company will indemnify and hold harmless each Holder, the partners, members, officers and directors of each Holder, any underwriter (as defined in the Securities Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages, or liabilities (joint or several) to which they may

 

 

become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a “Violation”) by the Company: (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement or incorporated reference therein, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law in connection with the offering covered by such registration statement; and the Company will reimburse each such Holder, partner, member, officer, director, underwriter or controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided however, that the indemnity agreement contained in this Section 2.8(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, nor shall the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by such Holder, partner, member, officer, director, underwriter or controlling person of such Holder.

 

(b)                                 To the extent permitted by law, each Holder will, if Registrable Securities held by such Holder are included in the securities as to which such registration qualifications or compliance is being effected, indemnify and hold harmless the Company, each of its directors, its officers and each person, if any, who controls the Company within the meaning of the Securities Act, any underwriter and any other Holder selling securities under such registration statement or any of such other 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 or other such Holder, or partner, director, officer or controlling person of such other Holder may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any of the following statements: (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement or incorporated reference therein, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act  (collectively, a “Holder Violation”), in each case to the extent (and only to the extent) that such Holder Violation occurs in reliance upon and in conformity with written information furnished by such Holder under an instrument duly executed by such Holder and stated to be specifically for use in connection with such registration; and each such Holder will reimburse any legal or other expenses reasonably incurred by the Company or any such director, officer, controlling person, underwriter or other Holder, or partner, officer, director or controlling person of such other Holder in connection with investigating or defending any such loss, claim, damage, liability or action if it is judicially

 

 

determined that there was such a Holder Violation; provided, however, that the indemnity agreement contained in this Section 2.8(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; provided further, that in no event shall any indemnity under this Section 2.8 exceed the net proceeds from the offering received by such Holder.

 

(c)                                  Promptly after receipt by an indemnified party under this Section 2.8 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.8, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the right to retain its own counsel, with the fees and expenses thereof to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding.  The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall relieve such indemnifying party of any liability to the indemnified party under this Section 2.8 to the extent, and only to the extent, prejudicial to its ability to defend such action, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 2.8.

 

(d)                                 If the indemnification provided for in this Section 2.8 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any losses, claims, damages or liabilities referred to herein, the indemnifying party, in lieu of indemnifying such indemnified party thereunder, shall to the extent permitted by applicable law contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the Violation(s) or Holder Violation(s) that resulted in such loss, claim, damage or liability, as well as any other relevant equitable considerations.  The relative fault of the indemnifying party and of the indemnified party shall be determined by a court of law by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided, that in no event shall any contribution by a Holder hereunder exceed the net proceeds from the offering received by such Holder.

 

(e)                                  The obligations of the Company and Holders under this Section 2.8 shall survive completion of any offering of Registrable Securities in a registration statement and, with respect to liability arising from an offering to which this Section 2.8 would apply that is covered by a registration filed before termination of this Agreement, such termination.  No indemnifying party, in the defense of any such claim or litigation, shall, except with the consent of each indemnified party, consent to entry of any judgment or enter into any settlement which does not

 

 

include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation.

 

2.9                               Assignment of Registration Rights.  The rights to cause the Company to register Registrable Securities pursuant to this Section 2 may be assigned by Investor to a transferee or assignee of Registrable Securities (for so long as such shares remain Registrable Securities) that is an Affiliate of Investor; provided, however, that (a) 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 (b) such transferee has agreed in writing to be bound by the terms of this Agreement.

 

2.10                        “Market Stand-Off” Agreement.  Each Holder hereby agrees that such Holder shall not sell, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, any Common Stock (or other securities) of the Company held by such Holder (other than those included in the registration) (i) during the 180-day period following the effective date of the Initial Offering (or such longer period, not to exceed thirty-four (34) days after the expiration of the 180-day period, as the underwriters or the Company shall request in order to facilitate compliance with NASD Rule 2711 or NYSE Member Rule 472 or any successor or similar rule or regulation), provided, that, with respect to (i) and (ii) above, all officers and directors of the Company and holders of at least one percent (1%) of the Company’s voting securities are bound by and have entered into similar agreements.  The obligations described in this Section 2.10 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.

 

2.11                        Agreement to Furnish Information.  Each Holder agrees to execute and deliver such other agreements as may be reasonably requested by the Company or the underwriter that are consistent with the Holder’s obligations under Section 2.10 or that are necessary to give further effect thereto.  In addition, if requested by the Company or the representative of the underwriters of Common Stock (or other securities) of the Company, each Holder shall provide, within ten (10) days of such request, such information as may be required by the Company or such representative in connection with the completion of any public offering of the Company’s securities pursuant to a registration statement filed under the Securities Act.  The obligations described in Section 2.10 and this Section 2.11 shall not apply to a Special Registration Statement.  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 day period.  Each Holder agrees that any transferee of any shares of Registrable Securities shall be bound by  Sections 2.10 and 2.11.  The underwriters of the Company’s stock are intended third party beneficiaries of Sections 2.10 and 2.11 and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto.

 

2.12                        Rule 144 Reporting.  With a view to making available to the Holders the benefits of certain rules and regulations of the SEC which may permit the sale of the Registrable Securities to the public without registration, the Company agrees to use its best efforts to:

 

 

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

 

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

 

(c)                                  So long as a Holder owns any Registrable Securities, furnish to such Holder forthwith upon request:  a written statement by the Company as to its compliance with the reporting requirements of said Rule 144 of the Securities Act, and of the Exchange Act (at any time after it has become subject to such reporting requirements); a copy of the most recent annual or quarterly report of the Company filed with the Commission; and such other reports and documents as a Holder may reasonably request in connection with availing itself of any rule or regulation of the SEC allowing it to sell any such securities without registration.

 

2.13                        Termination of Registration Rights.  The right of any Holder to request registration or inclusion of Registrable Securities in any registration pursuant to Section 2.2, 2.3 or 2.4 hereof shall terminate upon the earlier of: (i) the date three (3) years following an initial public offering that results in the conversion of all outstanding shares of Series A-1 Preferred; or (ii) such time as such Holder, as reflected on the Company’s list of stockholders, holds less than 1% of the Company’s outstanding Common Stock (treating all shares of Preferred Stock on an as converted basis), the Company has completed its Initial Offering and all Registrable Securities of the Company issuable or issued upon conversion of the Shares held by and issuable to such Holder (and its Affiliates) may be sold pursuant to Rule 144 during any ninety (90) day period, or (iii) an Acquisition.  Upon such termination, such shares shall cease to be “Registrable Securities” hereunder for all purposes.

 

SECTION 3.                         COVENANTS OF THE COMPANY.

 

3.1                               Basic Financial Information and Reporting.

 

(a)                                 The Company will keep proper books of record and account, in which entries which are complete and correct in all material respects shall be made of all material dealings and transactions of or in relation to the properties and business thereof, and which will permit the production of financial statements in accordance with GAAP consistently applied.

 

(b)                                 The Company will furnish to each Major A-1 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 or as otherwise determined by the Board of Directors, an audited balance sheet as of the end of such year, and statements of income, changes in stockholders’ equity and cash flows for such year, for the Company and its subsidiaries, setting forth, in the case of each financial statement, in comparative form, the audited financial statement for the immediately preceding fiscal year, all in reasonable detail, prepared in accordance with GAAP consistently applied. Such financials shall be accompanied by an opinion thereon of independent certified public accountants of recognized regional standing selected by the Company, which opinion shall state that such financial statements present fairly, in all material respects, the

 

 

financial position of the Company or its subsidiaries, as applicable, and its results of operations and cash flows and have been prepared in conformity with GAAP consistently applied, and that the examination of such accountants in connection with such financial statements has been made in accordance with GAAP consistently applied, and that such audit provides a reasonable basis for such opinion in the circumstances.

 

(c)                                  The Company will furnish each Major A-1 Investor, as soon as practicable after the end of each fiscal quarter of the Company, and in any event within sixty (60) days thereafter, an unaudited balance sheet as of the end of such fiscal quarter; and statements of income and cash flows (and any other statements requested by the Board of Directors) for such fiscal quarter and for the portion of such fiscal year ending with such fiscal quarter, for the Company and its subsidiaries, set forth in a manner and with a level of detail and any certifications requested by the Board of Directors.

 

3.2                               Inspection Rights.  Each Major A-1 Investor shall have the right to visit and inspect any of the properties of the Company or any of its subsidiaries, and to discuss the affairs, finances and accounts of the Company or any of its subsidiaries with its officers, and to review such information as is reasonably requested all at such reasonable times and as often as may be reasonably requested; provided, however, that the Company shall not be obligated under this Section 3.2 with respect to a competitor of the Company or with respect to information which is deemed confidential as unanimously determined by the Board of Directors or subject to the attorney-client privilege; and, provided, further, that each Major A-1 Investor may exercise such visitation, inspection, discussion and informational rights no more than twice each calendar year during the term of this Agreement.

 

3.3                               Confidentiality of Records.  Each Investor agrees to use the same degree of care as such Investor uses to protect its own confidential information to keep confidential any information furnished to such Investor pursuant to Section 3.1 and 3.2 hereof that the Company identifies as being confidential or proprietary (so long as such information is not in the public domain), except that such Investor may disclose such proprietary or confidential information (i) to any partner, subsidiary or parent of such Investor as long as such partner, subsidiary or parent is advised of and agrees or has agreed to be bound by the confidentiality provisions of this Section 3.3 or comparable restrictions; (ii) at such time as it enters the public domain through no fault of such Investor; (iii) that is communicated to it free of any obligation of confidentiality; (iv) that is developed by Investor or its agents independently of and without reference to any confidential information communicated by the Company; or (v) as required by applicable law.  Nothing herein shall alter, modify or change any of Investor’s obligations of confidentiality and non-use to the Company set forth in the Note Agreement and/or that certain Stock Purchase Agreement, by and between the Company and Pfizer, Inc., of even date herewith (the “Purchase Agreement”).

 

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 Series A-1 Preferred, all Common Stock issuable from time to time upon such conversion.

 

3.5                               Termination of Covenants.  All covenants of the Company contained in Section 3 of this Agreement (other than the provisions of Section 3.3)  shall expire and terminate as to

 

 

each Investor upon the earlier of (i) the effective date of the registration statement pertaining to an Initial Offering that results in the Preferred Stock being converted into Common Stock, (ii) upon an “Acquisition” as defined in the Company’s Amended and Restated Certificate of Incorporation as in effect as of the date hereof, or (iii) a liquidation, winding up, dissolution or deemed liquidation of the Company.

 

SECTION 4.                         RIGHTS OF FIRST REFUSAL.

 

4.1                               Subsequent Offerings.

 

(a)                                 Subject to applicable securities laws, each Major A-1 Investor shall have a right of first refusal to purchase its pro rata share of all Equity Securities, as defined in this subsection (a), 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.  For purposes of this subsection (a), each Major A-1 Investor’s pro rata share is equal to the ratio of (i) the number of shares of the Company’s Common Stock (including all shares of Common Stock issuable or issued upon conversion of the Shares or upon the exercise of outstanding warrants or options) of which such Major A-1 Investor is deemed to be a holder immediately prior to the issuance of such Equity Securities to (ii) the total number of shares of the Company’s outstanding Common Stock (including all shares of Common Stock issued or issuable upon conversion of the Shares and the conversion of the shares of Series A Preferred Stock then outstanding or upon the exercise of any outstanding warrants or options) immediately prior to the issuance of the Equity Securities.  The term “Equity Securities” shall mean (1) any Common Stock, Preferred Stock or other equity security of the Company, (2) any security convertible into or exercisable or exchangeable for, with or without consideration, any Common Stock, Preferred Stock or other equity security (including any option to purchase such a convertible security), (3) any security carrying any warrant or right to subscribe to or purchase any Common Stock, Preferred Stock or other equity security or (4) any such warrant or right.

 

(b)                                 Subject to applicable securities laws, in the event that the Shares are converted into Common Stock by the vote of the requisite number of holders of Series A Preferred Stock and Series A-1 Preferred Stock pursuant to Section 5(k)(i) of the Charter, each Major A-1 Investor (each a “Conversion Investor”) shall have a right of first refusal to purchase, during the period beginning on the date of such conversion and continuing until ninety (90) days following such date of conversion, its pro rata share of all Equity Securities that the Company may, from time to time, propose to sell and issue, other than the Equity Securities excluded by Section 4.6 hereof.  For purposes of this subsection (b), each Conversion Investor’s pro rata share is equal to the ratio of (i) the number of shares of the Company’s Common Stock (including all shares of Common Stock issuable or issued upon the exercise of outstanding warrants or options) of which such Conversion Investor is deemed to be a holder immediately prior to the issuance of such Equity Securities to (ii) the total number of shares of the Company’s outstanding Common Stock (including all shares of Common Stock issued or issuable upon conversion of the shares of any outstanding preferred stock or upon the exercise of any outstanding warrants or options) immediately prior to the issuance of the Equity Securities.

 

4.2                               Exercise of Rights.  If the Company proposes to issue any Equity Securities, it shall give each Major A-1 Investor or Conversion Investor, as the case may be, written notice of

 

 

its intention, describing the Equity Securities, the price and the terms and conditions upon which the Company proposes to issue the same.  Each Major A-1 Investor or Conversion Investor, as the case may be, 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 Major A-1 Investor or Conversion Investor, as the case may be, who would cause the Company to be in violation of applicable federal securities laws by virtue of such offer or sale.

 

4.3                               Sale Without Notice.  In lieu of giving notice to the Major A-1 Investors or Conversion Investor, as the case may be, prior to the issuance of Equity Securities as provided in Section 4.2, the Company may elect to give notice to the Major A-1 Investors or Conversion Investor, as the case may be, within thirty (30) days after the issuance of Equity Securities.  Such notice shall describe the type, price and terms of the Equity Securities.  Each Major A-1 Investor or Conversion Investor, as the case may be, shall have twenty (20) days from the date of receipt of such notice to elect to purchase up to the number of shares that would, if purchased by such Major A-1 Investor or Conversion Investor, as the case may be, maintain such Major A-1 Investor’s or Conversion Investor’s, as the case may be, pro rata share (as set forth in Section 4.1(a) or (b) as the case may be) of the Company’s equity securities after giving effect to all such purchases.  The closing of such sale shall occur within sixty (60) days of the date of notice to the Major A-1 Investors or Conversion Investor, as the case may be.

 

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) an Acquisition, or (ii) the effective date of the registration statement pertaining to the Company’s Qualified IPO.  Notwithstanding Section 5.5 hereof, the rights of first refusal established by this Section 4 may be amended, or any provision waived with and only with the written consent of the Company and the Major A-1 Investors or Conversion Investor, as the case may be, holding a majority of the Registrable Securities held by all Major A-1 Investors or Conversion Investor, as the case may be, or as permitted by Section 5.5.

 

4.5                               Assignment of Rights of First Refusal.  The rights of first refusal of each Major A-1 Investor or Conversion Investor, as the case may be, under this Section 4 may be assigned to the same parties, subject to the same restrictions as any transfer of registration rights pursuant to Section 2.9.

 

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

 

(a)                                 shares of Common Stock and/or options, warrants or other Common Stock purchase rights and the Common Stock issued pursuant to such options, warrants or other rights issued or to be issued after the date hereof 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 of Directors;

 

 

(b)                                 any Equity Securities issued or issuable pursuant to the exercise of any convertible securities outstanding as of the date of this Agreement; and any Equity Securities issued pursuant to any such convertible securities granted after the date of this Agreement, so long as the rights of first refusal established by this Section 4 were complied with, waived, 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 in connection with the First Closing, Second Closing, Third Closing, Optional Fourth Tranche Closing or Additional Closing (as each term is defined in the Purchase Agreement);

 

(d)                                 any Equity Securities issued pursuant to a merger, consolidation, acquisition or similar business combination approved by the Board of Directors;

 

(e)                                  any Equity Securities issued in connection with any stock split, stock dividend or recapitalization by the Company;

 

(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 approved by the Board of Directors;

 

(g)                                 any Equity Securities issued pursuant to a firmly underwritten public offering pursuant to an effective registration statement under the Securities Act covering the offer and sale of Common Stock for the account of the Company; and

 

(h)                                 any Equity Securities issued in connection with strategic transactions involving the Company and other entities, including, without limitation (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 Company’s Board of Directors.

 

SECTION 5.                         MISCELLANEOUS.

 

5.1                               Governing Law.  This Agreement shall be governed by and construed under the laws of the State of Delaware  in all respects as such laws are applied to agreements among Delaware residents entered into and to be performed entirely within Delaware, without reference to conflicts of laws or principles thereof.

 

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

 

 

5.3                               Entire Agreement.  This Agreement and the Note Agreement and the other documents delivered pursuant thereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and no party shall be liable or bound to any other in any manner by any oral or written representations, warranties, covenants and agreements except as specifically set forth herein and therein.  Each party expressly represents and warrants that it is not relying on any oral or written representations, warranties, covenants or agreements outside of this Agreement.

 

5.4                               Severability.  In the event one or more of the provisions of this Agreement should, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.

 

5.5                               Amendment and Waiver.

 

(a)                                 Except as otherwise expressly provided, this Agreement may be amended or modified, and  the obligations of the Company and the rights of the Holders under this Agreement may be waived, only upon the written consent of the Company and the holders of at least majority of the then-outstanding Registrable Securities.

 

(b)                                 For the purposes of determining the number of Holders or Major A-1 Investors entitled to vote or exercise any rights hereunder, the Company shall be entitled to rely solely on the list of record holders of its stock as maintained by or on behalf of the Company.

 

5.6                               Delays or Omissions.  It is agreed that no delay or omission to exercise any right, power, or remedy accruing to any party, upon any breach, default or noncompliance by another party under this Agreement shall impair any such right, power, or remedy, nor shall it be construed to be a waiver of any such breach, default or noncompliance, or any acquiescence therein, or of any similar breach, default or noncompliance thereafter occurring.  It is further agreed that any waiver, permit, consent, or approval of any kind or character on any party’s part of any breach, default or noncompliance under the Agreement or any waiver on such party’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 any party, shall be cumulative and not alternative.

 

5.7                               Notices.  All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient; if not, then on the next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt.  All communications shall be sent to the party to be notified at the address as set forth on the signature pages hereof or at such other address or electronic mail address as such party may designate by ten (10) days advance written notice to the other parties hereto.

 

 

5.8                               Attorneys’ Fees.  In the event that any suit or action is instituted under or in relation to this Agreement, including without limitation to enforce any provision in this Agreement, the prevailing party in such dispute shall be entitled to recover from the losing party all fees, costs and expenses of enforcing any right of such prevailing party under or with respect to this Agreement, including without limitation, such reasonable fees and expenses of attorneys and accountants, which shall include, without limitation, all fees, costs and expenses of appeals.

 

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

 

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

 

5.11                        Aggregation of Stock.  All shares of Registrable Securities held or acquired by affiliated entities or persons or persons or entities under common management or control shall be aggregated together for the purpose of determining the availability of any rights under this Agreement.

 

5.12                        Pronouns.  All pronouns contained herein, and any variations thereof, shall be deemed to refer to the masculine, feminine or neutral, singular or plural, as to the identity of the parties hereto may require.

 

5.13                        Termination.  This Agreement shall terminate and be of no further force or effect upon the happening of the last event described in Sections 2.13, 3.5 and 4.4.

 

[THIS SPACE INTENTIONALLY LEFT BLANK]

 

 

IN WITNESS WHEREOF, the parties hereto have executed this REGISTRATION RIGHTS AND SECURITYHOLDER AGREEMENT as of the date set forth in the first paragraph hereof.

 

	
COMPANY:
    	
INVESTOR:
    
	
 
    	
 
    
	
HDL   THERAPEUTICS, INC.
    	
PFIZER, INC.
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Pfizer Representative
    
	
By:
    	
/s/   Roger Newton
    	
 
    	
 
    
	
Roger Newton
    	
 
    
					

 

	
Title:
    	
President   and Chief Executive Officer
    	
 
    	
 
    
	
President and Chief Executive OfficerExhibit 10.1

 

HDL THERAPEUTICS, INC.
  2008 INCENTIVE STOCK OPTION AND RESTRICTED STOCK PLAN

 

1.                                      Purpose. HDL THERAPEUTICS, INC. (the “Company”) hereby adopts the HDL THERAPEUTICS, INC. 2008 INCENTIVE STOCK OPTION AND RESTRICTED STOCK PLAN (the “Plan”) for the purposes of attracting and retaining employees of the Company or any Affiliate (as hereinafter defined) of the Company (“Employees”), non-Employee members of the Company’s Board of Directors (the “Directors”), and non-Employee and non-Director consultants and advisors (collectively, “Outsiders”; together with Employees and Directors, “Participants”) of superior ability, encouraging ownership by selected Participants of common stock of the Company (the “Common Stock”), and providing an additional incentive to Participants to promote the success of the Company and its Affiliates.

 

2.                                      Plan Committee. This Plan shall be administered by the Board of Directors of the Company or by such committee of the Board of Directors of the Company as such Board may hereafter designate from time to time for such purpose. The Board of Directors or any such committee of the Board of Directors of the Company delegated the authority to administer this Plan shall be hereinafter referred to as the “Committee.” The Committee shall satisfy such criteria as are then necessary in order to facilitate exemption of compensation paid pursuant to this Plan from the tax deduction limits imposed by Section 162 of the Internal Revenue Code of 1986, as amended (the “Code”). In addition, in the event the Committee is not the entire Board of Directors of the Company or if the Company has a class of securities required to be registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), all members of the Committee shall be “Non-Employee Directors”, as such term is defined in Rule 16b-3 of the Exchange Act; provided, however, that the Board of Directors or the Committee may, to the extent that it deems necessary to comply with Code Section 162(m) or regulations thereunder, require that each “Non-Employee Director” also be an “outside director” as that term is defined in regulations under Code Section 162(m).

 

3.                                      Plan Eligibility. The Committee may grant options pursuant to the section entitled “OPTIONS” under this Plan (each an “Option”) or restricted stock pursuant to the section entitled “RESTRICTED STOCK” under this Plan (each a “Restricted Stock Grant”) only (a) to Employees of the Company or an Affiliate whose services are provided to the Company or an Affiliate at least 30 hours per week, (b) Directors who are not Employees, and (c) Outsiders having a written consulting or advisory agreement in effect with the Company (each of the foregoing, without distinction among them, an “Optionee”); provided, however, that no Director proposed to receive an Option or Restricted Stock Grant shall participate in any vote of the Committee with respect to the grant thereof. A non-Employee or non-Director consultant shall not be eligible for the grant of an Option or Restricted Stock Grant if, at the time of grant, either the offer or the

 

 

sale of the Company’s securities to such consultant is not exempt under Rule 701 (“Rule 701”) of the Securities Act of 1933, as amended (the “Securities Act”) because of the nature of the services that the consultant is providing to the Company, because the consultant is not a natural person, or because of any other provision of Rule 701, unless the Company determines that such grant need not comply with the requirements of Rule 701 and will satisfy another exemption under the Securities Act as well as comply with the securities laws of all other relevant jurisdictions.

 

4.                                      Shares Subject to Plan. The aggregate number of shares of Common Stock of the Company that may be issued pursuant to Options or Restricted Stock Grants shall not exceed 2,300,000 shares of Common Stock (the “Shares”). For clarity, the limitation in this Section 4 is a limitation in the number of shares of Common Stock that may be issued pursuant to the Plan. Such number, however, shall be subject to appropriate increase or decrease in the event of any future stock dividend or other recapitalization of the Common Stock of the Company. In the event of a lapse of any Option or forfeiture of Common Stock under the terms of a Restricted Stock Grant, the shares of Common Stock not purchased under that lapsed Option or forfeited under such Restricted Stock Grant shall again be available for grant under a new Option or Restricted Stock Grant. Any shares reacquired by the Company as consideration for the exercise of an Option shall again become available for issuance under the Plan. If an Option or Restricted Stock Grant (a) expires or otherwise terminates without having been exercised in full or (b) is settled in cash (i.e., the holder of such Option or Restricted Stock Grant receives cash rather than stock), such expiration, termination or settlement shall not reduce (or otherwise offset) the number of shares of Common Stock that may be issued pursuant to the Plan. Notwithstanding the provisions of this Section 4, any such shares shall not be subsequently issued pursuant to the exercise of Qualified Options.

 

OPTIONS

 

5.                                           Grant of Options. The Committee may, from time to time, grant Options to Optionees by means of the form of option grant which is attached as Exhibit A to this Plan or pursuant to any other instrument that references and incorporates this Plan and modifies, as permitted hereby, default provisions of this Plan (each an “Option Grant”). An Option Grant shall not be valid unless signed by an authorized officer of the Company and acknowledged by the Optionee.

 

6.                                      Nature of Options. Options shall either (a) meet the requirements of Code Section 422 (“Qualified Options”), or (b) not meet such requirements (“Non-Qualified Options”). The Committee may only grant Qualified Options to Employees who meet the requirements of Code Section 3401(c). At the time of the grant of an Option, the Committee shall specify whether the Option is a Qualified Option or a Non-Qualified Option and shall designate it as such in the Option Grant relating thereto. If for any reason an Option or any portion thereof intended to be a Qualified Option does not

 

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qualify as such under Code Section 422, either at the time of grant or at any time thereafter, such failure to qualify shall not invalidate the Option (or such portion), and instead such Option (or portion thereof) shall be deemed to have been granted as an Non-Qualified Option, notwithstanding the fact that the same had been designated as a Qualified Option in the Option Grant. If an Option is not specifically designated as a Qualified Option, then the option shall be a Non-Qualified Option.

 

7.                                      Time of Option. Each Option Grant and exercise of Options under this Plan shall be subject to the following:

 

7.1                               Time of Grant. The Committee may grant Options under this Plan from the date of adoption of this Plan by the Board of Directors of the Company (the “Adoption Date”), to and including (but not after) 10 years after such date.

 

7.2                               Vesting. Each Option granted under this Plan shall be exercisable, in whole or in part, from and after the date specified in the Option Grant. The Committee shall determine and specify in each Option Grant the vesting requirements relating thereto, with vesting to occur only upon either satisfaction of specific performance criteria or the completion of specified periods of continued employment with, or service to, the Company; provided, however, that in the event an Option Grant shall fail to specify a vesting schedule, the related Option shall be deemed vested as to 25% of the number of shares of Common Stock subject thereto on the first anniversary of the date of the Option Grant, with the remainder vesting in equal amounts on the first day of each of the following 36 calendar months.

 

7.3                               Expiration. Unless otherwise stated in an Option Grant, each Option granted under this Plan shall automatically expire 10 years after the date of grant; provided, however, that any Qualified Option granted to any Employee who, at the time of the grant of the Option, owns (individually or through members of his/her family) more than 10% of the Common Stock of the Company (each an “Insider”) shall expire no more than 5 years after the date of grant.

 

7.4                               Limitation on Exercise. No exercise of rights under an Option shall be permitted prior to the vesting date of those rights. No exercise of rights under an Option shall be permitted following the expiration of that Option or, if applicable, the forfeiture of the rights under that Option pursuant to Section 11 hereof.

 

7.5                               Non-Exempt Employees. No Option granted to an Employee that is a non-exempt employee for purposes of the Fair Labor Standards Act of 1938, as amended, shall be first exercisable for any shares of Common Stock until at least six (6) months following the date of grant of the Option. The foregoing provision is intended to operate so that any income derived by a non-exempt employee in connection with the exercise or vesting of an Option will be exempt from his or her regular rate of pay.

 

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8.                                      Shares Subject to Option. Options granted may be for any number of shares of Common Stock, as determined by the Committee, subject to the limitation that the number of Shares for which an exercise of a Qualified Option for the first time in any calendar year shall not have an aggregate Fair Market Value (as hereinafter defined), determined at the time of the issuance of the Option Grant, in excess of $100,000.

 

9.                                      Option Price/Payment Terms. The price and payment terms applicable to any purchase of Common Stock under an Option shall be as follows:

 

9.1                               Price. The price for each share of Common Stock purchased upon exercise of any Option (the “Exercise Price”) shall be determined as follows:

 

9.1.1                     The Exercise Price under a Qualified Option shall be not less than 100% of the Fair Market Value of the Common Stock at the time of issuance of the Option; provided, however, that if an Option is granted to an Employee who, at the time of the grant of the Option is also an Insider, then the Exercise Price shall be not less than 110% of the Fair Market Value of the Common Stock at the time of issuance of the Option.

 

9.1.2                     The Exercise Price for each share of Common Stock to be purchased under a Non-Qualified Option shall be determined by the Committee at the time of grant and set forth in the Option Grant; provided, however, the Exercise Price for a Non-Qualified Option shall not be less than 100% of the Fair Market Value of the Common Stock at the time of issuance of the Option. Notwithstanding the foregoing, an Option may be granted with an exercise price lower than one hundred percent (100%) of the Fair Market Value of the Common Stock subject to the Option if such Option is granted pursuant to an assumption or substitution for another option in a manner consistent with the provisions of Section 424(a) of the Code (whether or not such options are Qualified Options).

 

9.1.3                     For purposes of this Plan, the per share “Fair Market Value” of the Common Stock shall be (a) the closing sale price for a share of the Common Stock reported (i) on any national exchange on which the Company is listed, or (ii) the National Association of Securities Dealers, Inc. Automated Quotation System (“NASDAQ”) as of the date upon which the Company grants an Option, provided the Common Stock is authorized for quotation as a NASDAQ National Market System Security for such date (or, if no sale is so reported for such date, for the latest preceding date on which such a sale was so reported), or (b) if the Common Stock is not so listed or authorized for quotation, the price determined by the reasonable application of a reasonable valuation method as described in Treasury Regulation Section 1.409A-1(b)(5)(iv)(B) at the time of the grant of each Option. In the event of any stock dividend or other recapitalization of the Common Stock following the date of the grant of an Option, the Exercise Price and number of shares of Common Stock subject to an Option shall be proportionately adjusted to reflect the stock dividend or other recapitalization and the aggregate Exercise

 

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Price of the Option shall not be less than the aggregate Exercise Price of the Option before the stock dividend or other recapitalization.

 

9.2                               Payment Terms. In general, an Optionee shall pay the Company by cash, check, bank draft or money order payable to the Company the Exercise Price in full at the time of delivery of the Notice of Exercise. However, the Committee, in its discretion, may at the time of the issuance of the Option Grant or at any time thereafter, agree to (a) permit an Optionee to pay the Exercise Price in one or more deferred installments, upon such terms as the Committee deems advisable; provided, however, that interest shall compound at least annually and shall be charged at the minimum rate of interest necessary to avoid (i) the imputation of interest income to the Company and compensation income to the Optionee under any applicable provisions of the Code, and (ii) the classification of the Option as a liability for financial accounting purposes, (b) declare and pay bonuses to Employees to fund part or all of the Exercise Price, or (c) to the extent that the value of the Common Stock issuable upon the exercise of an Option is greater than the aggregate Exercise Price, allow the Optionee to use a portion thereof to pay such aggregate Exercise Price.

 

10.                               Exercise of Options. Optionees may exercise Options at any time prior to the expiration date specified in the related Option Grant by delivering a notice in the form attached hereto as Exhibit B (the “Notice of Exercise”), together with tender of the payment of the aggregate Exercise Price for the Common Stock subject to that Notice of Exercise. If financing is provided by the Company for such purchase, then such tender shall include an executed promissory note for the financed portion of the Exercise Price. An Optionee may exercise an Option in whole or in part.

 

11.                               Forfeiture of Options. Options shall be subject to forfeiture under the following circumstances:

 

11.1                        Forfeiture of Employee Options. If an Employee ceases to be employed by the Company while any Option remains outstanding, the unvested rights under that Option shall automatically expire as of the effective date of the termination of employment and the vested rights under that Option shall expire as follows:

 

11.1.1              If the termination of employment was due to the death or disability of the Employee, then the vested rights under the Option shall expire at the earlier of the expiration date stated in the Option Grant or 1 year after the effective date of termination of employment.

 

11.1.2              If the termination of employment was due to the resignation of the Employee, then the vested rights under the Option shall expire at midnight on the 90th day after the effective date of termination of employment.

 

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11.1.3              If the termination of employment was due to the termination of the Employee by the Company for reasons other than the “gross misconduct” of the Employee, then the vested rights under the Option will expire at midnight on the 90th day after the effective date of termination.

 

11.1.4              If the termination of employment was due to the termination of the Employee by the Company as a result of the “gross misconduct” of the Employee, then the vested rights under the Option will expire immediately upon the effective date of termination of employment.

 

For purposes of this Plan, “gross misconduct” of an Employee shall include and be limited to (a) fraud, embezzlement, theft or similar dishonest conduct on the part of the Employee in the course of employment with the Company, (b) conviction of the Employee of a crime which, in the reasonable determination of the Board of Directors of the Company, materially and adversely affects the business, prospects and/or reputation of the Company, (c) violation by an Employee of any agreement with, or any policy or procedure of the Company, or (d) willful misuse or improper disclosure by the Employee of proprietary information of the Company. The determination of the Board of Directors of the Company as to “gross misconduct” for purposes of this Plan shall be final and shall not be subject to challenge or appeal.

 

11.2                        Forfeiture of Non-Employee Director and Outsider Options. If a non-Employee Director or an Outsider’s Continuous Service (as defined below) to the Company terminates while any Option remains outstanding, the unvested rights under that Option shall automatically expire as of the effective date of termination of Continuous Service and the vested rights under that Option shall expire as follows:

 

11.2.1              If a non-Employee Director or an Outsider’s Continuous Service to the Company terminates by reason of death or disability, then the vested rights under any Non-Qualified Option issued to such Director or Outsider shall expire at the earlier of the expiration date stated in the Option Grant or one (1) year after the effective date of such termination.

 

11.2.2              If a non-Employee Director’s or Outsider’s Continuous Service to the Company terminates by reason of the breach by the non-Employee Director or Outsider of any of such Director’s or Outsider’s obligations to the Company or its shareholders, then all outstanding Non-Qualified Options held by such Director or Outsider shall automatically be canceled.

 

11.2.3              Termination of a non-Employee Director’s or Outsider’s Continuous Service to the Company for any other reason shall cause the vested rights on any Non-Qualified Options issued to such Director or Outsider to expire on midnight on

 

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the 90th day after the effective date of termination unless the Committee shall, in its discretion, allow for a longer period following such termination for exercise of such Director’s or Outsider’s Options not to exceed the earlier of the expiration date stated in the Option Grant or 10 years from the date of the Option Grant.

 

For purposes of this Plan, “Continuous Service” means that the Participant’s service with the Company or an Affiliate, whether as an Employee, Director or Outsider, is not interrupted or terminated. A change in the capacity in which the Participant renders service to the Company or an Affiliate as an Employee, Director, or Outsider or a change in the entity for which the Participant renders such service, provided that there is no interruption or termination of the Participant’s service with the Company or an Affiliate, shall not terminate a Participant’s Continuous Service; provided, however, if the entity for which a Participant is rendering service ceases to qualify as an Affiliate, as determined by the Committee in its sole discretion, such Participant’s Continuous Service shall be considered to have terminated on the date such entity ceases to qualify as an Affiliate. For example, a change in status from an employee of the Company to a consultant of an Affiliate or to a Director shall not constitute an interruption of Continuous Service. To the extent permitted by law, the Committee or the chief executive officer of the Company, in that party’s sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of any leave of absence approved by that party, including sick leave, military leave or any other personal leave. Notwithstanding the foregoing, a leave of absence shall be treated as Continuous Service for purposes of vesting in an Option or Restricted Stock Grant only to such extent as may be provided in the Company’s leave of absence policy, in the written terms of any leave of absence agreement or policy applicable to the Participant, or as otherwise required by law.

 

12.                               Changes in Control and Other Extraordinary Transactions.

 

12.1                        Certain Definitions. As used in this Section, the following terms shall have the meanings set forth below:

 

12.1.1              “Affiliate” means, at the time of determination, any “parent” or “majority-owned subsidiary” of the Company, as such terms are defined in Rule 405 of the Securities Act. The Committee shall have the authority to determine the time or times at which “parent” or “majority-owned subsidiary” status is determined within the foregoing definition.

 

12.1.2              “Cash-Out Amount” means, with respect to any Cash Transaction and any Option, an amount in cash equal to the difference between (a) the amount of cash to be paid to holders of the Company’s Common Stock for each share exchanged or surrendered in the transaction, multiplied by the number of shares of Common Stock for which such Option is exercisable or as accelerated by the Board of Directors, and (b) the exercise price for such shares under such Option.

 

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12.1.3              “Cash Transaction” means a merger or other transaction in which holders of the Common Stock receive a cash payment for each share exchanged or surrendered in such merger or other transaction.

 

12.1.4              “Cause” means (a) if the Optionee is an employee, “gross misconduct” as defined in Section 11.1.4 hereof, or (b) if the Optionee is not an Employee, willful misconduct by the Optionee or willful failure to perform his or her responsibilities in the best interests of the Company or any acquiring or succeeding entity (including, without limitation, breach by the Optionee of any provision of any consulting, employment, nondisclosure, non-competition or other agreement between the Optionee and the Company or such entity), as determined by the Board of Directors of the Company or the board of directors or equivalent managerial body of such acquiring or succeeding entity, which determination shall be final and not subject to challenge or appeal.

 

12.1.5              “Change in Control” means (a) any merger or consolidation of the Company with or into another entity, other than a merger or consolidation in which the shareholders of the Company immediately before the transaction will own immediately thereafter, directly or indirectly, securities having a majority in ordinary voting power of the outstanding securities of the surviving or resulting entity, and (b) any sale by the Company of all or substantially all of its assets, other than a sale of assets in which the shareholders of the Company immediately before the transaction will own immediately thereafter, directly or indirectly, securities having a majority in ordinary voting power of the outstanding securities of the acquiror of the Company’s assets.

 

12.1.6              “Extraordinary Transaction” means (a) any merger or consolidation of the Company with or into another entity, (b) any sale by the Company of all or substantially all of its assets, or (c) any sale or other transfer of shares of stock by one or more shareholders of the Company as a result of which any one transferee, together with the transferee’s Affiliates, will become the owner of a majority in ordinary voting power of the Company’s outstanding stock.

 

12.1.7              “Publicly Traded” means, with respect to any securities of a kind acquirable upon exercise of an Option, that there are shares of such class of securities that are traded on or through a national securities exchange or the National Association of Securities Dealers Automated Quotation System or any similar public securities market.

 

12.1.8              “Service” means, with respect to any Optionee, such Optionee’s service as an employee, officer or director of, or consultant or advisor to, the Company or any acquiring or succeeding corporation or entity, as the case may be.

 

12.1.9              “Unvested Shares” means, with respect to any Option at any time, any shares that are not then acquirable upon exercise of such Option but that will become acquirable at a future date if the Optionee continues to provide Service to the

 

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Company through that date. Unvested Shares do not include any shares that will become exercisable only if specified performance targets are met.

 

12.2                   Extraordinary Transactions in General. In the event of an Extraordinary Transaction in which all or substantially all of the outstanding shares of Common Stock are exchanged for securities, cash or other property of any other corporation or entity, the Board of Directors of the Company, or any corporation or entity assuming the obligations of the Company, shall take any one or a combination of the following actions as to all outstanding Options (and need not take the same action as to each such Option):

 

12.2.1              provide that such Options shall be assumed, or equivalent Options shall be substituted, by the acquiring or succeeding corporation or business entity (or an affiliate thereof), so long as (a) the assumption or substitution of a Qualified Option satisfies the requirements of Treasury Regulation Section 1.424-1, and (b) the assumption or substitution of a Non-Qualified Option satisfies the requirements of Treasury Regulation 1.409A-1(b)(5)(v)(D):

 

12.2.2              in the event of a Cash Transaction, make or provide for a cash payment of the Cash-Out Amount upon exercise of such Option, in lieu of the shares of Common Stock (or other securities) which the Optionee otherwise would be entitled to receive upon exercise of such Option;

 

12.2.3              provide for net or “cashless” exercise of Options based upon the difference between the value of Common Stock in the Extraordinary Transaction and the Exercise Price of such Option; or

 

12.2.4              upon written notice to the Optionee, provide that all unexercised Options that are then exercisable or would become exercisable by virtue of such Extraordinary Transaction will terminate prior to or upon the consummation of the transaction and may only be exercised by the Optionee within a specified period following the date of such notice.

 

In the event of an Extraordinary Transaction in which some but less than substantially all of the outstanding shares of Common Stock are exchanged for securities, cash or other property of any other corporation or entity, the Board of Directors of the Company, or the corporation or entity assuming the obligations of the Company, may in its discretion, take any one or a combination of the actions set forth in Sections 12.2.1, 12.2.2 and 12.2.3.

 

12.3                        Election to Cash-Out Options Upon Certain Changes in Control. Notwithstanding the foregoing, in the event an Option will terminate if not exercised prior to the effective time of an Extraordinary Transaction, the Board of Directors may provide, in its sole discretion, that the Optionee need not exercise such Option to receive a payment, in lieu of such exercise and in such form as may be determined by the Board of Directors, equal in value to the excess, if any, of (a) the value of the property the

 

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Optionee would have received upon the exercise of the Option, over (b) any exercise price payable by such holder in connection with such exercise.

 

12.4                        Certain Exceptions. Notwithstanding anything herein to the contrary, the Board of Directors by majority vote may provide in any Option Grant that any or all of the preceding provisions of this Section 12 shall not apply to the Options granted under that Agreement.

 

12.5                        Substitute Options. The Company may grant Options in substitution for Options held by employees of another corporation who become employees of the Company, or a subsidiary of the Company, as the result of a merger or consolidation of the employing corporation with the Company or a subsidiary of the Company, or as a result of the acquisition by the Company, or one of its subsidiaries, of property or stock of the employing corporation. The substitution of a Qualified Option shall satisfy the requirements of Treasury Regulation Section 1.424-1. The substitution of a Non-Qualified Option shall satisfy the requirements of Treasury Regulation 1.409A-1(b)(5)(v)(D).

 

12.6                        Options Held by Persons other than Current Participants. Except as otherwise stated in the Option Grant, in the event of a Extraordinary Transaction in which the surviving corporation or acquiring corporation (or its parent company) does not assume or continue such outstanding Options or substitute similar options for such outstanding Options, then with respect to Options that have not been assumed, continued or substituted and that are held by persons other than current Participants, the vesting of such Options (and, if applicable, the time at which such Option may be exercised) shall not be accelerated and such Options shall terminate if not exercised (if applicable) prior to the effective time of the Extraordinary Transaction; provided, however, that any reacquisition or repurchase rights held by the Company with respect to such Options shall not terminate and may continue to be exercised notwithstanding the Extraordinary Transaction.

 

13.                          Option is Discretionary. The grant by the Committee of any Option is entirely discretionary and nothing in this Plan shall be deemed to give any employee of the Company or any other person any right to participate in this Plan or to receive Options. Except as provided in Sections 11 and 12 hereof, the exercise of any Option granted under this Plan is entirely discretionary with the Optionee and nothing in this Plan shall be deemed to require any Optionee to exercise any Option.

 

14.                               Restrictions on Transfers.

 

14.1                        Restriction on Transfer of Options.

 

14.1.1              The rights of an Optionee under an Option shall not be transferable or assignable by that Optionee other than by will or by laws of descent upon

 

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death. During the lifetime of the Optionee, the Option shall be exercisable only by that Optionee; provided, however, that the Board of Directors may, in its sole discretion, permit transfer of the Option to such extent as permitted by Rule 701 of the Securities Act at the time of the grant of the Option and in a manner consistent with applicable tax and securities laws upon the Optionee’s request.

 

14.1.2              Notwithstanding the foregoing, an Option may be transferred pursuant to a domestic relations order, provided, however, that an Qualified Option may be deemed to be a Non-Qualified Option as a result of such transfer.

 

14.1.3              Notwithstanding the foregoing, the Optionee may, by delivering written notice to the Company, in a form provided by or otherwise satisfactory to the Company, designate a third party who, in the event of the death of the Optionee, shall thereafter be the beneficiary of an Option with the right to exercise the Option and receive the Common Stock or other consideration resulting from the Option exercise.

 

14.2                        Restrictions on Transfer of Option Stock. Except as permitted under Section 9.2 and or Section 12.2, Optionees shall not dispose of any Common Stock acquired by exercise of Options (“Option Stock”) within 2 years of the date of the Option Grant under which that Option Stock was acquired, or within 1 year from the date that Option Stock was issued, whichever is longer. For purposes of this Section, a disposition shall include any transfer or purported transfer of Option Stock, whether voluntary or involuntary, whether with or without valuable consideration and whether by sale, pledge, gift, foreclosure or otherwise.

 

14.3                        Company Right of First Refusal. If, during the period between the expiration of the applicable time period for disposition of any Option Stock set forth in Section 14.2 and the initial public offering of the Company’s capital stock pursuant to an effective registration statement under the Securities Act (the “Initial Public Offering”), any Optionee shall propose to voluntarily transfer any Option Stock, the Optionee shall deliver written notice of the proposed disposition to the Company, which notice shall specify the proposed transferee, the number of shares of Option Stock proposed to be transferred and the price and other terms of the transfer (the “Offer Notice”). The Company shall thereupon have the right, exercisable by written notice delivered to the Optionee within 45 days following the date of its receipt of the Offer Notice, to elect to acquire the Option Stock proposed to be transferred, with the terms of acquisition being the terms set forth in the Offer Notice. If the Company delivers such notice within such 45 day period, then the Optionee shall sell, and the Company shall purchase, the Option Stock proposed to be transferred on the 10th day (or next business day thereafter) following the date of delivery of such notice by the Company. Alternatively, if the Company fails to deliver such notice within such period, then the Optionee may proceed with the transfer of the Option Stock to the party upon the terms specified in the Offer Notice. This Section 14.3 shall have no further effect upon the occurrence of the Initial Public Offering.

 

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15.                               Redemption of Option Stock. Until the occurrence of the Initial Public Offering, all Option Stock shall be subject to redemption by the Company as follows:

 

15.1                        Termination of Employment. Upon termination of the employment of an Employee or the relationship between a Director or an Outsider and the Company for any reason other than death, disability or, in the case of an Employee, retirement at or after the age of 65, the Company shall have the option, exercisable by written notice delivered to the Optionee (or the legal representative of the Optionee) within one (1) year after the effective date of termination of employment, to purchase all (but not less than all) of the Common Stock acquired by the Optionee under this Plan at the price and terms determined as follows:

 

15.1.1              The Company and the Optionee (or legal representative of the Optionee) shall attempt to agree upon a redemption price within fifteen (15) days after the Company shall have delivered notice to the subject Optionee of its election to redeem such Optionee’s Option Stock. If the Company and the Optionee (or legal representative of the Optionee) cannot agree upon a redemption price within such time period, then the Company and the Optionee (or the legal representative of the Optionee) shall attempt to agree upon an independent third party to appraise the Option Stock. If they are unable to agree upon an appraiser, then the appraisal shall be conducted by a panel of 3 appraisers, one of whom shall be selected (and compensated) by the Company, one of whom shall be selected (and compensated) by the Optionee (or the legal representative of the Optionee) and one of whom shall be selected by the first two (2) appraisers and compensated in equal shares by the Company and the Optionee (or the legal representative of the Optionee). The appraiser(s) shall be directed to determine the fair market value of the Option Stock being redeemed, taking into account the financial condition of the Company and the fact that the Option Stock may or may not constitute a minority interest, but not taking into account the restrictions contained in this Plan. The determination of the appraiser(s) shall be communicated to the Company and the Optionee (or the legal representative of the Optionee) by written notice. That determination shall be binding upon the Company and the Optionee (or the legal representative of the Optionee) and shall not be subject to challenge or appeal.

 

15.1.2              Unless otherwise agreed by the Company and the Optionee (or the legal representative of the Optionee), the redemption price shall be payable, at the option of the Company, in one installment at the time of closing or in a series of up to 36 consecutive monthly installments beginning on the first day of the month following the closing. If the Company elects to make payment in deferred installments, then interest shall accrue on the unpaid balance of the redemption price at the prevailing London Interbank Offering Rate (LIBOR), adjusted when and as such rate is adjusted.

 

15.1.3              The closing of the redemption shall take place at the offices of the Company on a date designated by the Company which shall be not less than 10 days no more than 30 days after the date that the appraisal has been delivered to the Company

 

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and the Optionee (or the legal representative of the Optionee). At the closing, the Company shall pay the price in full (or the first installment and deliver a promissory note for the remaining balance) and the Optionee shall endorse in blank and deliver to the Company the stock certificate representing the Option Stock being redeemed. By delivery of the stock certificate, the Optionee shall warrant marketable title to the shares of Option Stock, free and clear of all liens and encumbrances.

 

15.1.4              The rights of the Company under this Section 15.1 are assignable to any person or entity upon the approval of the Board of Director of the Company.

 

15.2                        Approved Offer. If the Board of Directors of the Company at any time adopts a resolution recommending that all shareholders of the Company sell their Common Stock to a third party under an offer approved by the Board of Directors of the Company (each an “Approved Offer”), and if an Optionee holding Option Stock does not within 10 days after receipt of such notice commit to proceed as recommended by the Company, then the Company shall have the option, exercisable by written notice delivered within 20 days after the expiration of such 10 day period, to redeem such Option Stock at the price and upon the terms contained in the Approved Offer, with the closing of such redemption to occur on the 30th day following the date of delivery of such notice.

 

16.                               Limitation of Rights. An Optionee shall not have any rights as a stockholder with respect to any Common Stock which is the subject of an Option unless and until the date that a stock certificate is issued for such Common Stock pursuant to an exercise of the Option. No adjustment shall be made for dividends or otherwise if the record date for dividends is prior to the date of the issuance of such stock certificates.

 

17.                                    No Right to Continued Employment. The grant of an Option by the Company to an Employee under this Plan shall not in any way establish any continuing right of that Employee to employment with the Company and all employees of the Company shall remain “at will” employees, unless the Company shall otherwise agree in a separate instrument.

 

RESTRICTED STOCK

 

18.                               Grants of Restricted Stock. The Committee may, in its discretion, make grants of Common Stock to Participants in such number of shares of Common Stock (“Restricted Stock”), subject to risk of forfeiture and subject to such other terms and restrictions (including, without limitation, restrictions on transfer) as may be set forth in a written agreement between the Company and the grantee of such Common Stock (each a “Restricted Stock Agreement”). Each Restricted Stock Agreement shall contain a representation of the grantee that he or she has received and reviewed a copy of this Plan. To the extent consistent with the Company’s Bylaws, at the Board of Directors’ election,

 

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shares of Common Stock may be (a) held in book entry form subject to the Company’s instructions until any restrictions relating to the Restricted Stock Grant lapse; or (b) evidenced by a certificate, which certificate shall be held in such form and manner as determined by the Board of Directors. A Restricted Stock Grant may be awarded in consideration for (i) past or future services actually or to be rendered to the Company or an Affiliate, or (ii) any other form of legal consideration that may be acceptable to the Board of Directors in its sole discretion and permissible under applicable law.

 

19.                               Time of Restricted Stock Grants. The Committee may make Restricted Stock Grants under this Plan from the adoption date to and including (but not after) 10 years after such date.

 

20.                               Risk of Forfeiture. The Committee shall determine and specify in each Restricted Stock Agreement the circumstances under which the Restricted Stock granted thereunder shall be subject to forfeiture, which may include satisfaction of specific performance criteria and/or the completion of specified periods of continued employment with, or service to, the Company.

 

21.                               Voting Proxy. In the applicable Restricted Stock Agreement, each grantee of Restricted Stock shall grant to the Secretary of Company an irrevocable proxy, coupled with an interest, to vote all of the Shares of Restricted Stock that remain subject to risk of forfeiture under such Restricted Stock Agreement, provided that the Secretary of Company votes such shares on any matter put to a vote of the shareholders of Company in the same proportion (rounded to the nearest whole share) as (a) the shares of Common Stock are voted on such matter by all of the other holders of Company’s Common Stock, when voting as a separate class, or (b) the shares of Common Stock and all other series and classes of the Company’s capital stock are voted on such matter by all of the other holders of Company’s capital stock, without regard to series or class.

 

22.                               Escrow. For purposes of facilitating the forfeiture rights of the Company set forth in each Restricted Stock Agreement, the grantee of any shares of Restricted Stock shall deliver to the Secretary of Company any certificate(s) for such shares that remain subject to forfeiture under such Restricted Stock Agreement, together with a stock power executed by such grantee, in blank. The Secretary of Company or his or her designee (in either such case, the “Escrow Agent”) may hold such certificate(s) and stock power(s) in escrow and take all such actions and to effectuate all forfeitures contemplated by such Restricted Stock Agreement. Such escrow shall remain in effect so long as any shares of Restricted Stock remain subject to forfeiture under such Restricted Stock Agreement. As soon as any such shares of Restricted Stock cease to be subject to forfeiture, the Company shall give notice thereof to the Escrow Agent and the Escrow Agent shall release the same (together with any stock power relating thereto) to such grantee as and when requested by such grantee in writing to Company; provided, however, that Company shall be obligated to do so not more often than at the end of each calendar quarter thereafter and at such time as such shares are no longer subject to forfeiture;

 

14

 

provided further, however, that Company shall release any of such shares upon the occurrence of any event resulting in an acceleration of the lapse of forfeiture restrictions as provided in such Restricted Stock Agreement. By acknowledgement of this Plan in a Restricted Stock Agreement, each grantee of Restricted Stock acknowledges that the Escrow Agent is so appointed as a material inducement to the grant of such Restricted Stock, that such appointment is coupled with an interest, and is irrevocable. The Escrow Agent shall not be liable to such grantee or the Company (or to any other party) for any actions or omissions other than those constituting willful misconduct or gross negligence. The Escrow Agent may rely upon any letter, notice or other document executed by any signature purported to be genuine.

 

23.                               Transferability. Rights to acquire shares of Common Stock under the Restricted Stock Grant Agreement shall be transferable by the Participant only upon such terms and conditions as are set forth in the Restricted Stock Grant Agreement, as the Board of Directors shall determine in its sole discretion, so long as Common Stock awarded under the Restricted Stock Grant Agreement remains subject to the terms of the Restricted Stock Grant Agreement.

 

24.                               Termination of Participant’s Continuous Service. In the event a Participant’s Continuous Service terminates, the Company may receive via a forfeiture condition, any or all of the shares of Common Stock held by the Participant which have not vested as of the date of termination of Continuous Service under the terms of the Restricted Stock Grant Agreement.

 

GENERAL

 

25.                               Securities Laws.

 

25.1                        Conditioned upon Availability of Exemption. Any grant of Options or Restricted Stock under this Plan shall be conditioned on the availability of exemptions from the registration requirements of the Securities Act and applicable state securities laws (collectively, the “Securities Laws”). In addition, the Committee may condition any such grant on the receipt by the Company of such agreements, representations and warranties from the Optionee or grantee of Restricted Stock as the Company may request for the purpose of establishing the availability of such exemptions. Any such grant that is not so exempt shall be null, void and of no effect.

 

25.2                        Securities Laws. No person shall dispose of any Option Stock or Restricted Stock (together, without distinction, the “Stock”) unless in compliance with the Securities Laws. The Stock will not be registered under the Securities Laws and will be issued pursuant to exemptions therefrom. In the Notice of Exercise and the Restricted Stock Agreement, each Optionee and grantee of Restricted Stock shall acknowledge to the Company that the Stock will be, or has been, acquired pursuant to an exemption from the Securities Laws and that the Optionee or such grantee is acquiring the Stock for

 

15

 

investment purposes and not with a view to subsequent sale or redistribution. The Stock may not be transferred unless a registration statement for such Stock is then in effect or the transfer is otherwise exempt from registration.

 

25.3                        Restrictive Legend. Each certificate representing shares of Stock shall be imprinted with legends in substantially the following form:

 

“The Common Stock represented by this Stock Certificate has been issued pursuant to the HDL THERAPEUTICS, INC. 2008 INCENTIVE STOCK OPTION AND RESTRICTED STOCK PLAN (the “Plan”). [FOR OPTIONS: Pursuant to the Plan, any disposition of the Common Stock is subject to substantial restrictions and HDL THERAPEUTICS, INC. has the right to redeem the Common Stock under specified circumstances. A copy of the Plan is maintained in the offices of HDL THERAPEUTICS, INC., and may be reviewed upon request.] [FOR RESTRICTED STOCK: Such Common Stock has been issued pursuant to a Restricted Stock Agreement that sets for the restrictions applicable thereto, including the circumstances under which such Common Stock is forfeit. A copy of such Agreement is maintained in the offices of HDL THERAPEUTICS, INC., and may be reviewed upon request.]”

 

“The Common Stock represented by this certificate has not been registered under the Securities Act or the securities laws of any state. Accordingly, such Common Stock may not be sold or otherwise disposed of, or transferred, unless a registration statement relating to the Common Stock is then in effect under such Act and applicable state securities laws, or unless an exemption from registration is established under those laws. Any transfer pursuant to exception from applicable federal and state securities laws is subject to the written consent of HDL THERAPEUTICS, INC. which may condition such consent upon receipt of the opinion of counsel, in form and substance satisfactory to HDL THERAPEUTICS, INC., to the effect that such registration is not required.”

 

25.4                        Lock-Up Restriction. In connection with a firm commitment underwritten public offering of securities of the Company, if requested by the issuer or its principal underwriter, each holder of Stock will: (a) not sell or otherwise transfer any such shares of Stock not included in such underwriting during the one hundred eighty (180) day period (or such shorter or longer period as the underwriter may require of the principal security holders of the issuer) following the effective date of the registration statement filed with the Securities and Exchange Commission in connection with such offering; and (b) execute such instruments as the underwriter may reasonably require to evidence compliance with this subsection.

 

25.5                        Stop Transfer Orders. The Company may place a “stop transfer” order against shares of Stock issued upon exercise of any Option or pursuant to a Restricted

 

16

 

Stock Agreement until full compliance with all restrictions and conditions set forth in this Section.

 

26.                               Reclassifications. If there shall be any reclassification, capital reorganization, subdivision, combination or stock dividend or any other similar change affecting the Common Stock, then number of shares of Common Stock subject to any Option and the Exercise Price thereof shall be shall be proportionately and automatically adjusted and the aggregate Exercise Price of the Option shall not be less than the aggregate Exercise Price of the Option before the reclassification, capital reorganization, subdivision, combination or stock dividend or any other similar change affecting the Common Stock. Any such change shall be final and binding upon each Optionee. The instrument or action of the Board of Directors of the Company or committee thereof effecting any such change may provide for the elimination of any fractional share subject to an Option resulting therefrom.

 

27.                               Taxes.

 

27.1                        Withholding for Options. Upon the disposition by an Optionee or other person of shares of Option Stock acquired pursuant to the exercise of a Qualified Option prior to satisfaction of the holding period requirements of Code Section 422, or upon the exercise of a Non-Qualified Option, the Company shall have the right to (a) require such Optionee or such other person to pay by cash or check payable to the Company, the amount of any taxes which the Company may be required to withhold with respect to such transactions, or (b) deduct from amounts paid in cash the amount of any taxes which the Company may be required to withhold with respect to such cash amounts. Notwithstanding the foregoing, in any case where a tax is required to be withheld in connection with the issuance or transfer of shares of Option Stock under this Plan, the Optionee may elect, pursuant to such rules as the Committee may establish, to have the Company reduce the number of such shares issued by the appropriate number of shares to accomplish such withholding; provided, the Committee may, in its discretion, impose such conditions on the payment of any withholding obligation as may be required to satisfy applicable regulatory requirements.

 

27.2                        Withholding for Restricted Stock. Upon the grant of Restricted Stock, the Company shall have the right to require the grantee to pay by cash or check payable to the Company, the amount of any taxes which the Company may be required to withhold as a consequence of such grant.

 

27.3                        Loans to Pay Taxes. Subject to applicable laws, rules or regulations, the Committee may, in its discretion, permit a loan from the Company to an Optionee or grantee of Restricted Stock in the amount of any taxes which the Company may be required to withhold, or the grantee be required to pay, with respect to shares of Common Stock received upon exercise of an Option or upon grant of Restricted Stock. Such a loan

 

17

 

will be for a term, at a rate of interest and pursuant to such other terms and rules as the Committee may establish, in its discretion.

 

27.4                        Elections under Code Section 83(b). Any grantee of Restricted Stock shall be entitled to make an election with respect thereto under Code Section 83(b) and to pay taxes in respect of such Restricted Stock Grant upon the basis of such election. The Company shall have no obligation or liability with respect to any such filing, the value of the Restricted Stock declared therein or the timing of any such election.

 

28.                               Amendment, Termination and Suspension.

 

28.1                        Plan. The Committee may, at any time, terminate or, from time to time, amend, modify or suspend this Plan (or any part hereof) other than Section 12.

 

28.2                        Approval. If an amendment of this Plan would (a) materially increase the benefits accruing to Participants, (b) increase the aggregate number of shares of Common Stock which may be issued under this Plan, or (c) modify the requirements of eligibility for participation in this Plan, the amendment shall be approved by the Board of Directors of the Company or the Committee and, to the extent then required by Code Section 422, by a majority of the stockholders of the Company.

 

28.3                        Options. With the consent of the affected Optionee, the Committee may, make such modifications of the terms and conditions of such Optionee’s Option as it shall deem advisable. No modification of any other term or provision of any Option which is amended in accordance with the foregoing shall be required, although the Committee may, in its discretion, make such further modifications of any such Option as are not inconsistent with or prohibited by this Plan or Code Section 409A.

 

28.3.1              No Modification of Existing Options. In the case of Options issued before the effective date of any amendment, suspension or termination of this Plan, such amendment, suspension or termination shall not, without specific action of the Board of Directors of the Company or the Committee and the consent of the affected Optionee, in any way modify, amend, alter or impair any rights or obligations under any Option previously granted under this Plan.

 

28.3.2              Qualified Options. The Committee may not amend this Plan in any manner that would have the effect of preventing any Options which were intended to be Qualified Options from being treated as “qualified” incentive stock options under Code Section 422 and the Treasury Regulations promulgated thereunder.

 

28.3.3              Extensions. An Option may not be amended to provide for an extension of time to exercise the Option, other than at a time when the Exercise Price equals or exceeds the Fair Market Value of the Common Stock that could be purchased. In such case, the Committee, with the consent of the affected Optionee, may, but is not

 

18

 

obligated to, extend the exercise period of the Option and the extension shall be treated as the grant of a new Option.

 

28.3.4              Exercise Price. Notwithstanding anything in this Section 26.3 to the contrary, the Committee does not have the authority to adopt any amendment or agreement that will cause the Exercise Price of an Option (either Qualified and Non- Qualified) to be less than the Fair Market Value of the Common Stock at the time the Option was granted.

 

28.3.5              Suspension or Termination of Plan. No Options may be granted during any suspension of this Plan or after its termination.

 

28.4                        Restricted Stock. The terms applicable to a Restricted Stock Grant may only be amended or otherwise modified in accordance with a written amendment of the related Restricted Stock Agreement, executed by the Company and the grantee.

 

29.                               Administration. This Plan shall be administered by the Committee, which by majority vote of a duly constituted quorum, shall have the power to grant Options and Restricted Stock, to establish rules for administration and interpretation of this Plan, to exercise all rights of the Company under and with respect to this Plan, to determine from time to time (a) which of the persons eligible under the Plan shall be granted Options and/or Restricted Stock Grants; (b) when and how such Options and/or Restricted Stock Grants shall be granted; (c) what type or combination of types of Options and/or Restricted Stock Grants shall be granted; (d) the provisions of each Options and/or Restricted Stock Grants granted (which need not be identical), including the time or times when a person shall be permitted to receive cash or Common Stock pursuant to Options and/or Restricted Stock Grants; (e) the number of shares of Common Stock with respect to which Options and/or Restricted Stock Grants shall be granted to each such person; and (f) the Fair Market Value applicable to such Options and/or Restricted Stock Grants, and otherwise to generally administer this Plan. The Committee, in interpreting this Plan, reserves the right to correct any defect in this Plan, to supply any omission from this Plan or to reconcile any inconsistency in this Plan in a manner which is consistent with the objectives stated in the preamble to this Plan or to settle all controversies regarding the Plan and Options and/or Restricted Stock Grants granted under it. Any decision made by the Committee in the administration of this Plan shall be conclusive and binding upon the Company and the affected Optionee(s) and grantees of Restricted Stock Grants and shall not be subject to challenge or appeal.

 

29.1                        In addition to the foregoing, the Committee shall have the power, subject to, and within the limitations of, the express provisions of the Plan:

 

29.1.1              To accelerate the time at which Options and/or Restricted Stock Grants may first be exercised or the time during which such Options and/or Restricted Stock Grants or any part thereof will vest in accordance with the Plan,

 

19

 

notwithstanding the provisions in such Options and/or Restricted Stock Grants stating the time at which it may first be exercised or the time during which it will vest.

 

29.1.2              To suspend or terminate the Plan at any time. Suspension or termination of the Plan shall not impair rights and obligations under any Options and/or Restricted Stock Grants granted while the Plan is in effect except with the written consent of the affected Participant.

 

29.1.3              To amend the Plan in any respect the Committee deems necessary or advisable, including, without limitation, relating to Qualified Options and certain nonqualified deferred compensation under Section 409A of the Code and/or to bring the Plan or Options and/or Restricted Stock Grants granted under the Plan into compliance therewith, subject to the limitations, if any, of applicable law. However, except as provided in Section 26 relating to reclassification adjustments, to the extent required by applicable law, stockholder approval shall be required for any amendment of the Plan that either (a) materially increases the number of shares of Common Stock available for issuance under the Plan, (b) materially expands the class of individuals eligible to receive Options and/or Restricted Stock Grants under the Plan, (c) materially increases the benefits accruing to Participants under the Plan or materially reduces the price at which shares of Common Stock may be issued or purchased under the Plan, (d) materially extends the term of the Plan, or (e) expands the types of Options and/or Restricted Stock Grants available for issuance under the Plan. Except as provided above, rights under any Options and/or Restricted Stock Grants granted before amendment of the Plan shall not be impaired by any amendment of the Plan unless (i) the Company requests the consent of the affected Participant, and (ii) such Participant consents in writing.

 

29.1.4              To submit any amendment to the Plan for stockholder approval, including, but not limited to, amendments to the Plan intended to satisfy the requirements of Section 422 of the Code regarding Qualified Options.

 

29.1.5              To approve forms of Restricted Stock Grant Agreements or Option Grants for use under the Plan and to amend the terms of any one or more Restricted Stock Grants or Options, including, but not limited to, amendments to provide terms more favorable than previously provided in the Restricted Stock Grant Agreements or Option Grants, subject to any specified limits in the Plan that are not subject to Board of Director discretion; provided however, that, the rights under any Restricted Stock Grants or Options shall not be impaired by any such amendment unless (i) the Company requests the consent of the affected Participant, and (ii) such Participant consents in writing. Notwithstanding the foregoing, subject to the limitations of applicable law, if any, and without the affected Participant’s consent, the Committee may amend the terms of any one or more Restricted Stock Grants or Options if necessary to maintain the qualified status of the Restricted Stock Grants or Options as a Qualified Option or to bring the Restricted Stock Grants or Options into compliance with Section 409A of the Code and any applicable Treasury Regulations promulgated thereunder.

 

20

 

29.1.6              To adopt such procedures and sub-plans as are necessary or appropriate to permit participation in the Plan by Employees, Directors or Outsiders who are foreign nationals or employed outside the United States.

 

29.1.7              To effect, at any time and from time to time, with the consent of any adversely affected Participant, (a) the reduction of the exercise price of any outstanding Option under the Plan, (b) the cancellation of any outstanding Option under the Plan and the grant in substitution therefor of (i) a new Option under the Plan or another equity plan of the Company covering the same or a different number of shares of Common Stock, (ii) a Restricted Stock Grant, (iii) cash and/or (iv) other valuable consideration (as determined by the Committee, in its sole discretion), or (c) any other action that is treated as a repricing under generally accepted accounting principles; provided, however, that no such reduction or cancellation may be effected if it is determined, in the Company’s sole discretion, that such reduction or cancellation would result in any such outstanding Option becoming subject to the requirements of Section 409A of the Code.

 

29.2                        Delegation to an Officer. The Committee may delegate to one or more officers of the Company the authority to do one or both of the following: (a) designate officers and Employees of the Company or any of its Affiliates to be recipients of Options (and, to the extent permitted by applicable law, Restricted Stock Grants) and the terms thereof, and (b) determine the number of shares of Common Stock to be subject to such Options or Restricted Stock Grants granted to such officers and Employees; provided, however, that the Board of Directors’ resolutions regarding such delegation shall specify the total number of shares of Common Stock that may be subject to the Options or Restricted Stock Grants granted by such officer and that such officer may not grant Options or Restricted Stock Grants to himself or herself. Notwithstanding the foregoing, the Committee may not delegate authority to an officer to determine the Fair Market Value of the Common Stock pursuant to Section 9.1.3 above.

 

29.3                        Effect of Committee’s Decision. All determinations, interpretations and constructions made by the Committee in good faith shall not be subject to review by any person and shall be final, binding and conclusive on all persons.

 

30.                               Liability/Indemnification. No member of the Committee shall be liable for any act or omission relating to the administration of this Plan excepting acts or omissions of that member which constitute gross negligence or willful misconduct. The Company shall indemnify and hold each present and future member of the Committee harmless from and against all claims, liabilities, damages or expenses (including, without limitation, attorneys fees and disbursements) incurred by such member in connection with or arising out of any claim, suit or proceeding relating any way to the administration or interpretation of this Plan; provided, however, that if, as a result of such claim, suit or proceeding, it is determined that the conduct of such member with respect to this Plan

 

21

 

constituted gross negligence or willful misconduct, then such member shall be obligated to reimburse the Company for any amounts paid pursuant to this indemnification.

 

31.                                    No Deferred Compensation. The Company intends that the granting of any award under this Plan shall not constitute a deferral of compensation as defined in Code Section 409A and the interpretive authorities promulgated thereunder, and the provisions of this Plan shall be construed in a manner to carry out that intention.

 

32.                                    Availability of Shares. During the terms of the Options and Restricted Stock Grants, the Company shall keep available at all times the number of shares of Common Stock reasonably required to satisfy such Options and Restricted Stock Grants.

 

33.                                    Use of Proceeds from Sales of Common Stock. Proceeds from the sale of shares of Common Stock pursuant to Options or Restricted Stock Grants shall constitute general funds of the Company.

 

34.                                    Stockholder Rights. No Participant shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Common Stock subject to such Options or Restricted Stock Grants unless and until such Participant has satisfied all requirements for exercise of the Options or Restricted Stock Grants pursuant to its terms and the Participant shall not be deemed to be a stockholder of record until the issuance of the Common Stock pursuant to such exercise has been entered into the books and records of the Company.

 

35.                               No Employment or Other Service Rights. Nothing in the Plan, any Option Grant or Restricted Stock Grant Agreement any other instrument executed thereunder or in connection with any Options or Restricted Stock Grants granted pursuant thereto shall confer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the time the Options or Restricted Stock Grants was granted or shall affect the right of the Company or an Affiliate to terminate (a) the employment of an Employee with or without notice and with or without cause, (b) the service of a Consultant pursuant to the terms of such Consultant’s agreement with the Company or an Affiliate, or (c) the service of a Director pursuant to the Bylaws of the Company or an Affiliate, and any applicable provisions of the corporate law of the state in which the Company or the Affiliate is incorporated, as the case may be.

 

36.                                    Investment Assurances. The Company may require a Participant, as a condition of exercising or acquiring Common Stock under any Options or Restricted Stock Grants, (a) to give written assurances satisfactory to the Company as to the Participant’s knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters and that he or she is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Options or Restricted Stock Grants; and (b) to give written assurances satisfactory to the

 

22

 

Company stating that the Participant is acquiring Common Stock subject to the Options or Restricted Stock Grants for the Participant’s own account and not with any present intention of selling or otherwise distributing the Common Stock. The foregoing requirements, and any assurances given pursuant to such requirements, shall be inoperative if (i) the issuance of the shares upon the exercise or acquisition of Common Stock under the Options or Restricted Stock Grants has been registered under a then currently effective registration statement under the Securities Act, or (ii) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws. The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the Common Stock.

 

37.                                    Electronic Delivery. Any reference herein to a “written” agreement or document shall include any agreement or document delivered electronically or posted on the Company’s intranet.

 

38.                                    Compliance with Section 409A. To the extent that the Board determines that any Options or Restricted Stock Grants granted hereunder is subject to Section 409A of the Code, the Option Grant or Restricted Stock Grant Agreement evidencing such Options or Restricted Stock Grants shall incorporate the terms and conditions necessary to avoid the consequences specified in Section 409A(a)(1) of the Code. To the extent applicable, the Plan and Option Grant or Restricted Stock Grant Agreement shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued or amended after the Effective Date. Notwithstanding any provision of the Plan to the contrary, in the event that following the Effective Date the Board determines that any Options or Restricted Stock Grants may be subject to Section 409A of the Code and related Department of Treasury guidance (including such Department of Treasury guidance as may be issued after the Effective Date), the Board may adopt such amendments to the Plan and the applicable Option Grant or Restricted Stock Grant Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Board determines are necessary or appropriate to (a) exempt the Options or Restricted Stock Grants from Section 409A of the Code and/or preserve the intended tax treatment of the benefits provided with respect to the Options or Restricted Stock Grants, or (b) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance.

 

39.                                    Compliance with Exemption Provided by Rule 12h-1(f). If: (a) the aggregate of the number of Optionees and the number of holders of all other outstanding compensatory employee stock options to purchase shares of Common Stock equals or

 

23

 

exceeds five hundred (500), and (b) the assets of the Company at the end of the Company’s most recently completed fiscal year exceed $10 million, then the following restrictions shall apply during any period during which the Company does not have a class of its securities registered under Section 12 of the Exchange Act and is not required to file reports under Section 15(d) of the Exchange Act: (i) the Options and, prior to exercise, the shares of Common Stock acquired upon exercise of the Options may not be transferred until the Company is no longer relying on the exemption provided by Rule 12h-l(f) promulgated under the Exchange Act (“Rule 12h-l(f)”), except: (1) as permitted by Rule 701(c) promulgated under the Securities Act, (2) to a guardian upon the disability of the Optionee, or (3) to an executor upon the death of the Optionee (collectively, the “Permitted Transferees”); provided, however, the following transfers are permitted: (x) transfers by the Optionee to the Company, and (z) transfers in connection with a change of control or other acquisition involving the Company, if following such transaction, the Options no longer remain outstanding and the Company is no longer relying on the exemption provided by Rule 12h-1(f); provided further, that any Permitted Transferees may not further transfer the Options; (ii) except as otherwise provided in (i) above, the Options and shares of Common Stock acquired upon exercise of the Options are restricted as to any pledge, hypothecation, or other transfer, including any short position, any “put equivalent position” as defined by Rule 16a-1(h) promulgated under the Exchange Act, or any “call equivalent position” as defined by Rule 16a-1(b) promulgated under the Exchange Act by the Optionee prior to exercise of an Option until the Company is no longer relying on the exemption provided by Rule 12h-1(f); and (iii) at any time that the Company is relying on the exemption provided by Rule 12h-1(f), the Company shall deliver to Optionees (whether by physical or electronic delivery or written notice of the availability of the information on an internet site) the information required by Rule 701(e)(3), (4), and (5) promulgated under the Securities Act every six (6) months, including financial statements that are not more than one hundred eighty (180) days old; provided, however, that the Company may condition the delivery of such information upon the Optionee’s agreement to maintain its confidentiality.

 

40.                               Approval of Plan. The Adoption Date upon which this Plan has been adopted by the Board of Directors of the Company is April 24, 2008. The shareholders of the Company approved this Plan on April 24, 2008 (the “Effective Date”).

 

24

 

EXHIBIT A

OPTION GRANT

 

	
To:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Date:
    	
 
    	
 
    

 

 

HDL THERAPEUTICS, INC. (the “Company”) hereby grants you an option (the “Option”), pursuant to the HDL THERAPEUTICS, INC. 2008 INCENTIVE STOCK OPTION AND RESTRICTED STOCK PLAN (the “Plan”) to purchase up to            shares of the Common Stock of the Company (the “Option Shares”) at a price of $                 per share. The date of the grant of this Option is as indicated above. It has been determined that, on this date, the fair market value of the Common Stock of the Company is $         per share.

 

The Option [is intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended][IS NOT intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended].

 

Attached is a copy of the Plan. Your rights under this Option are, in all respects, limited and conditioned as provided in the Plan.

 

In your review of the Plan, your attention is specifically directed to the time within which you may and must exercise the Option. Your rights under the Option will vest if you continue to provide services to the Company on the following schedule:

 

	
Date
    	
 
    	
Cumulative Option Shares Vested
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    

 

If your employment or other arrangement with the Company is terminated for any reason prior to a vesting date, no further vesting will occur on or after the effective date of termination.

 

Please note that the Plan does not require that you exercise any vested rights under the Option as to any particular number of Option Shares at any particular time, but that your right to exercise this Option will in all events expire            years from the date of this Option Grant and will be subject to an earlier termination if your employment or

 

A-1

 

other applicable engagement with the Company is for any reason terminated prior to the expiration of that time period.

 

The purchase price for shares of Common Stock acquired by you pursuant to the Option shall be payable [as provided in Section 9 (Option Price/Payment Terms) of the Plan] [as follows: {INSERT METHOD OF PAYMENT}].

 

Your exercise of the Option shall only be by means of the Notice of Exercise which is attached to the Plan.

 

The Option Shares have not been registered, nor does the Company have any obligation to register the Option Shares, under the Securities or the securities laws of any state. Accordingly, upon any exercise of this Option, Option Shares will not be freely transferable and may not be sold or otherwise disposed of, or transferred, unless a registration statement relating to the Option Shares is then in effect under such Act and applicable state securities laws, or unless an exemption from registration is established under those laws. Any transfer pursuant to exception from applicable Federal and state securities laws is subject to the written consent of HDL THERAPEUTICS, INC., which may condition such consent upon receipt of the opinion of counsel, in form and substance satisfactory to HDL THERAPEUTICS, INC. to the effect that such registration is not required.

 

If you have any questions or comments regarding this Option or this Plan, please do not hesitate to discuss them with the undersigned.

 

	
 
    	
HDL   THERAPEUTICS, INC.
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Its:
    	
 
    

 

I have received and reviewed a copy of the Plan and acknowledge and agree that the grant evidenced by this instrument is in all respects governed by the Plan.

 

	
Signature   of Optionee:
    	
 
    	
 
    
	
 
    	
 
    
	
Name   of Optionee (Please print):
    	
 
    	
 
    
	
 
    	
 
    
	
Date:
    	
 
    	
 
    
					

 

A-2

 

EXHIBIT B

 

NOTICE OF EXERCISE

 

 

	
To:
    	
HDL   THERAPEUTICS, INC.
    	
 
    
	
 
    	
 
    	
 
    
	
Date:
    	
 
    	
 
    

 

 

The undersigned, pursuant to the Option Grant dated            , 2     (the “Option”) made by HDL THERAPEUTICS, INC. (the “Company”) under the HDL THERAPEUTICS, INC. 2008 INCENTIVE STOCK OPTION AND RESTRICTED STOCK PLAN (the “Plan”) hereby exercises the right to purchase              shares of Common Stock of the Company at the price of $                              per share. Enclosed is the consideration for those shares of Common Stock.

 

I  acknowledge that the Common Stock issued to me will be subject to all restrictions contained in this Plan, including, without limitation, restrictions on transfer of the Common Stock and the right of the Company under specified conditions to redeem the Common Stock.

 

I  acknowledge that the Common Stock has not been registered under any federal or state securities law and that I  may not transfer the Common Stock unless a registration is then in  effect or the transfer is exempted from registration. I acknowledge that any proposed transfer in reliance upon exemption from registration is subject to the written consent of the Company, which consent may be conditioned upon receipt of a satisfactory opinion of counsel with respect to such exemption.

 

I represent that the Common Stock is being acquired by me as an investment and not with the view to sale or distribution.

 

 

	
 
    	
 
    
	
 
    	
[NAME   OF OPTIONEE]
    

 

B-1

 

ESPERION THERAPEUTICS, INC.

Amendment to 2008 Incentive Stock Option and Restricted Stock Plan

 

This Amendment (this “Amendment”) to the 2008 Incentive Stock Option and Restricted Stock Plan (the “Plan”) of Esperion Therapeutics, Inc., a Delaware corporation (the “Company”), was adopted by the Board of Directors of the Company on December 5, 2012, and by the written consent of the stockholders of the Company on December 7, 2012, such amendment to be effective immediately. The Plan is hereby amended as follows:

 

1. The aggregate number of shares of Common Stock of the Company that may be issued pursuant to Options or Restricted Stock Grants under the Plan in Section 4 of the Plan is hereby amended to “5,000,000.”

 

Except to the extent amended hereby, all of the terms, provisions and conditions set forth in the Plan are hereby ratified and confirmed and shall remain in full force and effect. The Plan and this Amendment shall be read and construed together as a single instrument.

 

Adopted by the Board of Directors of the Company on December 5, 2012.

 

Adopted by the Stockholders of the Company on December 7, 2012.

 

 

ESPERION THERAPEUTICS, INC.

Amendment to 2008 Incentive Stock Option and Restricted Stock Plan

 

This Amendment (this “Amendment”) to the 2008 Incentive Stock Option and Restricted Stock Plan, as amended (the “Plan”), of Esperion Therapeutics, Inc., a Delaware corporation (the “Company”), was adopted by the written consent of the Board of Directors of the Company on March 25, 2013, and by the written consent of the stockholders of the Company on March 25, 2013, such amendment to be effective immediately. The Plan is hereby amended as follows:

 

1. The aggregate number of shares of Common Stock of the Company that may be issued pursuant to Options or Restricted Stock Grants under the Plan in Section 4 of the Plan is hereby amended to “5,800,000.”

 

Except to the extent amended hereby, all of the terms, provisions and conditions set forth in the Plan are hereby ratified and confirmed and shall remain in full force and effect. The Plan and this Amendment shall be read and construed together as a single instrument.

 

Adopted by the Board of Directors of the Company on March 25, 2013.

 

Adopted by the Stockholders of the Company on March 25, 2013.

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