Document:

Exhibit 4.2

 

SECOND AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

This SECOND AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT (this “Agreement”) is made as of the 1st day November, 2011, by and among  VERASTEM, INC., a Delaware corporation (the “Company”), each of the investors listed on Schedule A hereto, each of which is referred to in this Agreement as an “Investor,” and each of the stockholders listed on Schedule B hereto, each of whom is referred to in this Agreement as a “Key Holder”.

 

RECITALS

 

WHEREAS, the Company, certain of the Investors and the Key Holders are parties to an Amended and Restated Investors’ Rights Agreement dated as of July 12, 2011 (the “Prior Agreement”);

 

WHEREAS, concurrently with the execution of this Agreement, the Company and the Investors are entering into a Series C Preferred Stock Purchase Agreement (as amended and/or restated from time to time, the “Purchase Agreement”) providing for the sale of shares of the Series C Preferred Stock, $.0001 par value per share, of the Company (the “Series C Preferred Stock”), and in connection with that agreement it is a condition to the purchase of such Series C Preferred Stock that the Company, the Investors and the Key Holders enter into this Agreement;

 

WHEREAS, the Investors and the Company hereby agree that this Agreement shall govern the rights of the Investors to cause the Company to register shares of Common Stock issuable to the Investors, to receive certain information from the Company, and to participate in future equity offerings by the Company, and shall govern certain other matters as set forth in this Agreement; and

 

WHEREAS, the (i) Company, (ii) the holders of at least sixty percent (60%) of the shares of Common Stock issued or issuable upon conversion of the shares of Preferred Stock (as defined in the Prior Agreement) held by the Investors (voting as a single class and on an as-converted basis) and (iii) the Key Holders (as defined in the Prior Agreement) holding at least two-thirds of the Common Stock then held by the Key Holders who are providing services to the Company as officers, employees or consultants have executed this Agreement in order to amend and restate the Prior Agreement and to accept the rights created pursuant hereto in lieu of the rights granted to them under the Prior Agreement;

 

NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, the parties hereto hereby agree that the Prior Agreement shall be amended and restated, and the parties hereto further agree as follows:

 

1.                                       Definitions.  For purposes of this Agreement:

 

1.1                                 “Affiliate” means, with respect to any specified Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with such Person, including without limitation any stockholder, general partner, managing member, officer

 

1

 

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

 

1.2                                 “Common Stock” means shares of common stock, $.0001 par value per share, of the Company.

 

1.3                                 “Damages” means any loss, damage, or liability (joint or several) to which a party hereto may become subject under the Securities Act, the Exchange Act, or other federal or state law, insofar as such loss, damage, or liability (or any action in respect thereof) arises out of or is based upon (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement of the Company, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto; (ii) an omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (iii) any violation or alleged violation by the indemnifying  party (or any of its agents or Affiliates)  of the Securities Act, the Exchange Act, any state securities law, or any rule or regulation promulgated under the Securities Act, the Exchange Act, or any state securities law.

 

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

 

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

 

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

 

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

 

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

 

1.9                                 “Founders” means Christoph Westphal, Rich Aldrich, Michelle Dipp, Satish Jindal, Piyush Gupta and Robert Weinberg.

 

2

 

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

 

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

 

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

 

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

 

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

 

1.15                           “Key Employee” means any executive-level employee (including vice president-level positions) as well as any employee who, either alone or in concert with others, develops, invents, programs, or designs any Company Intellectual Property (as defined in the Purchase Agreement) or any other employee deemed to be a Key Employee by the Company’s Board of Directors or Compensation Committee.

 

1.16                           “Key Holder Registrable Securities” means (i) the shares of Common Stock held by the Key Holders, and (ii) any Common Stock issued as (or issuable upon the conversion or exercise of any Derivative Security that is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of such shares.

 

1.17                           “Major Investor” means (i) any Investor that, individually or together with such Investor’s Affiliates, holds at least twenty percent (20%) of the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock originally purchased by such Investor and (ii) any transferee of shares of Series A Preferred, Series B Preferred Stock and/or Series C Preferred Stock of any Investor, as the case may be, if such transferee is an Affiliate of such Investor and such transferee, individually or together with its Affiliates, holds at least twenty percent (20%) of the Series A Preferred Stock, Series B Preferred Stock and/or Series C Preferred Stock, as the case may be, originally purchased by such Investor.

 

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

 

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

 

1.20                           “Preferred Stock” means collectively, the Series A Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock.

 

3

 

1.21                           “Registrable Securities” means (i) the Common Stock issuable or issued upon conversion of the Preferred Stock, excluding any Common Stock issued upon conversion of the Preferred Stock pursuant to the “Special Mandatory Conversion” provisions of the Company’s Certificate of Incorporation (as amended and/or restated from time to time); (ii) any Common Stock, or any Common Stock  issued or issuable  (directly or indirectly)  upon conversion and/or exercise of  any other  securities  of the Company, acquired by the Investors after the date hereof; (iii) the Key Holder Registrable Securities, provided, however, that such Key Holder Registrable Securities shall not be deemed Registrable Securities and the Key Holders shall not be deemed Holders for the purposes of Sections 2.1 and 2.10; and (iv) any Common Stock issued as (or issuable upon the conversion or exercise of any Derivative Security that is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the shares referenced in clauses (i) and (ii) above; excluding in all cases, however, any Registrable Securities sold by a Person in a transaction in which the applicable  rights under this Agreement are not assigned pursuant to Section 6.1, and excluding for purposes of Section 2  any shares for which registration rights have terminated pursuant to Section 2.13  of this Agreement.

 

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

 

1.23                           “Restricted Securities” means the securities of the Company required to bear the legend set forth in Section 2.12(b) hereof.

 

1.24                           “SEC” means the Securities and Exchange Commission.

 

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

 

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

 

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

 

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

 

1.29                           “Series A Directors” means the directors of the Company that the holders of record of Series A Preferred Stock are entitled to elect exclusively and as a separate class pursuant to the Company’s Certificate of Incorporation (as amended and/or restated from time to time).

 

1.30                           “Series A Preferred Stock” means the Series A Preferred Stock, $.0001 par value per share, of the Company.

 

4

 

1.31                           “Series B Preferred Stock” means the Series B Preferred Stock, $.0001 par value per share, of the Company.

 

1.32                           “Qualified Public Offering” means a Qualified Public Offering, as defined in the Company’s Certificate of Incorporation, as amended and/or restated from time to time.

 

1.33                           “Voting Agreement” means that certain Second Amended and Restated Voting Agreement, by and among the Company and the other parties thereto, dated as of even date hereof.

 

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

 

2.1                                 Demand Registration.

 

(a)                                  Form S-1 Demand.  If at any time after the earlier of (i) three (3) years after the date of this Agreement or (ii) one hundred eighty (180) days after the effective date of the registration statement for the IPO, the Company receives a request from Holders of at least a majority of the Registrable Securities then outstanding (or a lesser percent if the anticipated aggregate offering price, net of Selling Expenses, would exceed $5 million), then the Company shall (i) within ten (10) days after the date such request is given, give notice thereof (the “Demand Notice”) to all Holders other than the Initiating Holders; and (ii) as soon as practicable, and in any event within sixty (60) days after the date such request is given by the Initiating Holders, file a Form S-1 registration statement under the Securities Act covering all Registrable Securities that the Initiating Holders requested  to be registered and any additional Registrable Securities requested to be included in such registration by any other Holders, as specified by notice given by each such Holder to the Company within twenty (20) days after the date the Demand Notice is given, and in each case, subject to the limitations of Section 2.1(c) and Section 2.3.

 

(b)                                 Form S-3 Demand.  If at any time when it is eligible to use a Form S-3 registration statement, the Company receives a request from Holders of at least thirty percent (30%) of the Registrable Securities then outstanding that the Company file a Form S-3 registration statement with respect to outstanding Registrable Securities of such Holders having an anticipated aggregate offering price, net of Selling Expenses, of at least $1 million, then the Company shall (i) within ten (10) days after the date such request is given, give a Demand Notice to all Holders other than the Initiating Holders; and (ii) as soon as practicable, and in any event within forty-five (45) days after the date such request is given by the Initiating Holders, file a Form S-3 registration statement under the Securities Act covering all Registrable Securities that the Initiating Holders requested  to be registered and any additional Registrable Securities requested to be included in such registration by any other Holders, as specified by notice given by each such Holder to the Company within twenty (20) days after the date the Demand Notice is given, and in each case, subject to the limitations of Section 2.1(c) and Section 2.3.

 

(c)                                  Notwithstanding the foregoing obligations, if the Company furnishes to Holders requesting a registration pursuant to this Section 2.1 a certificate signed by the Company’s chief executive officer stating that in the good faith judgment of the Company’s

 

5

 

Board of Directors (the “Board of Directors”) it would be materially detrimental to the Company and its stockholders for such registration statement to either become effective or remain effective for as long as such registration statement otherwise would be required to remain effective, because such action would: (i) materially interfere with a significant acquisition, corporate reorganization, or other similar transaction involving the Company; (ii) require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential; or (iii) render the Company unable to comply with requirements under the Securities Act or Exchange Act, then the Company shall have the right to defer taking action with respect to such filing, and any time periods with respect to filing or effectiveness thereof shall be tolled correspondingly, for a period of not more than thirty (30) days after the request of the Initiating Holders is given; provided, however, that the Company may not invoke this right more than once in any twelve (12) month period; and provided further that the Company shall not register any securities for its own account or that of any other stockholder during such thirty (30) day period other than pursuant to a registration relating to the sale of securities to employees of the Company or a subsidiary pursuant to a stock option, stock purchase, or similar plan; a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities; or a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities that are also being registered.

 

(d)                                 The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Section 2.1(a): (i) during the period that is sixty (60) days before the Company’s good faith estimate of the date of filing of, and ending on a date that is one hundred eighty (180) days after the effective date of, a Company-initiated registration, provided, that the Company is actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective; (ii) after the Company has effected two registrations pursuant to Section 2.1(a); or (iii) if the Initiating Holders propose to dispose of shares of Registrable Securities that may be immediately registered on Form S-3 pursuant to a request made pursuant to Section 2.1(b).  The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Section 2.1(b): (i) during the period that is thirty (30) days before the Company’s good faith estimate of the date of filing of, and ending on a date that is ninety (90) days after the effective date of, a Company-initiated registration, provided, that the Company is actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective; or (ii) if the Company has effected two registrations pursuant to Section 2.1(b) within the twelve (12) month period immediately preceding the date of such request.  A registration shall not be counted as “effected” for purposes of this Section 2.1(d) until such time as the applicable registration statement has been declared effective by the SEC, unless the Initiating Holders withdraw their request for such registration (other than as a result of a material adverse change to the Company), elect not to pay the registration expenses therefor and, as a result, forfeit their right to one demand registration statement pursuant to Section 2.6, in which case such withdrawn registration statement shall be counted as “effected” for purposes of this Section 2.1(d).

 

2.2                                 Company Registration.  If the Company proposes to register (including, for this purpose, a registration effected by the Company for stockholders other than the Holders) any of its Common Stock under the Securities Act in connection with the public offering of such securities solely for cash (other than an Excluded Registration), the Company shall, at such time,

 

6

 

promptly give each Holder notice of such registration.  Upon the request of each Holder given within twenty (20) days after such notice is given by the Company, the Company shall, subject to the provisions of Section 2.3, cause to be registered all of the Registrable Securities that each such Holder has requested to be included in such registration.  The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 2.2 before the effective date of such registration, whether or not any Holder has elected to include Registrable Securities in such registration.  The expenses (other than Selling Expenses) of such withdrawn registration shall be borne by the Company in accordance with Section 2.6.

 

2.3                                 Underwriting Requirements.

 

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

 

(b)                                 In connection with any offering involving an underwriting of shares of the Company’s capital stock pursuant to Section 2.2, the Company shall not be required to include any of the Holders’ Registrable Securities in such underwriting unless the Holders accept the terms of the underwriting as agreed upon between the Company and its underwriters, and then only in such quantity as the underwriters in their sole discretion determine will not jeopardize the success of the offering by the Company.  If the total number of securities, including Registrable Securities, requested by stockholders to be included in such offering exceeds the number of securities to be sold (other than by the Company) that the underwriters in their reasonable discretion determine is compatible with the success of the offering, then the

 

7

 

Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters and the Company in their sole discretion determine will not jeopardize the success of the offering.  If the underwriters determine that less than all of the Registrable Securities requested to be registered can be included in such offering, then the Registrable Securities that are included in such offering shall be allocated among the selling Holders in proportion (as nearly as practicable to) the number of Registrable Securities owned by each selling Holder or in such other proportions as shall mutually be agreed to by all such selling Holders.  To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder to the nearest 100 shares.  Notwithstanding the foregoing, in no event shall (i) the number of Registrable Securities included in the offering be reduced unless all other securities (other than securities to be sold by the Company) are first entirely excluded from the offering, (ii) the number of Registrable Securities included in the offering be reduced below thirty percent  (30%) of the total number of securities included in such offering, unless such offering is the IPO, in which case the selling Holders may be excluded further if the underwriters make the determination described above and no other stockholder’s securities are included in such offering, or (iii) notwithstanding (ii) above, any Registrable Securities which are not Key Holder Registrable Securities be excluded from such underwriting unless all Key Holder Registrable Securities are first excluded from such offering.  For purposes of the provision in this Section 2.3(b) concerning apportionment, for any selling Holder that is a partnership, limited liability company, Massachusetts Business Trust or corporation, the partners, members, retired partners, retired members, stockholders, and Affiliates of such Holder, or the estates and Immediate Family Members of any such partners, retired partners, members, and retired members and any trusts for the benefit of any of the foregoing Persons, shall be deemed to be a single “selling Holder,” and any pro rata reduction with respect to such “selling Holder” shall be based upon the aggregate number of Registrable Securities owned by all Persons included in such “selling Holder,” as defined in this sentence.

 

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

 

2.4                                 Obligations of the Company.  Whenever required under this Section 2 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:

 

(a)                                  prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its commercially reasonable efforts to cause such registration statement to become effective and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for a period of up to one hundred twenty (120) days or, if earlier, until the distribution contemplated in the registration statement has been completed; provided, however, that (i) such one hundred twenty (120) day period shall be extended for a period of time equal to the period the Holder refrains, at the request of an underwriter of Common Stock (or other securities) of the Company, from selling any securities included in such registration, and (ii) in the case of any registration of Registrable Securities on Form S-3 that are intended to be offered on a continuous or delayed

 

8

 

basis, subject to compliance with applicable SEC rules, such one hundred twenty (120) day period shall be extended for up to one hundred eighty (180) days, if necessary, to keep the registration statement effective until all such Registrable Securities are sold;

 

(b)                                 prepare and file with the SEC such amendments and supplements to such registration statement, and the prospectus used in connection with such registration statement, as may be necessary to comply with the Securities Act in order to enable the disposition of all securities covered by such registration statement;

 

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

 

(d)                                 use its commercially reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or blue-sky laws of such jurisdictions as shall be reasonably requested by the selling Holders; provided that the Company shall not be required to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act;

 

(e)                                  in the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the underwriter(s) of such offering;

 

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

 

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

 

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

 

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

 

9

 

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

 

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

 

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

 

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

 

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

 

(a)                                  To the extent permitted by law, the Company will indemnify and hold harmless each selling Holder, and the partners, members, officers, directors, and stockholders of each such Holder; legal counsel and accountants for each such Holder; any underwriter (as defined in the Securities Act) for each such Holder; and each Person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any Damages, and the Company will pay to each such Holder, underwriter, controlling Person, or other aforementioned Person any legal or other expenses reasonably

 

10

 

incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that the indemnity agreement contained in this Section 2.8(a) shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, nor shall the Company be liable for any Damages to the extent that they arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of any such Holder, underwriter, controlling Person, or other aforementioned Person expressly for use in connection with such registration.

 

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

 

(c)                                  Promptly after receipt by an indemnified party under this Section 2.8  of notice of the commencement of any action (including any governmental action) for which a party may be entitled to indemnification hereunder, such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.8, give the indemnifying party notice of the commencement thereof.  The indemnifying party shall have the right to participate in such action and, to the extent the indemnifying party so desires, participate jointly with any other indemnifying party to which notice has been given, and to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties that may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such action. The failure to give notice to the indemnifying party within a reasonable time of the commencement of any such action shall relieve such indemnifying party of any liability to the indemnified party under this Section 2.8, to the extent that such failure materially prejudices the indemnifying party’s ability to defend such action.  The failure to give notice to

 

11

 

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

 

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

 

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

 

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

 

12

 

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

 

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

 

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

 

2.10                           Limitations on Subsequent Registration Rights.  From and after the date of this Agreement, the Company shall not, without the prior written consent of the Holders of (a) at least sixty percent (60%) of the Registrable Securities then outstanding held by the Holders of Series A Preferred Stock and Series B Preferred Stock, voting together as a single class and on an as-converted basis, and (b) at least sixty percent (60%) of the Registrable Securities then outstanding held by the Holders of Preferred Stock, voting together as a single class and on an as-converted basis, enter into any agreement with any holder or prospective holder of any securities of the Company that would (i) allow such holder or prospective holder to include such securities in any registration unless, under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of such securities will not reduce the number of the Registrable Securities of the Holders that are included or (ii) allow such holder or prospective holder to initiate a demand for registration of any securities held by such holder or prospective holder; provided that this limitation shall not apply to any additional Investor who becomes a party to this Agreement in accordance with Section 6.9.

 

2.11                           “Market Stand-off” Agreement.  Each Holder hereby agrees that it will not, without the prior written consent of the managing underwriter, during the period commencing on the date of the final prospectus relating to the IPO and ending on the date specified by the Company and the managing underwriter (such period not to exceed one hundred eighty (180) days) or such other period as may be requested by the Company or an underwriter to accommodate regulatory restrictions on (1) the publication or other distribution of research reports and (2) analyst recommendations and opinions, including, but not limited to, the restrictions contained in FINRA Rule 2711(f)(4) or NYSE Rule 472(f)(4), or any successor

 

13

 

provisions or amendments thereto), (i) lend; offer; pledge; sell; contract to sell; sell any option or contract to purchase; purchase any option or contract to sell; grant any option, right, or warrant to purchase; or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable (directly or indirectly) for Common Stock held immediately  before the effective date of the registration statement for such offering  or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of such securities, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or other securities, in cash, or otherwise.  The foregoing provisions of this Section 2.11 shall not apply to the sale of any shares to an underwriter pursuant to an underwriting agreement, or the transfer of any shares to any trust for the direct or indirect benefit of the Holder or an Immediate Family Member of the Holder or an Affiliate of the Holder, provided that the trustee of the trust agrees to be bound in writing by the restrictions set forth herein, and provided further that any such transfer shall not involve a disposition for value, and shall be applicable to the Holders only if all officers and directors are subject to the same restrictions and the Company uses commercially reasonable efforts to obtain a similar agreement from all stockholders individually owning more than one percent (1%) of the Company’s outstanding Common Stock (after giving effect to conversion into Common Stock of all outstanding Preferred Stock).  The underwriters in connection with such registration are intended third-party beneficiaries of this Section 2.11 and shall have the right, power, and authority to enforce the provisions hereof as though they were a party hereto.  Each Holder further agrees to execute such agreements as may be reasonably requested by the underwriters in connection with such registration that are consistent with this Section 2.11 or that are necessary to give further effect thereto.  Notwithstanding the foregoing, the Company shall use commercially reasonable efforts to obtain from the managing underwriter(s) an agreement, and the underwriters may, in their sole discretion agree, to waive these restrictions in order to provide for periodic early releases of portions of the aforesaid securities upon the occurrence of certain specified events, any such release to apply pro rata to all Holders subject to this Section 2.11, based on the number of securities (determined on an as-converted basis) subject to the restrictions set forth in this Section 2.11.

 

2.12                           Restrictions on Transfer.

 

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

 

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

 

14

 

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.  NO SUCH TRANSFER MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.

 

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

 

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

 

(c)                                  The holder of each certificate representing Restricted Securities, by acceptance thereof, agrees to comply in all respects with the provisions of this Section 2.  Before any proposed sale, pledge, or transfer of any Restricted Securities, unless there is in effect a registration statement under the Securities Act covering the proposed transaction, the Holder thereof shall give notice to the Company of such Holder’s intention to effect such sale, pledge, or transfer.  Each such notice shall describe the manner and circumstances of the proposed sale, pledge, or transfer in sufficient detail and, if reasonably requested by the Company, shall be accompanied at such Holder’s expense by either (i) a written opinion of legal counsel who shall, and whose legal opinion shall, be reasonably satisfactory to the Company, addressed to the Company, to the effect that the proposed transaction may be effected without registration under the Securities Act; (ii) a “no action” letter from the SEC to the effect that the proposed  sale, pledge, or transfer of such Restricted Securities without registration will not result in a recommendation by the staff of the SEC that action be taken with respect thereto; or (iii) any other evidence reasonably satisfactory to counsel to the Company to the effect that the proposed sale, pledge, or transfer of the Restricted Securities may be effected without registration under the Securities Act, whereupon the Holder of such Restricted Securities shall be entitled to sell, pledge, or transfer such Restricted Securities in accordance with the terms of the notice given by the Holder to the Company.  Notwithstanding the foregoing, the Company will not require such a legal opinion or “no action” letter (x) in any transaction in compliance with SEC Rule 144 or (y) in any transaction in which such Holder distributes Restricted Securities to an Affiliate of such Holder in compliance with the registration or qualification provisions of the Securities Act of 1933, as amended, or applicable exemptions therefrom, or (z) in the case of any Holder that is a natural person, in connection with any transfer for no consideration by such Holder for bona fide estate planning purposes, either during such Holder’s lifetime or on death by gift, will, intestate succession; provided that each transferee agrees in writing to be subject to the terms of this Section 2.12.  Each certificate or instrument evidencing the Restricted Securities transferred as above provided shall bear, except if such transfer is made pursuant to SEC Rule 144, the

 

15

 

appropriate restrictive legend set forth in Section 2.12(b), except that such certificate shall not bear such restrictive legend if, in the opinion of counsel for such Holder and the Company, such legend is not required in order to establish compliance with any provisions of the Securities Act.

 

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

 

(a)                                  the closing of a Deemed Liquidation Event, as such term is defined in the Company’s Certificate of Incorporation (as amended and/or restated from time to time); and

 

(b)                                 the fifth anniversary of the IPO.

 

3.                                       Information Rights.

 

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

 

(a)                                  as soon as practicable, but in any event within one hundred eighty (180) days after the end of each fiscal year of the Company, (i) a balance sheet as of the end of such year, (ii) statements of income and of cash flows for such year, and a comparison between (x) the actual amounts as of and for such fiscal year and (y) the comparable amounts for the prior year and as included in the Budget (as defined in Section 3.1(e)) for such year, with an explanation of any material differences between such amounts and a schedule as to the sources and applications of funds for such year, and (iii) a statement of stockholders’ equity as of the end of such year, all such financial statements audited and certified by independent public accountants of nationally recognized standing selected by the Company and approved by the Board of Directors;

 

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

 

(c)                                  as soon as practicable, but in any event within forty-five (45) days after the end of each of the first three (3) quarters of each fiscal year of the Company, a statement showing the number of shares of each class and series of capital stock and securities convertible into or exercisable for shares of capital stock outstanding at the end of the period, the Common Stock issuable upon conversion or exercise of any outstanding securities convertible or exercisable for Common Stock and the exchange ratio or exercise price applicable thereto, and the number of shares of issued stock options and stock options not yet issued but reserved for issuance, if any, all in sufficient detail as to permit the Major Investors to calculate their respective percentage equity ownership in the Company, and certified on behalf of the Company

 

16

 

by the chief financial officer or chief executive officer of the Company as being true, complete, and correct;

 

(d)                                 as soon as practicable, but in any event within thirty (30) days after the end of each fiscal year, a budget and business plan for the next fiscal year (collectively, the “Budget”), approved by the Board of Directors and prepared on a quarterly  basis, including balance sheets, income statements, and statements of cash flow for such months and, promptly after prepared, any other budgets or revised budgets prepared by the Company;

 

(e)                                  with respect to the financial statements called for in Section 3.1(a) and Section 3.1(b), an instrument executed on behalf of the Company by the chief financial officer and chief executive officer of the Company certifying that such financial statements were prepared in accordance with GAAP consistently applied with prior practice for earlier periods (except as otherwise set forth in Section 3.1(b)) and fairly present the financial condition of the Company and its results of operation for the periods specified therein; and

 

(f)                                    such other information relating to the financial condition, business, prospects, or corporate affairs of the Company as any Major Investor may from time to time reasonably request; provided, however, that the Company shall not be obligated under this Section 3.1 to provide information (i) that the Company reasonably determines in good faith to be a trade secret or confidential information (unless covered by an enforceable confidentiality agreement, in form acceptable to the Company) or (ii) the disclosure of which would adversely affect the attorney-client privilege between the Company and its counsel.

 

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

 

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

 

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

 

17

 

3.3                                 Termination of Information.  The covenants set forth in Section 3.1, and Section 3.2 shall terminate and be of no further force or effect (i) immediately before the consummation of a Qualified Public Offering or (ii) upon a Deemed Liquidation Event, as such term is defined in the Company’s Certificate of Incorporation (as amended and/or restated from time to time), whichever event occurs first.

 

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

 

4.                                       Rights to Future Stock Issuances.

 

4.1                                 Right of First Offer.  Subject to the terms and conditions of this Section 4.1 and applicable securities laws, if the Company proposes to offer or sell any New Securities, the Company shall first offer such New Securities to each Investor (the “Preemptive Right Holders”).  A Preemptive Right Holder shall be entitled to apportion the right of first offer hereby granted to it among itself and its Affiliates in such proportions as it deems appropriate.

 

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

 

(b)                                 By notification to the Company within twenty (20) days after the Offer Notice is given, each Preemptive Right Holder may elect to purchase or otherwise acquire, at the price and on the terms specified in the Offer Notice, up to that portion of such New Securities which equals the proportion that the Common Stock issued and held, or issuable (directly or indirectly) upon conversion and/or exercise, as applicable of all Derivative Securities then held, by such Preemptive Right Holder bears to the total Common Stock then outstanding (assuming full conversion and/or exercise, as applicable, of all then outstanding Derivative Securities).  At the expiration of such twenty (20) day period, the Company shall promptly notify

 

18

 

each Preemptive Right Holder that elects to purchase or acquire all the shares available to it (each, a “Fully Exercising Investor”) of any other Preemptive Right Holder’s failure to do likewise.  During the ten (10) day period commencing after the Company has given such notice, each Fully Exercising Investor may, by giving notice to the Company, elect to purchase or acquire, in addition to the number of shares specified above, up to that portion of the New Securities for which Preemptive Right Holders were entitled to subscribe but that were not subscribed for by the Preemptive Right Holders which is equal to the proportion that the Common Stock issued and held, or issuable (directly or indirectly) upon conversion and/or exercise, as applicable, of all Derivative Securities then held, by such Fully Exercising Investor bears to the Common Stock issued and held, or issuable (directly or indirectly) upon conversion and/or exercise, as applicable, of all Derivative Securities  then held, by all Fully Exercising Investors who wish to purchase such unsubscribed shares.   The closing of any sale pursuant to this Section 4.1(b) shall occur within the later of one hundred and twenty (120) days after the date that the Offer Notice is given and the date of initial sale of New Securities pursuant to Section 4.1(c).

 

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

 

(d)                                 The right of first offer in this Section 4.1 shall not be applicable to (i) Exempted Securities (as defined in the Company’s Certificate of Incorporation, as amended and/or restated from time to time); and (ii) shares of Common Stock issued in a Qualified Public Offering.

 

4.2                                 Termination.  The covenants set forth in Section 4.1 shall terminate and be of no further force or effect (i) immediately before the consummation of a Qualified Public Offering or (ii) upon a Deemed Liquidation Event, as such term is defined in the Company’s Certificate of Incorporation (as amended and/or restated from time to time), whichever event occurs first.

 

5.                                       Additional Covenants.

 

5.1                                 Employee Agreements.  The Company will cause (i) each person (including each Key Employee) now or hereafter employed by it or by any subsidiary (or engaged by the Company or any subsidiary as a consultant/independent contractor) with access to confidential information and/or trade secrets to enter into a nonsolicitation, nondisclosure and proprietary information assignment agreement and (ii) each Key Employee to enter into a one (1) year noncompetition and nonsolicitation agreement.

 

19

 

5.2                                 Vesting Terms.

 

(a)                                  Founders.  Unless otherwise approved by the Board of Directors, the Founders shall have executed restricted stock agreements for the purchase of restricted Common Stock providing for vesting of shares over a four (4) year period, with the first twenty-five percent (25%) of such shares vesting upon issuance and the remaining shares vesting in equal quarterly installments over the following four (4) years.  In addition, all shares of the Founders’ unvested Common Stock shall fully vest in connection with a Change in Control as defined the restricted stock agreements.

 

(a)                                  Employees and Consultants.  Unless otherwise approved by the Board of Directors, all future employees and consultants of the Company who purchase, receive options to purchase, or receive awards of shares of the Company’s capital stock after the date hereof shall be required to execute restricted stock or option agreements, as applicable, providing for (i) vesting of shares over a four (4) year period, with the first twenty-five percent (25%) of such shares vesting following twelve (12) months of continued employment or service, and the remaining shares vesting in equal quarterly installments over the following three (3) years, and (ii) a market stand-off provision substantially similar to that in Section 2.11.  In addition, unless otherwise approved by the Board of Directors, the  Company shall retain a “right of first refusal” on employee transfers until the Company’s Qualified Public Offering and shall have the right to repurchase unvested shares at cost upon termination of employment of a holder of restricted stock.

 

5.3                                 Board Matters.  Unless otherwise determined by the vote of a majority of the directors then in office, the Board of Directors shall meet at least quarterly in accordance with an agreed-upon schedule.  The Company shall reimburse the directors for all reasonable out-of-pocket travel expenses incurred (consistent with the Company’s travel policy) in connection with attending meetings of the Board of Directors.  The Company will maintain an audit committee, which shall consist solely of non-management directors, and a compensation committee. Further, the compensation committee shall be comprised of no more than three directors, two of whom shall be Series A Directors.

 

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

 

5.5                                 Insurance.   The Company will use commercially reasonable efforts to maintain from financially sound and reputable insurers Directors and Officers liability insurance in an amount and on terms and conditions satisfactory to the Board of Directors until such time as the Board of Directors determines that such insurance should be discontinued.  The Company

 

20

 

shall name the Company as loss payee, and the policy shall not be cancelable by the Company without prior approval by the Board of Directors, including a majority of the Series A Directors.

 

5.6                                 Matters Requiring Investor Director Approval.  The Company hereby covenants and agrees with each of the Investors that it shall not, without approval of the Board of Directors, which approval must include the affirmative vote of a majority of the Series A Directors then in office:

 

(a)                                  make, or permit any subsidiary to make, any loan or advance to, or own any stock or other securities of, any subsidiary or other corporation, partnership, or other entity unless it is wholly owned by the Company;

 

(b)                                 make, or permit any subsidiary to make, any loan or advance to any Person, including, without limitation, any employee or director of the Company or any subsidiary, except advances and similar expenditures in the ordinary course of business or under the terms of an employee stock or option plan approved by the Board of Directors;

 

(c)                                  guarantee, directly or indirectly, or permit any subsidiary to guarantee, directly or indirectly, any indebtedness except for trade accounts of the Company or any subsidiary arising in the ordinary course of business;

 

(d)                                 make any investment other than investments in prime commercial paper, money market funds, certificates of deposit in any U.S. bank having a net worth in excess of $100,000,000 or obligations issued or guaranteed by the United States, in each case having a maturity not in excess of two (2) years;

 

(e)                                  otherwise enter into or be a party to any transaction with any director, officer, or employee of the Company or any “associate” (as defined in Rule 12b-2 promulgated under the Exchange Act) of any such Person, except for transactions contemplated by this Agreement or the Purchase Agreement;

 

(f)                                    incur any aggregate indebtedness in excess of $100,000, in a single or series of related transactions, other than trade credit incurred in the ordinary course of business;

 

(g)                                 hire, terminate, or change the compensation of the executive officers, including approving any option grants or stock awards to executive officers;

 

(h)                                 change the principal business of the Company, enter new lines of business, or exit the current line of business;

 

(i)                                     sell, transfer, assign, license, pledge, or encumber material technology or intellectual property, other than licenses granted in the ordinary course of business; or

 

(j)                   enter into any corporate strategic relationship involving the payment, contribution, or assignment by the Company or to the Company of money or assets greater than $100,000.

 

21

 

5.7                                 Termination of Covenants.  The covenants set forth in this Section 5, except for Section 5.4, shall terminate and be of no further force or effect (i) immediately before the consummation of a Qualified Public Offering  or (ii) upon a Deemed Liquidation Event, as such term is defined in the Company’s Certificate of Incorporation (as amended and/or restated from time to time), whichever event occurs first.

 

6.                                       Miscellaneous.

 

6.1                                 Successors and Assigns.  The rights under this Agreement may be  assigned (but only with all related obligations) by a Holder to a transferee of Registrable Securities that (i) is a direct or indirect beneficial owner of a Holder or an Affiliate of a Holder (ii) is an Affiliate of a Holder; (iii) is an Immediate Family Member or trust for the benefit of an individual Holder or any individual described in clauses (i) or (ii) above or one or more of any such individual’s Immediate Family Members; (iv) in the case of any Holder that is a natural person, is a transferee pursuant to any transfer by such Holder for bona fide estate planning purposes, either during such Holder’s lifetime or on death by gift, will, intestate succession; or (v) after such transfer, holds at least five percent (5%) of such Holder’s Registrable Securities; provided, however, that (x) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee and the Registrable Securities with respect to which such rights are being transferred; (y) such transferee agrees in a written instrument delivered to the Company to be bound by and subject to the terms and conditions of this Agreement, including the provisions of Section 2.11 and (z) such transferee is not, a direct or indirect competitor of the Company, provided that transfers to companies whose primary purpose is to make investments shall not be deemed to be competitors of the Company.  For the purposes of determining the number of shares of Registrable Securities held by a transferee, the holdings of a transferee (1) that is a direct or indirect beneficial owner of a Holder or an Affiliate of a Holder; (2) that is an Affiliate of a Holder; (3) who is an Immediate Family Member of an individual Holder or any individual described in clauses (1) or (2) above; or (4) that is a trust for the benefit of an individual Holder, any individual described in clauses (1) or (2) above, or any such individual’s Immediate Family Members shall be aggregated together and with those of the transferring Holder; provided further that all transferees who would not qualify individually for assignment of rights shall have a single attorney-in-fact for the purpose of exercising any rights, receiving notices, or taking any action under this Agreement.  The terms and conditions of this Agreement inure to the benefit of and are binding upon the respective successors and permitted assignees of the parties.  Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and permitted assignees any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided herein.

 

6.2                                 Governing Law.  This Agreement and any controversy arising out of or relating to this Agreement shall be governed by and construed in accordance with the General Corporation Law of the State of Delaware as to matters within the scope thereof, and as to all other matters shall be governed by and construed in accordance with the internal laws of the Commonwealth of Massachusetts, without regard to conflict of law principles that would result in the application of any law other than the law of the Commonwealth of Massachusetts.

 

22

 

6.3                                 Counterparts; Facsimile.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  This Agreement may also be executed and delivered by facsimile signature and in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

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

 

6.5                                 Notices.  All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given upon the earlier of actual receipt or: (i) personal delivery to the party to be notified; (ii) when sent, if sent by  electronic mail or facsimile during the recipient’s normal business hours, and if not sent during normal business hours, then on the recipient’s next business day; (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (iv) one (1) business day (or two (2) business days, in the case of notices and other communications sent to the Cayman Islands) after the business day of deposit with a nationally recognized overnight courier, freight prepaid, specifying next-day delivery, with written verification of receipt.  All communications shall be sent to the respective parties at their addresses as set forth on Schedule A or Schedule B (as applicable) hereto, or to the principal office of the Company and to the attention of the Chief Executive Officer, in the case of the Company, or to such email address, facsimile number, or address as subsequently modified by written notice given in accordance with this Section 6.5.  If notice is given to the Company, a copy (which shall not constitute notice) shall also be sent to Wilmer Cutler Pickering Hale and Dorr LLP, 60 State Street, Boston, MA 02109, Attn: Graham Robinson, Esq., and  if notice is given to the Investors, a copy shall also be given to a copy (which shall not constitute notice) shall also be given to Goodwin Procter LLP, 53 State Street, Boston, MA 02109, Attn:  Michael H. Bison, Esq., and to Dechert LLP, 902 Carnegie Center, suite 500, Princeton, NJ 08540, Attn: Ella DeTrizio, Esq.

 

6.6                                 Amendments and Waivers.  Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance, and either retroactively or prospectively) only by a written instrument executed by (a) the Company, (b) the holders of at least sixty percent (60%) of the shares of Common Stock issued or issuable upon conversion of the shares of Series A Preferred Stock and Series B Preferred Stock then held by the Investors (voting as a single class and on an as-converted basis), (c) the holders of at least sixty percent (60%) of the shares of Common Stock issued or issuable upon conversion of the shares of Preferred Stock then held by the Investors (voting as a single class and on an as-converted basis) and (d) the Key Holders holding at least two-thirds of the Common Stock then held by the Key Holders who are then providing services to the Company as officers, employees or consultants; provided that the Company may in its sole discretion waive compliance with Section 2.12(c) (and the Company’s failure to object promptly in writing after notification of a proposed assignment allegedly in violation of Section 2.12(c) shall be deemed to be a waiver); and provided further that any provision hereof may be waived by any waiving party on such party’s own behalf, without the consent of any other party; and provided further that the written consent of the Key Holders shall not be required for any amendment or waiver if such amendment or waiver either is not directly applicable to the rights of the Key Holders or does not adversely affect the rights of the Key Holders in a manner that is

 

23

 

disproportionate to the effect on the rights of other parties hereto. Notwithstanding the foregoing, (i) this Agreement may not be amended or terminated and the observance of any term hereof may not be waived with respect to any Investor without the written consent of such Investor unless such amendment, termination or waiver applies to all Investors in the same fashion, and (ii) any waiver of Section 4 of this Agreement that is made in connection with a transaction in which any of the Investors, by agreement of the Company, purchases New Securities outside of the provisions of this Agreement shall be ineffective unless each Investor is afforded a similar opportunity to participate in such transaction (on the same terms and conditions) by purchasing at least such Investor’s pro rata share of the New Securities sold by the Company and purchased by the Investors in such transaction.  No waivers of or exceptions to any term, condition, or provision of this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such term, condition, or provision.  The Company shall give prompt written notice of any amendment or termination hereof or waiver hereunder to any party hereto that did not consent in writing to such amendment, termination or waiver.  Any amendment, termination or waiver effected in accordance with this Section 6.6 shall be binding on all parties hereto, regardless of whether any such party has consented thereto.

 

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

 

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

 

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

 

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

 

6.11                           Dispute Resolution.

 

(a)                Any dispute, controversy, or claim arising out of, relating to, or in connection with this Agreement, or the breach, termination, or validity thereof, shall be finally settled by arbitration.  The arbitration shall be conducted in accordance with the Securities

 

24

 

Arbitration Rules (the “Rules”) of the American Arbitration Association (“AAA”), including the AAA’s Procedures for Large, Complex Commercial Disputes, in effect at the time of the arbitration, except as they may be modified herein or by mutual agreement of the parties.  The seat of the arbitration shall be New York, New York, and it shall be conducted in the English language.  The parties consent to the jurisdiction of the federal or state courts in New York, New York for the limited purpose of enforcing this agreement to arbitrate.  The arbitration and this clause shall be governed by Title 9 (Arbitration) of the United States Code.

 

(b)                                 The arbitration shall be conducted by three arbitrators.  The claimant shall appoint an arbitrator in its request for arbitration.  The respondent shall appoint an arbitrator within 20 days of the receipt of the request for arbitration.  The two arbitrators shall appoint a third arbitrator, who shall act as chair of the tribunal, within 20 days after the appointment of the second arbitrator.  If any of the three arbitrators is not appointed within the time prescribed above, then the AAA shall appoint that arbitrator from its National Panel of Securities Arbitrators or its Large, Complex Commercial Case Panel, not including any such members affiliated with the securities industry.  The chair of the tribunal shall be a citizen of the United States.

 

(c)                                  In addition to the authority conferred on the arbitration tribunal by the Rules, the arbitration tribunal shall have the authority to order such production of documents, generally consistent with the discovery permitted under the Federal Rules of Civil Procedure, as may reasonably be requested by either party or by the tribunal itself.  In addition, either party may request a reasonable number of depositions of party witnesses.

 

(d)                                 The parties agree that the arbitration shall be kept confidential and that  the existence of the proceeding and any element of it (including but not limited to any pleadings, briefs or other documents submitted or exchanged, any testimony or other oral submissions, and any awards) shall not be disclosed beyond the tribunal, the AAA, the parties, their counsel, accountants and auditors, insurers and re-insurers, and any person necessary to the conduct of the proceeding.  The confidentiality obligations shall not apply (i) if disclosure is required by law, or in judicial or administrative proceedings, or (ii) as far as disclosure is necessary to enforce the rights arising out of the award.

 

(e)                                  The arbitration award shall be final and binding on the parties.  Judgment upon the award may be entered by any court having jurisdiction thereof or having jurisdiction over the relevant party or its assets.

 

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

 

25

 

6.13         H & Q Funds.  A copy of the Declaration of Trust, as amended and restated, for each of H & Q Healthcare Investors and H & Q Life Sciences Investors (together, the “Funds’) is on file with the Secretary of State of The Commonwealth of Massachusetts, and notice is hereby given that this Agreement  is executed on behalf of the Funds by an officer or trustee of the Funds in his or her capacity as an officer or trustee of the Funds, and not individually and that the obligations of or arising out of this Agreement are not binding upon any of the trustees, officers or shareholders individually but are binding only upon the assets and property of each of the respective Funds.

 

[Remainder of Page Intentionally Left Blank]

 

26

 

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

 

 

	
 
    	
VERASTEM, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Robert Forrester
    
	
 
    	
Name:
    	
Robert   Forrester
    
	
 
    	
Title:
    	
Chief   Operating Officer
    

 

Signature Page to Second Amended and Restated Investors’ Rights Agreement

 

 

	
 
    	
KEY HOLDERS:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Christoph Westphal
    
	
 
    	
Christoph   Westphal
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Rich Aldrich
    
	
 
    	
Rich   Aldrich
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Michelle Dipp
    
	
 
    	
Michelle   Dipp
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Satish Jindal
    
	
 
    	
Satish   Jindal
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Piyush   Gupta
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Robert Weinberg
    
	
 
    	
Robert   Weinberg
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Eric   Lander
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Robert Forrester
    
	
 
    	
Robert   Forrester
    

 

Signature Page to Second Amended and Restated Investors’ Rights Agreement

 

 

	
 
    	
INVESTORS:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
BESSEMER VENTURE PARTNERS VII L.P.
    
	
 
    	
BESSEMER VENTURE PARTNERS VII   INSTITUTIONAL L.P.
    
	
 
    	
BVP VII SPECIAL OPPORTUNITY   FUND L.P.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   Deer VII & Co. L.P., their General Partner
    
	
 
    	
 
    
	
 
    	
By:   Deer VII & Co. Ltd., its General Partner
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   J. Edmund Colloton
    
	
 
    	
Name:
    	
J.   Edmund Colloton
    
	
 
    	
Title:
    	
Director
    

 

Signature Page to Second Amended and Restated Investors’ Rights Agreement

 

 

	
 
    	
INVESTORS:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
MPM BIOVENTURES V, L.P.
    
	
 
    	
 
    
	
 
    	
By: MPM BIOVENTURES V GP LLC, its General   Partner
    
	
 
    	
 
    
	
 
    	
By: MPM BIOVENTURES V LLC, its Managing Member
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Ansbert Gadicke
    
	
 
    	
Name:
    	
Ansbert   Gadicke
    
	
 
    	
Title:
    	
Member
    

 

Signature Page to Second Amended and Restated Investors’ Rights Agreement

 

 

	
 
    	
INVESTORS:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
LONGWOOD FOUNDERS FUND, L.P.
    
	
 
    	
 
    
	
 
    	
By:   Longwood Founders GP, LLC, its General Partner
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Michelle Dipp
    
	
 
    	
Name:
    	
Michelle   Dipp
    
	
 
    	
Title:
    	
Member   and Manager
    

 

Signature Page to Second Amended and Restated Investors’ Rights Agreement

 

 

	
 
    	
INVESTORS:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
CHP III, L.P.
    
	
 
    	
 
    
	
 
    	
By:   CHP   III Management, LLC, its General Partner
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   John J. Park
    
	
 
    	
Name:
    	
John   J. Park
    
	
 
    	
Title:
    	
Managing   Member
    

 

Signature Page to Second Amended and Restated Investors’ Rights Agreement

 

 

	
 
    	
INVESTORS:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
EASTERN CAPITAL LIMITED
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Mark VanDevelde
    
	
 
    	
Name:
    	
Mark   VanDevelde
    
	
 
    	
Title:
    	
Director
    

 

Signature Page to Second Amended and Restated Investors’ Rights Agreement

 

 

	
 
    	
INVESTORS:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
H&Q HEALTHCARE INVESTORS *
    
	
 
    	
 
    	
(Full Legal Name of Purchaser Entity)
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/ Laura Woodward
    
	
 
    	
 
    	
 
    	
(Authorized Signatory)
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
Title:
    	
Treasurer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Date:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Telephone No.:
    	
617-772-8500
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Telecopy No.:
    	
617-772-8577
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Address:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
c/o Hambrecht & Quist   Capital Management LLC 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
2 Liberty Square, 9th Floor Boston, MA 02109
    
						

 

* The name H&Q Healthcare Investors is the designation of the Trustees for the time being under an Amended & Restated Declaration of Trust dated April 12, 1987, as amended, and all persons dealing with H&Q Healthcare Investors must look solely to the trust property for the enforcement of any claim against H&Q Healthcare Investors, as neither the Trustees, officers nor shareholders assume any personal liability for the obligations entered into on behalf of H&Q Healthcare Investors.

 

Signature Page to Second Amended and Restated Investors’ Rights Agreement

 

 

	
 
    	
INVESTORS:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
H&Q LIFE SCIENCES INVESTORS *
    
	
 
    	
 
    	
(Full Legal Name of Purchaser Entity)
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/ Laura Woodward
    
	
 
    	
 
    	
 
    	
(Authorized Signatory)
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
Title:
    	
Treasurer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Date:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Telephone No.:
    	
617-772-8500
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Telecopy No.:
    	
617-772-8577
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Address:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
c/o   Hambrecht & Quist Capital Management LLC 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
2 Liberty Square, 9th   Floor Boston, MA 02109
    
						

 

* The name H&Q Life Sciences Investors is the designation of the Trustees for the time being under an Amended & Restated Declaration of Trust dated February 20, 1992, as amended, and all persons dealing with H&Q Life Sciences Investors must look solely to the trust property for the enforcement of any claim against H&Q Life Sciences Investors, as neither the Trustees, officers nor shareholders assume any personal liability for the obligations entered into on behalf of H&Q Life Sciences Investors.

 

Signature Page to Second Amended and Restated Investors’ Rights Agreement

 

 

	
 
    	
INVESTORS:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
ADVANCED TECHNOLOGY VENTURES VIII, L.P.
    
	
 
    	
 
    
	
 
    	
By:
    	
ATV   Associates VIII, LLC
    
	
 
    	
 
    	
its   General Partner
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Jean George
    
	
 
    	
Name:   
    	
Jean   George
    
	
 
    	
Title:
    	
Managing   Director
    
				

 

Signature Page to Second Amended and Restated Investors’ Rights Agreement

 

 

	
 
    	
INVESTORS:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
ASTELLAS VENTURE FUND I LP
    
	
 
    	
 
    
	
 
    	
By:
    	
Astellas   Venture Management LLC
    
	
 
    	
Its:
    	
General   Partner
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Shinya Yano
    
	
 
    	
Name:
    	
Shinya   Yano, Ph.D
    
	
 
    	
Title:
    	
President   and Chief Executive Officer
    
				

 

Signature Page to Second Amended and Restated Investors’ Rights Agreement

 

 

	
 
    	
INVESTORS:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
CD-VENTURE GMBH
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Christoph Boehringer
    
	
 
    	
Name:
    	
Christoph   Boehringer
    
	
 
    	
Title:
    	
General   Manager
    

 

Signature Page to Second Amended and Restated Investors’ Rights Agreement

 

 

	
 
    	
INVESTORS:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
ALEXANDRIA EQUITIES, LLC,
    
	
 
    	
a Delaware limited liability company
    
	
 
    	
 
    
	
 
    	
By:
    	
Alexandria   Real Estate Equities, Inc.,
    
	
 
    	
 
    	
a   Maryland corporation, managing member
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   dean shigenaga
    
	
 
    	
Name:
    	
dean shigenaga
    
	
 
    	
Title:
    	
CFO
    
				

 

Signature Page to Second Amended and Restated Investors’ Rights Agreement

 

 

	
 
    	
INVESTORS:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   E. Jeffrey Peierls
    
	
 
    	
E.   Jeffrey Peierls
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Brian E. Peierls
    
	
 
    	
Brian   E. Peierls
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Signed   by E. Jeffrey Peierls, on behalf of the entities listed below, as trustee   and/or authorized officer:
    
	
 
    	
 
    
	
 
    	
UD E.F. Peierls for Brian E. Peierls
    
	
 
    	
UD E.F. Peierls for E. Jeffrey Peierls
    
	
 
    	
UD J.N. Peierls for B.E. Peierls
    
	
 
    	
UD J.N Peierls for E.J. Peierls
    
	
 
    	
UD E.S. Peierls for E.F. Peierls et al
    
	
 
    	
UW J.N. Peierls for Brian E. Peierls
    
	
 
    	
UW J.N. Peierls for E. Jeffrey Peierls
    
	
 
    	
UW E.S. Peierls for Brian E. Peierls —   Accumulation
    
	
 
    	
UW E.S. Peierls for E. Jeffrey Peierls —   Accumulation
    
	
 
    	
The Peierls Foundation, Inc.
    
	
 
    	
UD Ethel F. Peierls Charitable Lead Trust
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/ E. Jeffrey Peierls
    
	
 
    	
E. Jeffrey Peierls
    

 

Signature Page to Second Amended and Restated Investors’ Rights Agreement

 

 

	
 
    	
INVESTORS:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
PETER AND CAROLYN LYNCH
    
	
 
    	
Jt Ten with Rights of Survivorship
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Peter S. Lynch
    
	
 
    	
Peter   S. Lynch
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Carolyn A. Lynch
    
	
 
    	
Carolyn   A. Lynch
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Signed   by Peter S. Lynch, on behalf of the entities listed below, as trustee:
    
	
 
    	
 
    
	
 
    	
The Lynch Foundation u/a 07/14/88
    
	
 
    	
Peter S. and Carolyn A. Lynch 1999 Unitrust u/a/   12/28/99
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Peter S. Lynch
    
	
 
    	
Peter   S. Lynch
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Signed   by Carolyn A. Lynch, on behalf of the entities listed below, as trustee:
    
	
 
    	
 
    
	
 
    	
Lynch Childrens Trust fbo Anne Lynch u/a 03/08/88
    
	
 
    	
Lynch Childrens Trust fbo Elizabeth Lynch u/a   03/08/88
    
	
 
    	
Lynch Childrens Trust fbo Mary Lynch u/a 03/08/88
    
	
 
    	
Peter S. Lynch Charitable Lead Annuity u/a   03/27/96
    
	
 
    	
Peter S. Lynch Charitable Lead Unitrust u/a   03/03/97
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Carolyn A. Lynch
    
	
 
    	
Carolyn   A. Lynch
    

 

Signature Page to Second Amended and Restated Investors’ Rights Agreement

 

 

SCHEDULE A

 

INVESTORS

 

	
Name and Address
    	
 
    	
Number of Shares Held
    
	
Bessemer   Venture Partners VII L.P.

c/o   Bessemer Venture Partners

1865 Palmer Avenue

Suite 104

Larchmont, NY 10538

Tel. 914-833-5300

Transactions@bvp.com
    	
 
    	
1,280,000   shares of Series A Preferred Stock

800,000   shares of Series B Preferred Stock

42,667   shares of Series C Preferred Stock
    
	
 
    	
 
    	
 
    
	
Bessemer   Venture Partners VII Institutional L.P.

c/o   Bessemer Venture Partners

1865 Palmer Avenue

Suite 104

Larchmont, NY 10538

Tel.914-833-5300

Transactions@bvp.com
    	
 
    	
560,000   shares of Series A Preferred Stock

350,000   shares of Series B Preferred Stock

18,667   shares of Series C Preferred Stock
    
	
 
    	
 
    	
 
    
	
BVP   VII Special Opportunity Fund L.P.

c/o   Bessemer Venture Partners

1865 Palmer Avenue

Suite 104

Larchmont, NY 10538

Tel. 914-833-5300

Transactions@bvp.com
    	
 
    	
2,160,000   shares of Series A Preferred Stock

1,350,000   shares of Series B Preferred Stock

71,999   shares of Series C Preferred Stock
    
	
 
    	
 
    	
 
    
	
MPM Bioventures V, L.P. 

The   John Hancock Tower

200   Clarendon Street

54th   floor

Boston,   MA 02116

Phone:   617-425-9200

Fax:   617-425-9201
    	
 
    	
4,000,000   shares of Series A Preferred Stock

2,500,000   shares of Series B Preferred Stock

266,666   shares of Series C Preferred Stock
    
	
 
    	
 
    	
 
    
	
Longwood   Founders Fund, L.P.

800   Boylston St, Suite 1555

Boston,   MA 02199

Phone:   (617) 252-692
    	
 
    	
4,000,000   shares of Series A Preferred Stock

3,500,000   shares of Series B Preferred Stock

444,444   shares of Series C Preferred Stock
    

 

 

	
Name and Address
    	
 
    	
Number of Shares Held
    
	
CHP   III, L.P.

c/o   Cardinal Partners

230   Nassau Street

Princeton,   NJ 08542

Phone:   (609) 924-6452
    	
 
    	
4,000,000   shares of Series A Preferred Stock

2,500,000   shares of Series B Preferred Stock

444,444   shares of Series C Preferred Stock
    
	
 
    	
 
    	
 
    
	
Advanced   Technology Ventures VIII, L.P.

1000   Winter Street

Waltham,   MA 02451
    	
 
    	
0   shares of Series A Preferred Stock

2,500,000   shares of Series B Preferred Stock

100,000   shares of Series C Preferred Stock
    
	
 
    	
 
    	
 
    
	
Eastern   Capital Limited

c/o   Foreshore Corporate Services Ltd.

Fourth   Floor, Queensgate House

113   South Church Street

PO   Box 1994

George   Town

Grand   Cayman KY1-1104

Cayman   Islands

Attn:   Mark VanDevelde, Director
    	
 
    	
0   shares of Series A Preferred Stock

0   shares of Series B Preferred Stock

4,000,000   shares of Series C Preferred Stock
    
	
 
    	
 
    	
 
    
	
H &   Q Healthcare Investors

2   Liberty Square, 9th Floor

Boston,   MA 02109

Fax:   (617) 772-8577
    	
 
    	
0   shares of Series A Preferred Stock

0   shares of Series B Preferred Stock

1,533,333   shares of Series C Preferred Stock
    
	
 
    	
 
    	
 
    
	
H &   Q Life Sciences Investors

2   Liberty Square, 9th Floor

Boston,   MA 02109

Fax:   (617) 772-8577
    	
 
    	
0   shares of Series A Preferred Stock

0   shares of Series B Preferred Stock

688,889   shares of Series C Preferred Stock
    
	
 
    	
 
    	
 
    
	
Astellas   Venture Fund I LP

2882   San Hill Road, Suite 121

Menlo   Park, CA 94025

Attn:   Shinya Yano, Ph.D

Phone:   (650) 926-0732

Fax:   (650) 926-0740
    	
 
    	
0   shares of Series A Preferred Stock

1,000,000   shares of Series B Preferred Stock

71,111   shares of Series C Preferred Stock
    
	
 
    	
 
    	
 
    
	
CD-Ventures   GmbH

Bergheimerstrasse   89 a

69115   Heidelberg
    	
 
    	
0   shares of Series A Preferred Stock

500,000   shares of Series B Preferred Stock

138,755   shares of Series C Preferred Stock
    

 

 

	
Name and Address
    	
 
    	
Number of Shares Held
    
	
Germany

Attn:   Christoph Boehringer
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Alexandria   Equities, LLC

385   E. Colorado Blvd., Suite 299

Pasadena,   CA 91101

Phone:   (626) 578-0777

Fax:   (626) 578-0770
    	
 
    	
0   shares of Series A Preferred Stock

250,000   shares of Series B Preferred Stock

44,444   shares of Series C Preferred Stock
    
	
 
    	
 
    	
 
    
	
E.   Jeffrey Peierls

73   South Holman Way

Golden,   CO 80401
    	
 
    	
0   shares of Series A Preferred Stock

57,400   shares of Series B Preferred Stock

44,000   shares of Series C Preferred Stock
    
	
 
    	
 
    	
 
    
	
Brian   E. Peierls

7808   Harvestman Cove

Austin,   TX 78731-1243
    	
 
    	
0   shares of Series A Preferred Stock

57,400   shares of Series B Preferred Stock

38,000   shares of Series C Preferred Stock
    
	
 
    	
 
    	
 
    
	
UD   E.F. Peierls for Brian E. Peierls

c/o   E. Jeffrey Peierls

73   South Holman Way

Golden,   CO 80401
    	
 
    	
0   shares of Series A Preferred Stock

13,500   shares of Series B Preferred Stock

8,900   shares of Series C Preferred Stock
    
	
 
    	
 
    	
 
    
	
UD   E.F. Peierls for E. Jeffrey Peierls

c/o   E. Jeffrey Peierls

73   South Holman Way

Golden,   CO  80401
    	
 
    	
0   shares of Series A Preferred Stock

13,500   shares of Series B Preferred Stock

8,900   shares of Series C Preferred Stock
    
	
 
    	
 
    	
 
    
	
UD   J.N. Peierls for B.E. Peierls

c/o   E. Jeffrey Peierls

73   South Holman Way

Golden,   CO  80401
    	
 
    	
0   shares of Series A Preferred Stock

18,000   shares of Series B Preferred Stock

20,000   shares of Series C Preferred Stock
    
	
 
    	
 
    	
 
    
	
UD   J.N Peierls for E.J. Peierls

c/o   E. Jeffrey Peierls

73   South Holman Way

Golden,   CO  80401
    	
 
    	
0   shares of Series A Preferred Stock

18,000   shares of Series B Preferred Stock

20,000   shares of Series C Preferred Stock
    
	
 
    	
 
    	
 
    
	
UD   E.S. Peierls for E.F. Peierls et al

c/o   E. Jeffrey Peierls

73   South Holman Way
    	
 
    	
0   shares of Series A Preferred Stock

0   shares of Series B Preferred Stock

16,000   shares of Series C Preferred Stock
    

 

 

	
Name and Address
    	
 
    	
Number of Shares Held
    
	
Golden,   CO  80401
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
UW   E.S. Peierls for Brian E. Peierls — Accumulation

c/o   E. Jeffrey Peierls

73   South Holman Way

Golden,   CO  80401
    	
 
    	
0   shares of Series A Preferred Stock

12,300   shares of Series B Preferred Stock

13,300   shares of Series C Preferred Stock
    
	
 
    	
 
    	
 
    
	
UW   E.S. Peierls for E. Jeffrey Peierls — Accumulation

c/o   E. Jeffrey Peierls

73   South Holman Way

Golden,   CO  80401
    	
 
    	
0   shares of Series A Preferred Stock

9,000   shares of Series B Preferred Stock

7,100   shares of Series C Preferred Stock
    
	
 
    	
 
    	
 
    
	
UW   J.N. Peierls for Brian E. Peierls

c/o   E. Jeffrey Peierls

73   South Holman Way

Golden,   CO  80401
    	
 
    	
0   shares of Series A Preferred Stock

16,900   shares of Series B Preferred Stock

14,200   shares of Series C Preferred Stock
    
	
 
    	
 
    	
 
    
	
UW   J.N. Peierls for E. Jeffrey Peierls

c/o   E. Jeffrey Peierls

73   South Holman Way

Golden,   CO  80401
    	
 
    	
0   shares of Series A Preferred Stock

16,900   shares of Series B Preferred Stock

14,200   shares of Series C Preferred Stock
    
	
 
    	
 
    	
 
    
	
The   Peierls Foundation, Inc.

c/o   E. Jeffrey Peierls

73   South Holman Way

Golden,   CO  80401
    	
 
    	
0   shares of Series A Preferred Stock

424,400   shares of Series B Preferred Stock

289,000   shares of Series C Preferred Stock
    
	
 
    	
 
    	
 
    
	
UD   Ethel F. Peierls Charitable Lead Trust

c/o   E. Jeffrey Peierls

73   South Holman Way

Golden,   CO  80401
    	
 
    	
0   shares of Series A Preferred Stock

42,700   shares of Series B Preferred Stock

37,700   shares of Series C Preferred Stock
    
	
 
    	
 
    	
 
    
	
Peter   and Carolyn Lynch

Jt.   Ten with Rights of Survivorship

82   Devonshire Street, S4A

Boston,   MA 02109

Phone:   (617) 563-3603
    	
 
    	
0   shares of Series A Preferred Stock

0   shares of Series B Preferred Stock

106,666   shares of Series C Preferred Stock

 
    
	
 
    	
 
    	
 
    
	
The   Lynch Foundation u/a 07/14/88

82   Devonshire Street, S4A

Boston,   MA 02109
    	
 
    	
0   shares of Series A Preferred Stock

0   shares of Series B Preferred Stock

164,444   shares of Series C Preferred Stock
    

 

 

	
Name and Address
    	
 
    	
Number of Shares Held
    
	
Phone:   (617) 563-3603
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Peter   S. Lynch and Carolyn A. Lynch 1999 Unitrust u/a 12/28/99

82   Devonshire Street, S4A

Boston,   MA 02109

Phone:   (617) 563-3603
    	
 
    	
0   shares of Series A Preferred Stock

0   shares of Series B Preferred Stock

151,111   shares of Series C Preferred Stock
    
	
 
    	
 
    	
 
    
	
Lynch   Childrens Trust fbo Anne Lynch u/a 03/08/88

82   Devonshire Street, S4A

Boston,   MA 02109

Phone:   (617) 563-3603
    	
 
    	
0   shares of Series A Preferred Stock

0   shares of Series B Preferred Stock

17,777   shares of Series C Preferred Stock
    
	
 
    	
 
    	
 
    
	
Lynch   Childrens Trust fbo Elizabeth Lynch u/a 03/08/88

82   Devonshire Street, S4A

Boston,   MA 02109

Phone:   (617) 563-3603
    	
 
    	
0   shares of Series A Preferred Stock

0   shares of Series B Preferred Stock

17,777   shares of Series C Preferred Stock
    
	
 
    	
 
    	
 
    
	
Lynch   Childrens Trust fbo Mary Lynch u/a 03/08/88

82   Devonshire Street, S4A

Boston,   MA 02109

Phone:   (617) 563-3603
    	
 
    	
0   shares of Series A Preferred Stock

0   shares of Series B Preferred Stock

17,777   shares of Series C Preferred Stock
    
	
 
    	
 
    	
 
    
	
Peter   S. Lynch Charitable Lead Annuity u/a 3/27/96

82   Devonshire Street, S4A

Boston,   MA 02109

Phone:   (617) 563-3603
    	
 
    	
0   shares of Series A Preferred Stock

0   shares of Series B Preferred Stock

31,111   shares of Series C Preferred Stock
    
	
 
    	
 
    	
 
    
	
Peter   S. Lynch Charitable Lead Unitrust u/a 3/03/97

82   Devonshire Street, S4A

Boston,   MA 02109

Phone:   (617) 563-3603
    	
 
    	
0   shares of Series A Preferred Stock

0   shares of Series B Preferred Stock

31,111   shares of Series C Preferred Stock
    
	
 
    	
 
    	
 
    
	
Lawrence   H. Summers

207   Fisher Avenue

Brookline,   MA 02445
    	
 
    	
0   shares of Series A Preferred Stock

75,000   shares of Series B Preferred Stock

0   shares of Series C Preferred Stock
    

 

 

SCHEDULE B

 

KEY HOLDERS

 

	
Name and Address
    	
 
    	
Number of Shares Held
    
	
Christoph   Westphal

17   Hawes St.

Brookline,   MA 02446
    	
 
    	
2,200,000   shares of Common Stock
    
	
 
    	
 
    	
 
    
	
Rich   Aldrich

26   Beech Rd.

Brookline,   MA 02446
    	
 
    	
1,900,000   shares of Common Stock
    
	
 
    	
 
    	
 
    
	
Michelle   Dipp

505   Tremont St., Unit 702

Boston,   MA 02116
    	
 
    	
600,000   shares of Common Stock
    
	
 
    	
 
    	
 
    
	
Piyush   Gupta

2   Hawthorne Place, Apt. 9K

Boston,   MA 02114
    	
 
    	
1,550,000   shares of Common Stock
    
	
 
    	
 
    	
 
    
	
Satish   Jindal

375   Atherton St.

Milton,   MA 02186
    	
 
    	
667,319   shares of Common Stock
    
	
 
    	
 
    	
 
    
	
Eric   Lander

74R   Fayerweather St.

Cambridge,   MA 02138
    	
 
    	
1,250,000   shares of Common Stock
    
	
 
    	
 
    	
 
    
	
Robert   Weinberg

25   Copley St.

Brookline,   MA 02446
    	
 
    	
1,250,000   shares of Common Stock
    
	
 
    	
 
    	
 
    
	
Robert   Forrester

346   Gay Street

Westwood,   MA 02090
    	
 
    	
448,000   shares of Common StockExhibit 10.1

 

VERASTEM, INC.

 

2010 EQUITY INCENTIVE PLAN, AS AMENDED

 

ADOPTED BY THE BOARD OF DIRECTORS:  NOVEMBER 3, 2010
 APPROVED BY THE STOCKHOLDERS:  NOVEMBER 3, 2010
 TERMINATION DATE:  NOVEMBER 3, 2020

 

1.                                      GENERAL.

 

(a)                                  Eligible Stock Award Recipients.  The persons eligible to receive Stock Awards are Employees, Directors and Consultants.

 

(b)                                  Available Stock Awards.  The Plan provides for the grant of the following Stock Awards:  (i) Incentive Stock Options, (ii) Nonstatutory Stock Options, (iii) Restricted Stock Awards, (iv) Restricted Stock Unit Awards, and (v) Stock Appreciation Rights.

 

(c)                                  Purpose.  The Company, by means of the Plan, seeks to secure and retain the services of the group of persons eligible to receive Stock Awards as set forth in Section l(a), to provide incentives for such persons to exert maximum efforts for the success of the Company and any Affiliate, and to provide a means by which such eligible recipients may be given an opportunity to benefit from increases in value of the Common Stock through the granting of Stock Awards.

 

2.                                      ADMINISTRATION.

 

(a)                                  Administration by Board.  The Board shall administer the Plan unless and until the Board delegates administration of the Plan to a Committee, as provided in Section 2(c).

 

(b)                                  Powers of Board.  The Board shall have the power, subject to, and within the limitations of, the express provisions of the Plan:

 

(i)                                    To determine from time to time (A) which of the persons eligible under the Plan shall be granted Stock Awards; (B) when and how each Stock Award shall be granted; (C) what type or combination of types of Stock Award shall be granted; (D) the provisions of each Stock Award 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 a Stock Award; (E) the number of shares of Common Stock with respect to which a Stock Award shall be granted to each such person; and (F) the Fair Market Value applicable to a Stock Award.

 

(ii)                                To construe and interpret the Plan and Stock Awards granted under it, and to establish, amend and revoke rules and regulations for administration of the Plan.  The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or in any Stock Award Agreement, in a manner and to the extent it shall deem necessary or expedient to make the Plan or Stock Award fully effective.

 

 

(iii)                            To settle all controversies regarding the Plan and Stock Awards granted under it.

 

(iv)                               To accelerate the time at which a Stock Award may first be exercised or the time during which a Stock Award or any part thereof will vest in accordance with the Plan, notwithstanding the provisions in the Stock Award stating the time at which it may first be exercised or the time during which it will vest.

 

(v)                                   To suspend or terminate the Plan at any time.  Suspension or termination of the Plan shall not impair rights and obligations under any Stock Award granted while the Plan is in effect except with the written consent of the affected Participant.

 

(vi)                               To amend the Plan in any respect the Board deems necessary or advisable, including, without limitation, amendments relating to Incentive Stock Options and certain nonqualified deferred compensation under Section 409A of the Code and/or to bring the Plan or Stock Awards granted under the Plan into compliance therewith, subject to the limitations, if any, of applicable law.  However, except as provided in Section 9(a) relating to Capitalization Adjustments, to the extent required by applicable law, stockholder approval shall be required for any amendment of the Plan that either (i) materially increases the number of shares of Common Stock available for issuance under the Plan, (ii) materially expands the class of individuals eligible to receive Stock Awards under the Plan, (iii) 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, (iv) materially extends the term of the Plan, or (v) expands the types of Stock Awards available for issuance under the Plan.  Except as provided above, rights under any Stock Award 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.

 

(vii)                           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 Incentive Stock Options.

 

(viii)                       To approve forms of Stock Award Agreements for use under the Plan and to amend the terms of any one or more Stock Awards, including, but not limited to, amendments to provide terms more favorable than previously provided in the Stock Award Agreement, subject to any specified limits in the Plan that are not subject to Board discretion; provided however, that, the rights under any Stock Award 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 Board may amend the terms of any one or more Stock Awards if necessary to maintain the qualified status of the Stock Award as an Incentive Stock Option or to bring the Stock Award into compliance with Section 409A of the Code and the related guidance thereunder.

 

(ix)                              Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company and that are not in conflict with the provisions of the Plan or Stock Awards.

 

2

 

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

 

(xi)                              To effect, at any time and from time to time, with the consent of any adversely affected Participant, (1) the reduction of the exercise price or strike price of any outstanding Option or Stock Appreciation Right under the Plan, (2) the cancellation of any outstanding Option or Stock Appreciation Right under the Plan and the grant in substitution therefor of (A) 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, (B) a Restricted Stock Award, (C) Restricted Stock Unit Award, (D) cash and/or (E) other valuable consideration (as determined by the Board, in its sole discretion), or (3) 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.

 

(c)                                  Delegation to Committee.  The Board may delegate some or all of the administration of the Plan to a Committee or Committees.  If administration of the Plan is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board that have been delegated to the Committee, including the power to delegate to a subcommittee of the Committee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board shall thereafter be to the Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board.  The Board may retain the authority to concurrently administer the Plan with the Committee and may, at any time, revest in the Board some or all of the powers previously delegated.

 

(d)                                  Delegation to an Officer.  The Board may delegate to one or more Officers of the Company the authority to do one or both of the following:  (i) designate Officers and Employees of the Company or any of its Subsidiaries to be recipients of Options (and, to the extent permitted by applicable law, other Stock Awards) and the terms thereof, and (ii) determine the number of shares of Common Stock to be subject to such Stock Awards granted to such Officers and Employees; provided, however, that the Board resolutions regarding such delegation shall specify the total number of shares of Common Stock that may be subject to the Stock Awards granted by such Officer and that such Officer may not grant a Stock Award to himself or herself.  Notwithstanding the foregoing, the Board may not delegate authority to an Officer to determine the Fair Market Value of the Common Stock pursuant to Section 13(t) below.

 

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

 

3.                                      SHARES SUBJECT TO THE PLAN.

 

(a)                                  Share Reserve.  Subject to Section 9(a) relating to Capitalization Adjustments and the provisions of this Section 3(a), the aggregate number of shares of Common Stock that

 

3

 

may be issued pursuant to Stock Awards after the Effective Date shall not exceed One Million Nine Hundred Ninety Nine Thousand Three Hundred Forty Eight (1,999,348) shares.  The limitation in this Section 3(a) is a limitation solely in the number of shares of Common Stock that may be issued pursuant to the Plan and is not a limitation on the granting of Stock Awards (except as provided in Section 7(a)).

 

(b)                                  Reversion of Shares to the Share Reserve.  If any shares of Common Stock issued pursuant to a Stock Award are forfeited back to the Company because of the failure to meet a contingency or condition required to vest such shares in the Participant, then the shares which are forfeited shall revert to and again become available for issuance under the Plan.  Also, any shares reacquired by the Company pursuant to Section 8(g) or as consideration for the exercise of an Option shall again become available for issuance under the Plan.  Furthermore, if a Stock Award (i) expires or otherwise terminates without having been exercised in full or (ii) is settled in cash (i.e., the holder of the Stock Award 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 3(b), any such shares shall not be subsequently issued pursuant to the exercise of Incentive Stock Options.

 

(c)                                  Incentive Stock Option Limit.  Notwithstanding anything to the contrary in this Section 3, but subject to the provisions of Section 9(a) relating to Capitalization Adjustments and the shares limits established in Section 3(a), the aggregate maximum number of shares of Common Stock that may be issued pursuant to the exercise of Incentive Stock Options shall be One Million Nine Hundred Ninety Nine Thousand Three Hundred Forty Eight (1,999,348) shares.

 

(d)                                  Source of Shares.  The stock issuable under the Plan shall be shares of authorized but unissued or reacquired Common Stock, including shares repurchased by the Company on the open market.

 

4.                                      ELIGIBILITY.

 

(a)                                  Eligibility for Specific Stock Awards.  Incentive Stock Options may be granted only to employees of the Company or a “parent corporation” or “subsidiary corporation” thereof (as such terms are defined in Sections 424(e) and (f) of the Code).  Stock Awards other than Incentive Stock Options may be granted to Employees, Directors and Consultants; provided, however, Nonstatutory Stock Options and Stock Appreciation rights may not be granted to Employees, Directors and Consultants who are providing Continuous Service only to any “parent” of the Company, as such term is defined in Rule 405, unless the stock underlying such Stock Awards is treated as “service recipient stock” under Section 409A of the Code because the Stock Awards are granted pursuant to a corporate transaction (such as a spin off transaction) or unless such Stock Awards comply with the distribution requirements of Section 409A of the Code.

 

(b)                                  Ten Percent Stockholders.  A Ten Percent Stockholder shall not be granted an Incentive Stock Option unless the exercise price of such Option is at least one hundred ten

 

4

 

percent (110%) of the Fair Market Value of the Common Stock on the date of grant and the Option is not exercisable after the expiration of five (5) years from the date of grant.

 

(c)                                  Consultants.  A Consultant shall not be eligible for the grant of a Stock Award 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 of the Securities Act (“Rule 701”)  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.

 

5.                                      OPTION PROVISIONS.

 

Each Option shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate.  All Options shall be separately designated Incentive Stock Options or Nonstatutory Stock Options at the time of grant, and, if certificates are issued, a separate certificate or certificates shall be issued for shares of Common Stock purchased on exercise of each type of Option.  If an Option is not specifically designated as an Incentive Stock Option, then the Option shall be a Nonstatutory Stock Option.  The provisions of separate Options need not be identical; provided, however,  that each Option Agreement shall include (through incorporation of provisions hereof by reference in the Option Agreement or otherwise) the substance of each of the following provisions:

 

(a)                                  Term.  Subject to the provisions of Section 4(b) regarding Ten Percent Stockholders, no Option shall be exercisable after the expiration often (10) years from the date of its grant or such shorter period specified in the Option Agreement.

 

(b)                                  Exercise Price.  Subject to the provisions of Section 4(b) regarding Incentive Stock Options granted to Ten Percent Stockholders, the exercise price of each Option shall be not less than one hundred percent (100%) of the Fair Market Value of the Common Stock subject to the Option on the date the Option is granted.  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 Incentive Stock Options).

 

(c)                                  Consideration.  The purchase price of Common Stock acquired pursuant to the exercise of an Option shall be paid, to the extent permitted by applicable law and as determined by the Board in its sole discretion, by any combination of the methods of payment set forth below.  The Board shall have the authority to grant Options that do not permit all of the following methods of payment (or otherwise restrict the ability to use certain methods) and to grant Options that require the consent of the Company to utilize a particular method of payment.  The permitted methods of payment are as follows:

 

(i)                                    by cash, check, bank draft or money order payable to the Company;

 

5

 

(ii)                                pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of the stock subject to the Option, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds;

 

(iii)                            by delivery to the Company (either by actual delivery or attestation) of shares of Common Stock;

 

(iv)                               if the Option is a Nonstatutory Stock Option, by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Common Stock issued upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price; provided, however, that the Company shall accept a cash or other payment from the Participant to the extent of any remaining balance of the aggregate exercise price not satisfied by such reduction in the number of whole shares to be issued; provided, further, that shares of Common Stock will no longer be outstanding under an Option and will not be exercisable thereafter to the extent that (A) shares are used to pay the exercise price pursuant to the “net exercise,” (B) shares are delivered to the Participant as a result of such exercise, and (C) shares are withheld to satisfy tax withholding obligations;

 

(v)                                   according to a deferred payment or similar arrangement with the Optionholder; provided, however,  that interest shall compound at least annually and shall be charged at the minimum rate of interest necessary to avoid (A) the imputation of interest income to the Company and compensation income to the Optionholder under any applicable provisions of the Code, and (B) the classification of the Option as a liability for financial accounting purposes; or

 

(vi)                               in any other form of legal consideration that may be acceptable to the Board.

 

(d)                                  Transferability of Options.  The Board may, in its sole discretion, impose such limitations on the transferability of Options as the Board shall determine.  In the absence of such a determination by the Board to the contrary, the following restrictions on the transferability of Options shall apply:

 

(i)                                    Restrictions on Transfer.  An Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder; provided, however, that the Board 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 Optionholder’s request.

 

(ii)                                Domestic Relations Orders.  Notwithstanding the foregoing, an Option may be transferred pursuant to a domestic relations order, provided, however, that an Incentive Stock Option may be deemed to be a Nonstatutory Stock Option as a result of such transfer.

 

(iii)                            Beneficiary Designation.  Notwithstanding the foregoing, the Optionholder 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

 

6

 

the Optionholder, 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.

 

(e)                                  Vesting of Options Generally.  The total number of shares of Common Stock subject to an Option may vest and therefore become exercisable in periodic installments that may or may not be equal.  The Option may be subject to such other terms and conditions on the time or times when it may or may not be exercised (which may be based on the satisfaction of performance goals or other criteria) as the Board may deem appropriate.  The vesting provisions of individual Options may vary.  The provisions of this Section 5(e) are subject to any Option provisions governing the minimum number of shares of Common Stock as to which an Option may be exercised.

 

(f)                                    Termination of Continuous Service.  Except as otherwise provided in the applicable Option Agreement or other agreement between the Optionholder and the Company, in the event that an Optionholder’s Continuous Service terminates (other than for Cause or upon the Optionholder’s death or Disability), the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination of Continuous Service) but only within such period of time ending on the earlier of (i) the date three (3) months following the termination of the Optionholder’s Continuous Service (or such longer or shorter period specified in the Option Agreement), or (ii) the expiration of the term of the Option as set forth in the Option Agreement.  If, after termination of Continuous Service, the Optionholder does not exercise his or her Option within the time specified herein or in the Option Agreement (as applicable), the Option shall terminate.

 

(g)                                 Extension of Termination Date.  Except as otherwise provided in the applicable Option Agreement or other agreement between the Optionholder and the Company, if the exercise of the Option following the termination of the Optionholder’s Continuous Service (other than for Cause or upon the Optionholder’s death or Disability) would be prohibited at any time solely because the issuance of shares of Common Stock would violate the registration requirements under the Securities Act, then the Option shall terminate on the earlier of (i) the expiration of a period of three (3) months after the termination of the Optionholder’s Continuous Service during which the exercise of the Option would not be in violation of such registration requirements, or (ii) the expiration of the term of the Option as set forth in the Option Agreement.

 

(h)                                 Disability of Optionholder.  Except as otherwise provided in the applicable Option Agreement or other agreement between the Optionholder and the Company, in the event that an Optionholder’s Continuous Service terminates as a result of the Optionholder’s Disability, the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination of Continuous Service), but only within such period of time ending on the earlier of (i) the date twelve (12) months following such termination of Continuous Service (or such longer or shorter period specified in the Option Agreement), or (ii) the expiration of the term of the Option as set forth in the Option Agreement.  If, after termination of Continuous Service, the Optionholder does not exercise his or her Option within the time specified herein or in the Option Agreement (as applicable), the Option shall terminate.

 

7

 

(i)                                    Death of Optionholder.  Except as otherwise provided in the applicable Option Agreement or other agreement between the Optionholder and the Company, in the event that (i) an Optionholder’s Continuous Service terminates as a result of the Optionholder’s death, or (ii) the Optionholder dies within the period (if any) specified in the Option Agreement after the termination of the Optionholder’s Continuous Service for a reason other than death, then the Option may be exercised (to the extent the Optionholder was entitled to exercise such Option as of the date of death) by the Optionholder’s estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by a person designated as the beneficiary of the Option upon the Optionholder’s death, but only within the period ending on the earlier of (i) the date eighteen (18) months following the date of death (or such longer or shorter period specified in the Option Agreement), or (ii) the expiration of the term of such Option as set forth in the Option Agreement.  If, after the Optionholder’s death, the Option is not exercised within the time specified herein or in the Option Agreement (as applicable), the Option shall terminate.  If the Optionholder designates a third party beneficiary of the Option in accordance with Section 5(d)(iii), then upon the death of the Optionholder such designated beneficiary shall have the sole right to exercise the Option and receive the Common Stock or other consideration resulting from the Option exercise.

 

(j)                                    Termination for Cause.  Except as explicitly provided otherwise in an Optionholder’s Option Agreement, in the event that an Optionholder’s Continuous Service is terminated for Cause, the Option shall terminate upon the termination date of such Optionholder’s Continuous Service, and the Optionholder shall be prohibited from exercising his or her Option from and after the time of such termination of Continuous Service.

 

(k)                                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 months following the date of grant of the Option.  Notwithstanding the foregoing, consistent with the provisions of the Worker Economic Opportunity Act, in the event of the Participant’s death or Disability, upon a Corporate Transaction or a Change in Control in which the vesting of such Options accelerates, or upon the Participant’s retirement (as such term may be defined in the Participant’s Stock Award Agreement or in another applicable agreement or in accordance with the Company’s then current employment policies and guidelines) any such vested Options may be exercised earlier than six months following the date of grant.  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.

 

(l)                                    Early Exercise.  The Option may, but need not, include a provision whereby the Optionholder may elect at any time before the Optionholder’s Continuous Service terminates to exercise the Option as to any part or all of the shares of Common Stock subject to the Option prior to the full vesting of the Option.  Any unvested shares of Common Stock so purchased may be subject to a repurchase option in favor of the Company or to any other restriction the Board determines to be appropriate.  The Company shall not be required to exercise its repurchase option until at least six (6) months (or such longer or shorter period of time required to avoid classification of the Option as a liability for financial accounting purposes) have elapsed following exercise of the Option unless the Board otherwise specifically provides in the Option Agreement.

 

8

 

(m)                              Right of Repurchase.  The Option may include a provision whereby the Company may elect to repurchase all or any part of the vested shares of Common Stock acquired by the Optionholder pursuant to the exercise of the Option.

 

(n)                                 Right of First Refusal.  The Option may include a provision whereby the Company may elect to exercise a right of first refusal following receipt of notice from the Optionholder of the intent to transfer all or any part of the shares of Common Stock received upon the exercise of the Option.  Except as expressly provided in this Section 5(n) or in the Stock Award Agreement for the Option, such right of first refusal shall otherwise comply with any applicable provisions of the Bylaws of the Company.

 

6.                                      PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.

 

(a)                                  Restricted Stock Awards.  Each Restricted Stock Award Agreement shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate.  To the extent consistent with the Company’s Bylaws, at the Board’s election, shares of Common Stock may be (x) held in book entry form subject to the Company’s instructions until any restrictions relating to the Restricted Stock Award lapse; or (y) evidenced by a certificate, which certificate shall be held in such form and manner as determined by the Board.  The terms and conditions of Restricted Stock Award Agreements may change from time to time, and the terms and conditions of separate Restricted Stock Award Agreements need not be identical; provided, however, that each Restricted Stock Award Agreement shall include (through incorporation of the provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions:

 

(i)                                    Consideration.  A Restricted Stock Award may be awarded in consideration for (A) past or future services actually or to be rendered to the Company or an Affiliate, or (B) any other form of legal consideration that may be acceptable to the Board in its sole discretion and permissible under applicable law.

 

(ii)                                Vesting.  Shares of Common Stock awarded under the Restricted Stock Award Agreement may be subject to forfeiture to the Company in accordance with a vesting schedule to be determined by the Board.

 

(iii)                            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 Award Agreement.

 

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

 

(b)                                  Restricted Stock Unit Awards.  Each Restricted Stock Unit Award Agreement shall be in such form and shall contain such terms and conditions as the Board shall deem

 

9

 

appropriate.  The terms and conditions of Restricted Stock Unit Award Agreements may change from time to time, and the terms and conditions of separate Restricted Stock Unit Award Agreements need not be identical, provided, however, that each Restricted Stock Unit Award Agreement shall include (through incorporation of the provisions hereof by reference in the Agreement or otherwise) the substance of each of the following provisions:

 

(i)                                    Consideration.  At the time of grant of a Restricted Stock Unit Award, the Board will determine the consideration, if any, to be paid by the Participant upon delivery of each share of Common Stock subject to the Restricted Stock Unit Award.  The consideration to be paid (if any) by the Participant for each share of Common Stock subject to a Restricted Stock Unit Award may be paid in any form of legal consideration that may be acceptable to the Board in its sole discretion and permissible under applicable law.

 

(ii)                                Vesting.  At the time of the grant of a Restricted Stock Unit Award, the Board may impose such restrictions or conditions to the vesting of the Restricted Stock Unit Award as it, in its sole discretion, deems appropriate.

 

(iii)                            Payment.  A Restricted Stock Unit Award may be settled by the delivery of shares of Common Stock, their cash equivalent, any combination thereof or in any other form of consideration, as determined by the Board and contained in the Restricted Stock Unit Award Agreement.

 

(iv)                               Additional Restrictions.  At the time of the grant of a Restricted Stock Unit Award, the Board, as it deems appropriate, may impose such restrictions or conditions that delay the delivery of the shares of Common Stock (or their cash equivalent) subject to a Restricted Stock Unit Award to a time after the vesting of such Restricted Stock Unit Award.

 

(v)                                   Dividend Equivalents.  Dividend equivalents may be credited in respect of shares of Common Stock covered by a Restricted Stock Unit Award, as determined by the Board and contained in the Restricted Stock Unit Award Agreement.  At the sole discretion of the Board, such dividend equivalents may be converted into additional shares of Common Stock covered by the Restricted Stock Unit Award in such manner as determined by the Board.  Any additional shares covered by the Restricted Stock Unit Award credited by reason of such dividend equivalents will be subject to all the terms and conditions of the underlying Restricted Stock Unit Award Agreement to which they relate.

 

(vi)                               Termination of Participant’s Continuous Service.  Except as otherwise provided in the applicable Restricted Stock Unit Award Agreement, such portion of the Restricted Stock Unit Award that has not vested will be forfeited upon the Participant’s termination of Continuous Service.

 

(c)                                  Stock Appreciation Rights.  Each Stock Appreciation Right Agreement shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate.  Stock Appreciation Rights may be granted as stand-alone Stock Awards or in tandem with other Stock Awards.  The terms and conditions of Stock Appreciation Right Agreements may change from time to time, and the terms and conditions of separate Stock Appreciation Right Agreements need not be identical; provided, however,  that each Stock Appreciation Right

 

10

 

Agreement shall include (through incorporation of the provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions:

 

(i)                                    Term.  No Stock Appreciation Right shall be exercisable after the expiration often (10) years from the date of grant or such shorter period specified in the Stock Appreciation Right Agreement.

 

(ii)                                Strike Price.  Each Stock Appreciation Right will be denominated in shares of Common Stock equivalents.  The strike price of each Stock Appreciation Right granted as a stand-alone or tandem Stock Award shall not be less than one hundred percent (100%) of the Fair Market Value of the Common Stock equivalents subject to the Stock Appreciation Right on the date of grant.

 

(iii)                            Calculation of Appreciation.  The appreciation distribution payable on the exercise of a Stock Appreciation Right will be not greater than an amount equal to the excess of (A) the aggregate Fair Market Value (on the date of the exercise of the Stock Appreciation Right) of a number of shares of Common Stock equal to the number of shares of Common Stock equivalents in which the Participant is vested under such Stock Appreciation Right, and with respect to which the Participant is exercising the Stock Appreciation Right on such date, over (B) the strike price that will be determined by the Board on the date of grant.

 

(iv)                               Vesting.  At the time of the grant of a Stock Appreciation Right, the Board may impose such restrictions or conditions to the vesting of such Stock Appreciation Right as it, in its sole discretion, deems appropriate.

 

(v)                                   Exercise.  To exercise any outstanding Stock Appreciation Right, the Participant must provide written notice of exercise to the Company in compliance with the provisions of the Stock Appreciation Right Agreement evidencing such Stock Appreciation Right.

 

(vi)                               Non-Exempt Employees.  No Stock Appreciation Right 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 months following the date of grant of the Stock Appreciation Right.  The foregoing provision is intended to operate so that any income derived by a non-exempt employee in connection with the exercise of a Stock Appreciation Right will be exempt from his or her regular rate of pay.

 

(vii)                           Payment.  The appreciation distribution in respect to a Stock Appreciation Right may be paid in Common Stock, in cash, in any combination of the two or in any other form of consideration, as determined by the Board and contained in the Stock Appreciation Right Agreement evidencing such Stock Appreciation Right.

 

(viii)                       Termination of Continuous Service.  Except as otherwise provided in the applicable Stock Appreciation Right Agreement or other agreement between the Participant and the Company, in the event that a Participant’s Continuous Service terminates (other than for Cause or upon the Participant’s death or Disability), the Participant may exercise his or her Stock Appreciation Right (to the extent that the Participant was entitled to exercise such Stock Appreciation Right as of the date of termination of Continuous Service) but only within such

 

11

 

period of time ending on the earlier of (A) the date three (3) months following the termination of the Participant’s Continuous Service (or such longer or shorter period specified in the Stock Appreciation Right Agreement), or (B) the expiration of the term of the Stock Appreciation Right as set forth in the Stock Appreciation Right Agreement.  If, after termination of Continuous Service, the Participant does not exercise his or her Stock Appreciation Right within the time specified herein or in the Stock Appreciation Right Agreement (as applicable), the Stock Appreciation Right shall terminate.

 

(ix)                              Disability of Participant.  Except as otherwise provided in the applicable Stock Appreciation Right Agreement or other agreement between the Participant and the Company, in the event that a Participant’s Continuous Service terminates as a result of the Participant’s Disability, the Participant may exercise his or her Stock Appreciation Right (to the extent that the Participant was entitled to exercise such Stock Appreciation Right as of the date of termination of Continuous Service), but only within such period of time ending on the earlier of (A) the date twelve (12) months following such termination of Continuous Service (or such longer or shorter period specified in the Stock Appreciation Right Agreement), or (B) the expiration of the term of the Stock Appreciation Right as set forth in the Stock Appreciation Right Agreement.  If, after termination of Continuous Service, the Participant does not exercise his or her Stock Appreciation Right within the time specified herein or in the Stock Appreciation Right Agreement (as applicable), the Stock Appreciation Right shall terminate.

 

(x)                                  Death of Participant.  Except as otherwise provided in the applicable Stock Appreciation Right Agreement or other agreement between the Participant and the Company, in the event that (i) a Participant’s Continuous Service terminates as a result of the Participant’s death, or (ii) the Participant dies within the period (if any) specified in the Stock Appreciation Right Agreement after the termination of the Participant’s Continuous Service for a reason other than death, then the Stock Appreciation Right may be exercised (to the extent the Participant was entitled to exercise such Stock Appreciation Right as of the date of death) by the Participant’s estate, by a person who acquired the right to exercise the Stock Appreciation Right by bequest or inheritance or by a person designated as the beneficiary of the Stock Appreciation Right upon the Participant’s death, but only within the period ending on the earlier of (i) the date eighteen (18) months following the date of death (or such longer or shorter period specified in the Stock Appreciation Right Agreement), or (ii) the expiration of the term of such Stock Appreciation Right as set forth in the Stock Appreciation Right Agreement.  If, after the Participant’s death, the Stock Appreciation Right is not exercised within the time specified herein or in the Stock Appreciation Right Agreement (as applicable), the Stock Appreciation Right shall terminate.

 

(xi)                              Termination for Cause.  Except as explicitly provided otherwise in an Participant’s Stock Appreciation Right Agreement, in the event that a Participant’s Continuous Service is terminated for Cause, the Stock Appreciation Right shall terminate upon the termination date of such Participant’s Continuous Service, and the Participant shall be prohibited from exercising his or her Stock Appreciation Right from and after the time of such termination of Continuous Service.

 

12

 

7.                                      COVENANTS OF THE COMPANY.

 

(a)                                  Availability of Shares.  During the terms of the Stock Awards, the Company shall keep available at all times the number of shares of Common Stock reasonably required to satisfy such Stock Awards.

 

(b)                                  Securities Law Compliance.  The Company shall seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Stock Awards and to issue and sell shares of Common Stock upon exercise of the Stock Awards; provided, however, that this undertaking shall not require the Company to register under the Securities Act the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any such Stock Award.  If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority that counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell Common Stock upon exercise of such Stock Awards unless and until such authority is obtained.  A Participant shall not be eligible for the grant of a Stock Award or the subsequent issuance of Common Stock pursuant to the Stock Award if such grant or issuance would be in violation of any applicable securities law.

 

(c)                                  No Obligation to Notify.  The Company shall have no duty or obligation to any holder of a Stock Award to advise such holder as to the time or manner of exercising such Stock Award.  Furthermore, the Company shall have no duty or obligation to warn or otherwise advise such holder of a pending termination or expiration of a Stock Award or a possible period in which the Stock Award may not be exercised.  The Company has no duty or obligation to minimize the tax consequences of a Stock Award to the holder of such Stock Award.

 

8.                                      MISCELLANEOUS.

 

(a)                                  Use of Proceeds from Sales of Common Stock.  Proceeds from the sale of shares of Common Stock pursuant to Stock Awards shall constitute general funds of the Company.

 

(b)                                  Corporate Action Constituting Grant of Stock Awards.  Corporate action constituting a grant by the Company of a Stock Award to any Participant shall be deemed completed as of the date of such corporate action, unless otherwise determined by the Board, regardless of when the instrument, certificate, or letter evidencing the Stock Award is communicated to, or actually received or accepted by, the Participant.

 

(c)                                  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 Stock Award unless and until such Participant has satisfied all requirements for exercise of the Stock Award 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.

 

(d)                                  No Employment or Other Service Rights.  Nothing in the Plan, any Stock Award Agreement or any other instrument executed thereunder or in connection with any Stock

 

13

 

Award 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 Stock Award was granted or shall affect the right of the Company or an Affiliate to terminate (i) the employment of an Employee with or without notice and with or without cause, (ii) the service of a Consultant pursuant to the terms of such Consultant’s agreement with the Company or an Affiliate, or (iii) 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.

 

(e)                                  Incentive Stock Option $100,000 Limitation.  To the extent that the aggregate Fair Market Value (determined at the time of grant) of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by any Optionholder during any calendar year (under all plans of the Company and any Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or portions thereof that exceed such limit (according to the order in which they were granted) shall be treated as Nonstatutory Stock Options, notwithstanding any contrary provision of the applicable Option Agreement(s).

 

(f)                                    Investment Assurances.  The Company may require a Participant, as a condition of exercising or acquiring Common Stock under any Stock Award, (i) 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 Stock Award; and (ii) to give written assurances satisfactory to the Company stating that the Participant is acquiring Common Stock subject to the Stock Award 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 (x) the issuance of the shares upon the exercise or acquisition of Common Stock under the Stock Award has been registered under a then currently effective registration statement under the Securities Act, or (y) 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.

 

(g)                                 Withholding Obligations.  Unless prohibited by the terms of a Stock Award Agreement, the Company may, in its sole discretion, satisfy any federal, state or local tax withholding obligation relating to a Stock Award by any of the following means (in addition to the Company’s right to withhold from any compensation paid to the Participant by the Company) or by a combination of such means:  (i) causing the Participant to tender a cash payment; (ii) withholding shares of Common Stock from the shares of Common Stock issued or otherwise issuable to the Participant in connection with the Stock Award; provided, however, that no shares of Common Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by law (or such lower amount as may be necessary to avoid classification of the Stock Award as a liability for financial accounting purposes); (iii) withholding payment from

 

14

 

any amounts otherwise payable to the Participant; (iv) withholding cash from a Stock Award settled in cash; or (v) by such other method as may be set forth in the Stock Award Agreement.

 

(h)                                 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.

 

(i)                                    Deferrals.  To the extent permitted by applicable law, the Board, in its sole discretion, may determine that the delivery of Common Stock or the payment of cash, upon the exercise, vesting or settlement of all or a portion of any Stock Award may be deferred and may establish programs and procedures for deferral elections to be made by Participants.  Deferrals by Participants will be made in accordance with Section 409A of the Code.  Consistent with Section 409A of the Code, the Board may provide for distributions while a Participant is still an employee.  The Board is authorized to make deferrals of Stock Awards and determine when, and in what annual percentages, Participants may receive payments, including lump sum payments, following the Participant’s termination of employment or retirement, and implement such other terms and conditions consistent with the provisions of the Plan and in accordance with applicable law.

 

(j)                                    Compliance with Section 409A.  To the extent applicable, the Plan and Stock Award Agreements shall be interpreted in accordance with Section 409A of the Code.  Notwithstanding any provision of the Plan to the contrary, in the event that following the Effective Date the Board determines that any Stock Award may be subject to Section 409A of the Code, the Board may adopt such amendments to the applicable Stock Award Agreement or adopt other policies and procedures, or take any other actions, that the Board determines are necessary or appropriate to (1) exempt the Stock Award from Section 409A of the Code and/or preserve the intended tax treatment of the benefits provided with respect to the Stock Award, or (2) comply with the requirements of Section 409 A of the Code.

 

(k)                                Compliance with Exemption Provided by Rule 12h-1(f) If:  (i) the aggregate of the number of Optionholders and the number of holders of all other outstanding compensatory employee stock options to purchase shares of Common Stock equals or exceeds five hundred (500), and (ii) 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:  (A) 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-1(f)”), except:  (1) as permitted by Rule 701(c) promulgated under the Securities Act, (2) to a guardian upon the disability of the Optionholder, or (3) to an executor upon the death of the Optionholder (collectively, the “Permitted Transferees”), provided, however,  the following transfers are permitted:  (i) transfers by the Optionholder to the Company, and (ii) 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-l(f); provided further,  that any Permitted Transferees may not further transfer the Options; (B) except as otherwise provided in (A) above, the Options and

 

15

 

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-l(h) promulgated under the Exchange Act, or any “call equivalent position” as defined by Rule 16a-l(b) promulgated under the Exchange Act by the Optionholder prior to exercise of an Option until the Company is no longer relying on the exemption provided by Rule 12h-l(f); and (C) at any time that the Company is relying on the exemption provided by Rule 12h-l(f), the Company shall deliver to Optionholders (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 Optionholder’s agreement to maintain its confidentiality.

 

9.                                      ADJUSTMENTS UPON CHANGES IN COMMON STOCK; OTHER CORPORATE EVENTS.

 

(a)                                  Capitalization Adjustments.  In the event of a Capitalization Adjustment, the Board shall proportionately and appropriately adjust:  (i) the class(es) and maximum number of securities subject to the Plan pursuant to Section 3(a), (ii) the class(es) and maximum number of securities that may be issued pursuant to the exercise of Incentive Stock Options pursuant to Section 3(b), and (iii) the class(es) and number of securities and price per share of stock subject to outstanding Stock Awards.  The Board shall make such adjustments, and its determination shall be final, binding and conclusive.

 

(b)                                  Dissolution or Liquidation.  Except as otherwise provided in the Stock Award Agreement, in the event of a dissolution or liquidation of the Company, all outstanding Stock Awards (other than Stock Awards consisting of vested and outstanding shares of Common Stock not subject to the Company’s right of repurchase) shall terminate immediately prior to the completion of such dissolution or liquidation, and the shares of Common Stock subject to the Company’s repurchase rights or subject to a forfeiture condition may be repurchased or reacquired by the Company notwithstanding the fact that the holder of such Stock Award is providing Continuous Service, provided, however, that the Board may, in its sole discretion, cause some or all Stock Awards to become fully vested, exercisable and/or no longer subject to repurchase or forfeiture (to the extent such Stock Awards have not previously expired or terminated) before the dissolution or liquidation is completed but contingent on its completion.

 

(c)                                  Corporate Transaction.  The following provisions shall apply to Stock Awards in the event of a Corporate Transaction unless otherwise provided in the instrument evidencing the Stock Award or any other written agreement between the Company or any Affiliate and the holder of the Stock Award or unless otherwise expressly provided by the Board at the time of grant of a Stock Award.  Except as otherwise stated in the Stock Award Agreement, in the event of a Corporate Transaction, then, notwithstanding any other provision of the Plan, the Board may take any one or more of the following actions with respect to Stock Awards, contingent upon the closing or completion of the Corporate Transaction:

 

(i)                                    arrange for the surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company) to assume or continue the Stock Award or to substitute a similar stock award for the Stock Award (including, but not limited to, an award to

 

16

 

acquire the same consideration paid to the stockholders of the Company pursuant to the Corporate Transaction);

 

(ii)                                arrange for the assignment of any reacquisition or repurchase rights held by the Company in respect of Common Stock issued pursuant to the Stock Award to the surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company);

 

(iii)                            accelerate the vesting of the Stock Award (and, if applicable, the time at which the Stock Award may be exercised) to a date on or prior to the effective time of such Corporate Transaction as the Board shall determine (and contingent upon the effectiveness of the Corporate Transaction);

 

(iv)                               arrange for the lapse of any reacquisition or repurchase rights held by the Company with respect to the Stock Award;

 

(v)                                   cancel or arrange for the cancellation of the Stock Award, to the extent not vested or not exercised prior to the effective time of the Corporate Transaction; and/or

 

(vi)                               make a payment, in such form as may be determined by the Board equal to the excess, if any, of (A) the value of the property the holder of the Stock Award would have received upon the exercise of the Stock Award (which may be limited to vested Stock Awards), over (B) any exercise price payable by such holder in connection with such exercise.  For purposes of clarity, this payment may be zero if the value of the property is equal to or less than the exercise price.  Additionally, the amount and timing of this payment may be reduced or delayed in part or in full as a result of any holdbacks, escrows, earn outs or other contingencies applicable to the proceeds of the Corporate Transaction payable to the Company’s stockholders or the Company.

 

The Board need not take the same action with respect to all Stock Awards (and may take different actions with respect to the portions of the same Stock Award, including with respect to vested and unvested portions of such Awards) or with respect to all Participants.

 

(d)                                  Change in Control.  A Stock Award may be subject to additional acceleration of vesting and exercisability upon or after a Change in Control as may be provided in the Stock Award Agreement for such Stock Award or as may be provided in any other written agreement between the Company or any Affiliate and the Participant, but in the absence of such provision, no such acceleration shall occur.

 

10.                               TERMINATION OR SUSPENSION OF THE PLAN.

 

(a)                                  Plan Term.  The Board may suspend or terminate the Plan at any time.  Unless sooner terminated by the Board pursuant to Section 2, the Plan shall automatically terminate on the day before the tenth (10th) anniversary of the earlier of (i) the date the Plan is adopted by the Board, or (ii) the date the Plan is approved by the stockholders of the Company.  No Stock Awards may be granted under the Plan while the Plan is suspended or after it is terminated.

 

17

 

(b)                                  No Impairment of Rights.  Suspension or termination of the Plan shall not impair rights and obligations under any Stock Award granted while the Plan is in effect except with the written consent of the affected Participant.

 

11.                               EFFECTIVE DATE OF PLAN.

 

This Plan shall become effective on the Effective Date.

 

12.                               CHOICE OF LAW.

 

The law of the State of Delaware shall govern all questions concerning the construction, validity and interpretation of this Plan, without regard to that state’s conflict of laws rules.

 

13.                               DEFINITIONS.  AS USED IN THE PLAN, THE FOLLOWING DEFINITIONS SHALL APPLY TO THE CAPITALIZED TERMS INDICATED BELOW:

 

(a)                                  “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 Board shall have the authority to determine the time or times at which “parent” or “majority- owned subsidiary” status is determined within the foregoing definition.

 

(b)                                  “Board”  means the Board of Directors of the Company.

 

(c)                                  “Capitalization Adjustment”  means any change that is made in, or other events that occur with respect to, the Common Stock subject to the Plan or subject to any Stock Award after the Effective Date without the receipt of consideration by the Company (through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other transaction not involving the receipt of consideration by the Company).  Notwithstanding the foregoing, the conversion of any convertible securities of the Company shall not be treated as a transaction “without the receipt of consideration” by the Company.

 

(d)                                  “Cause”  shall have the meaning of the term “Cause” (or any comparable term) contained in any then effective employment agreement or other letter between the Participant and the Company, or if no such agreement or letter exists, or if the term is not defined, shall mean with respect to a Participant, the occurrence of any of the following events:  (i) such Participant’s commission of any felony or any crime involving fraud, dishonesty or moral turpitude under the laws of the United States or any state thereof; (ii) such Participant’s attempted commission of, or participation in, a fraud or act of dishonesty against the Company; (iii) such Participant’s intentional, material violation of any contract or agreement between the Participant and the Company or of any statutory duty owed to the Company; (iv) such Participant’s unauthorized use or disclosure of the Company’s confidential information or trade secrets; or (v) such Participant’s gross misconduct.  The determination that a termination of the Participant’s Continuous Service is either for Cause or without Cause shall be made by the Company in its sole discretion.  Any determination by the Company that the Continuous Service of a Participant was terminated by reason of dismissal without Cause for the purposes of

 

18

 

outstanding Stock Awards held by such Participant shall have no effect upon any determination of the rights or obligations of the Company or such Participant for any other purpose.

 

(e)                                  “Change in Control”  means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events:

 

(i)                                    any Exchange Act Person becomes the Owner, directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities other than by virtue of a merger, consolidation or similar transaction.  Notwithstanding the foregoing, a Change in Control shall not be deemed to occur (A) on account of the acquisition of securities of the Company by an investor, any affiliate thereof or any other Exchange Act Person that acquires the Company’s securities in a transaction or series of related transactions the primary purpose of which is to obtain financing for the Company through the issuance of equity securities or (B) solely because the level of Ownership held by any Exchange Act Person (the “Subject Person”) exceeds the designated percentage threshold of the outstanding voting securities as a result of a repurchase or other acquisition of voting securities by the Company reducing the number of shares outstanding, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of voting securities by the Company, and after such share acquisition, the Subject Person becomes the Owner of any additional voting securities that, assuming the repurchase or other acquisition had not occurred, increases the percentage of the then outstanding voting securities Owned by the Subject Person over the designated percentage threshold, then a Change in Control shall be deemed to occur;

 

(ii)                                there is consummated a merger, consolidation or similar transaction involving (directly or indirectly) the Company and, immediately after the consummation of such merger, consolidation or similar transaction, the stockholders of the Company immediately prior thereto do not Own, directly or indirectly, either (A) outstanding voting securities representing more than fifty percent (50%) of the combined outstanding voting power of the surviving Entity in such merger, consolidation or similar transaction or (B) more than fifty percent (50%) of the combined outstanding voting power of the parent of the surviving Entity in such merger, consolidation or similar transaction, in each case in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such transaction;

 

(iii)                            the stockholders of the Company approve or the Board approves a plan of complete dissolution or liquidation of the Company, or a complete dissolution or liquidation of the Company shall otherwise occur, except for a liquidation into a parent corporation; or

 

(iv)                               there is consummated a sale, lease, exclusive license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries, other than a sale, lease, license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries to an Entity, more than fifty percent (50%) of the combined voting power of the voting securities of which are Owned by stockholders of the Company in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such sale, lease, license or other disposition;

 

19

 

Notwithstanding the foregoing definition or any other provision of this Plan, (A) the term Change in Control shall not include a sale of assets, merger or other transaction effected exclusively for the purpose of changing the domicile of the Company, and (B) the definition of Change in Control (or any analogous term) in an individual written agreement between the Company or any Affiliate and the Participant shall supersede the foregoing definition with respect to Stock Awards subject to such agreement; provided, however, that if no definition of Change in Control or any analogous term is set forth in such an individual written agreement, the foregoing definition shall apply.

 

(f)                                    “Code”  means the Internal Revenue Code of 1986, as amended.

 

(g)                                 “Committee”  means a committee of one (1) or more Directors to whom authority has been delegated by the Board in accordance with Section 2(c).

 

(h)                                 “Common Stock”  means the common stock of the Company.

 

(i)                                    “Company”  means Verastem, Inc., a Delaware corporation.

 

(j)                                    “Consultant”  means any person, including an advisor, who is (i) engaged by the Company or an Affiliate to render consulting or advisory services and is compensated for such services, or (ii) serving as a member of the board of directors of an Affiliate and is compensated for such services.  However, service solely as a Director, or payment of a fee for such service, shall not cause a Director to be considered a “Consultant” for purposes of the Plan.

 

(k)                                “Continuous Service”  means that the Participant’s service with the Company or an Affiliate, whether as an Employee, Director or Consultant, 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 Consultant 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 Board 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 Board 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 a Stock Award 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.

 

(l)                                    “Corporate Transaction”  means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events:

 

20

 

(i)                                    the consummation of a sale or other disposition of all or substantially all, as determined by the Board in its sole discretion, of the consolidated assets of the Company and its Subsidiaries;

 

(ii)                                the consummation of a sale or other disposition of at least fifty percent (50%) of the outstanding voting securities of the Company;

 

(iii)                            the consummation of a merger, consolidation or similar transaction following which the Company is not the surviving corporation; or

 

(iv)                               the consummation of a merger, consolidation or similar transaction following which the Company is the surviving corporation but the shares of Common Stock outstanding immediately preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of the merger, consolidation or similar transaction into other property, whether in the form of securities, cash or otherwise.

 

(m)                              “Director”  means a member of the Board.

 

(n)                                 “Disability”  means permanent and total disability as defined in Section 22(e)(3) of the Code, and shall be determined by the Board on the basis of such medical evidence as the Board deems warranted under the circumstances.

 

(o)                                  “Effective Date”  means the effective date of this Plan, which is the earlier of (i) the date that this Plan is first approved by the Company’s stockholders, or (ii) the date this Plan is adopted by the Board.

 

(p)                                  “Employee”  means any person employed by the Company or an Affiliate.  However, service solely as a Director, or payment of a fee for such services, shall not cause a Director to be considered an “Employee” for purposes of the Plan.

 

(q)                                  “Entity”  means a corporation, partnership, limited liability company or other entity.

 

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

 

(s)                                  “Exchange Act Person”  means any natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act), except that “Exchange Act Person” shall not include (i) the Company or any Subsidiary of the Company, (ii) any employee benefit plan of the Company or any Subsidiary of the Company or any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any Subsidiary of the Company, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, (iv) an Entity Owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their Ownership of stock of the Company; or (v) any natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act) that, as of the Effective Date of the Plan as set forth in Section 11, is the Owner, directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities.

 

21

 

(t)                                    “Fair Market Value”  means, as of any date, the value of the Common Stock determined by the Board in compliance with Section 409A of the Code or, in the case of an Incentive Stock Option, in compliance with Section 422 of the Code.

 

(u)                                 “Incentive Stock Option”  means an Option that qualifies as an “incentive stock option” within the meaning of Section 422 of the Code and the regulations promulgated thereunder.

 

(v)                                   “Nonstatutory Stock Option”  means an Option that does not qualify as an Incentive Stock Option.

 

(w)                                “Officer”  means any person designated by the Company as an officer.

 

(x)                                  “Option”  means an Incentive Stock Option or a Nonstatutory Stock Option to purchase shares of Common Stock granted pursuant to the Plan.

 

(y)                                  “Option Agreement”  means a written agreement between the Company and an Optionholder evidencing the terms and conditions of an Option grant.  Each Option Agreement shall be subject to the terms and conditions of the Plan.

 

(z)                                  “Optionholder”  means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option.

 

(aa)                            “Own,”  “Owned,”  “Owner,”  “Ownership”  A person or Entity shall be deemed to “Own,” to have “Owned,” to be the “Owner” of, or to have acquired “Ownership” of securities if such person or Entity, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power, which includes the power to vote or to direct the voting, with respect to such securities.

 

(bb)                            “Participant”  means a person to whom a Stock Award is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Stock Award.

 

(cc)                            “Plan”  means this Verastem, Inc. 2010 Equity Incentive Plan.

 

(dd)                            “Restricted Stock Award”  means an award of shares of Common Stock which is granted pursuant to the terms and conditions of Section 6(a).

 

(ee)                            “Restricted Stock Award Agreement”  means a written agreement between the Company and a holder of a Restricted Stock Award evidencing the terms and conditions of a Restricted Stock Award.  Each Restricted Stock Award Agreement shall be subject to the terms and conditions of the Plan.

 

(ff)                                “Restricted Stock Unit Award”  means a right to receive shares of Common Stock which is granted pursuant to the terms and conditions of Section 6(b).

 

(gg)                          “Restricted Stock Unit Award Agreement”  means a written agreement between the Company and a holder of a Restricted Stock Unit Award evidencing the terms and conditions

 

22

 

of a Restricted Stock Unit Award grant.  Each Restricted Stock Unit Award Agreement shall be subject to the terms and conditions of the Plan.

 

(hh)                          “Securities Act”  means the Securities Act of 1933, as amended.

 

(ii)                                “Stock Appreciation Right”  means a right to receive the appreciation on Common Stock that is granted pursuant to the terms and conditions of Section 6(c).

 

(jj)                                “Stock Appreciation Right Agreement”  means a written agreement between the Company and a holder of a Stock Appreciation Right evidencing the terms and conditions of a Stock Appreciation Right grant.  Each Stock Appreciation Right Agreement shall be subject to the terms and conditions of the Plan.

 

(kk)                        “Stock Award”  means any right to receive Common Stock granted under the Plan, including an Incentive Stock Option, a Nonstatutory Stock Option, a Restricted Stock Award, a Restricted Stock Unit Award, or a Stock Appreciation Right.

 

(ll)                                “Stock Award Agreement”  means a written agreement between the Company and a Participant evidencing the terms and conditions of a Stock Award grant.  Each Stock Award Agreement shall be subject to the terms and conditions of the Plan.

 

(mm)                    “Subsidiary”  means, with respect to the Company, (i) any corporation of which more than fifty percent (50%) of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, Owned by the Company, and (ii) any partnership, limited liability company or other entity in which the Company has a direct or indirect interest (whether in the form of voting or participation in profits or capital contribution) of more than fifty percent (50%) .

 

(nn)                          “Ten Percent Stockholder”  means a person who Owns (or is deemed to Own pursuant to Section 424(d) of the Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Affiliate.

 

23

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00195-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00195-of-00352.parquet"}]]