Document:

Exhibit 10.1

	
 
    

 

 

NEOS THERAPEUTICS, INC.

 

AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

	
 
    

 

 

June 9, 2015

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
1.
    	
Definitions
    	
1
    
	
 
    	
 
    	
 
    
	
2.
    	
Registration   Rights
    	
4
    
	
 
    	
 
    	
 
    
	
 
    	
2.1
    	
Demand   Registration
    	
4
    
	
 
    	
2.2
    	
Company   Registration
    	
5
    
	
 
    	
2.3
    	
Underwriting   Requirements
    	
6
    
	
 
    	
2.4
    	
Obligations   of the Company
    	
7
    
	
 
    	
2.5
    	
Furnish   Information
    	
8
    
	
 
    	
2.6
    	
Expenses   of Registration
    	
9
    
	
 
    	
2.7
    	
Delay   of Registration
    	
9
    
	
 
    	
2.8
    	
Indemnification
    	
9
    
	
 
    	
2.9
    	
Reports   Under Exchange Act
    	
11
    
	
 
    	
2.10
    	
Limitations   on Subsequent Registration Rights
    	
12
    
	
 
    	
2.11
    	
“Market   Stand off” Agreement
    	
12
    
	
 
    	
2.12
    	
Termination   of Registration Rights
    	
13
    
	
 
    	
2.13
    	
Restrictions   on Transfer
    	
13
    
	
 
    	
 
    	
 
    	
 
    
	
3.
    	
Information   and Observer Rights
    	
14
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
3.1
    	
Delivery   of Financial Statements
    	
14
    
	
 
    	
3.2
    	
Inspection
    	
16
    
	
 
    	
3.3
    	
Observer   Rights
    	
16
    
	
 
    	
3.4
    	
Termination   of Information and Observer Rights
    	
17
    
	
 
    	
3.5
    	
Confidentiality
    	
17
    
	
 
    	
 
    	
 
    	
 
    
	
4.
    	
Rights   to Future Stock Issuances
    	
17
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
4.1
    	
Right   of First Offer
    	
17
    
	
 
    	
4.2
    	
Termination
    	
19
    
	
 
    	
 
    	
 
    	
 
    
	
5.
    	
Additional   Covenants
    	
19
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
5.1
    	
Insurance
    	
19
    
	
 
    	
5.2
    	
Employee   Agreements
    	
19
    
	
 
    	
5.3
    	
Employee   Stock
    	
19
    
	
 
    	
5.4
    	
Board   Matters
    	
19
    
	
 
    	
5.5
    	
Successor   Indemnification
    	
20
    
	
 
    	
5.6
    	
Termination   of Covenants
    	
20
    
	
 
    	
 
    	
 
    	
 
    
	
6.
    	
Miscellaneous
    	
20
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
6.1
    	
Successors   and Assigns
    	
20
    
	
 
    	
6.2
    	
Governing   Law
    	
20
    
	
 
    	
6.3
    	
Counterparts;   Facsimile
    	
20
    
	
 
    	
6.4
    	
Titles   and Subtitles
    	
21
    
	
 
    	
6.5
    	
Notices
    	
21
    
	
 
    	
6.6
    	
Amendments,   Termination and Waivers
    	
21
    

 

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TABLE OF CONTENTS

(Continued)

 

	
 
    	
6.7
    	
Severability
    	
22
    
	
 
    	
6.8
    	
Aggregation   of Stock
    	
22
    
	
 
    	
6.9
    	
Additional   Investors
    	
22
    
	
 
    	
6.10
    	
Entire   Agreement
    	
23
    
	
 
    	
6.11
    	
Dispute   Resolution
    	
23
    
	
 
    	
6.12
    	
Delays   or Omissions
    	
23
    
	
 
    	
6.13
    	
Acknowledgment
    	
23
    
	
 
    	
6.14
    	
Construction
    	
23
    
	
 
    	
 
    	
 
    
	
Schedule A
    	
-
    	
Schedule   of Investors
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Exhibit A
    	
-
    	
Essex   Transfers
    	
 
    

 

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AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

THIS AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT (this “Agreement”) is made as of the 9th day of June 2015, by and among Neos Therapeutics, 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.”

 

RECITALS

 

WHEREAS, the Company and certain of the Investors entered into that certain Investors’ Rights Agreement, dated as of June 19, 2009 (the “Prior Agreement”);

 

WHEREAS, pursuant to that certain Omnibus Amendment Agreement dated as of May 27, 2011, by and among the Company and certain of the Investors, and that certain Omnibus Amendment Agreement dated as of July 16, 2012, by and among the Company and certain of the Investors, (together, the “Amendments”), the Company and the Investors amended the Prior Agreement; and

 

WHEREAS, the Company and the Investors desire to amend and restate the Prior Agreement to incorporate the Amendments;

 

NOW, THEREFORE, in consideration of the premises and the covenants, terms and conditions herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree that the Prior Agreement shall be amended and restated as follows:

 

1.                                      Definitions.  For purposes of this Agreement:

 

“Affiliate” means, with respect to any specified Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with such Person, including without limitation any general partner, managing member, officer or director of such Person or any venture capital fund now or hereafter existing that is controlled by one or more general partners or managing members of, or shares the same management company with, such Person.

 

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

 

“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.

 

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

 

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

 

“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 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 (iii) a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities that are also being registered.

 

“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.

 

“Form S-2” 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.

 

“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.

 

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

 

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

 

“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.

 

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

 

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

 

“Major Investor” means any Investor that, individually or together with such Investor’s Affiliates, holds at least 50,000 shares of Registrable Securities (as adjusted for any stock split, stock dividend, combination, or other recapitalization or reclassification effected after the date hereof); provided, however, that Greg Robitaille and Alan Heller shall each be deemed to be a Major Investor as such term is used herein for so long as, individually or together with his respective Affiliates, he holds any shares of Registrable Securities.

 

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“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.

 

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

 

“Preferred Stock” means, collectively, shares of the Company’s Series A Preferred Stock, Series B Preferred Stock, Series B-1 Preferred Stock and Series C Preferred Stock.

 

“Registrable Securities” means (i) the Common Stock issuable or issued upon conversion of the Series B Preferred Stock, Series B-l Preferred Stock or Series C Preferred Stock, (ii) any Common Stock, or any Common Stock issued or issuable (directly or indirectly) upon conversion and/or exercise of any other securities of the Company (other than Series A Preferred Stock), acquired by the Investors after June 19, 2009 and (iii) any Common Stock issued as (or issuable upon the conversion or exercise of any warrant, right, or other security that is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the shares referenced in clauses (i) and (ii) above; excluding in all cases, however, any Registrable Securities sold by a Person in a transaction in which the applicable rights under this Agreement are not assigned pursuant to Section 6.1, and excluding for purposes of Section 2 any shares for which registration rights have terminated pursuant to Section 2.12 of this Agreement.

 

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

 

“Restricted Securities” means the securities of the Company required to bear the legend set forth in Section 2.13(b) hereof.

 

“SEC” means the Securities and Exchange Commission.

 

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

 

“SEC Rule 144(k)” means Rule 144(k) promulgated by the SEC under the Securities Act.

 

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

 

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

 

“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.

 

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

 

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

 

“Series B-1 Preferred Stock” means shares of the Company’s Series B-1 Preferred Stock, par value $0.001 per share.

 

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

 

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

 

2.1                               Demand Registration.

 

(a)                                 Form S-1 Demand.  If at any time after the earlier of (i) March 31, 2017 or (ii) 180 days after the effective date of the registration statement for the IPO, the Company receives a request from Holders of a majority of the Registrable Securities then outstanding that the Company file a Form S-l registration statement with respect to at least 40% of the Registrable Securities then outstanding (or a lesser percent if the anticipated aggregate offering price, net of Selling Expenses, would exceed $10 million), then the Company shall (i) within 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 90 days after the date such request is given by the Initiating Holders, file a Form S-l 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 20 days of 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 20% 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 $3 million, then the Company shall (i) within 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 45 days after the date such request is given by the Initiating Holders, file a Form S-3 registration statement under the Securities Act covering all Registrable Securities requested to be included in such registration by any other Holders, as specified by notice given by each such Holder to the Company within 30 days of 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 Board of Directors it would be materially detrimental to the Company and its stockholders for

 

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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 60 days after the request of the Initiating Holders is given; provided, however, that the Company may not invoke this right more than twice in any 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 60-day period other than an Excluded Registration.

 

(d)                                 The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Section 2.1(a) (i) during the period that is 60 days before the Company’s good faith estimate of the date of filing of, and ending on a date that is 180 days after the effective date of, a Company-initiated registration; provided, however, 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 30 days before the Company’s good faith estimate of the date of filing of, and ending on a date that is 90 days after the effective date of, a Company-initiated registration, provided, however, 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 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, elect not to pay the registration expenses therefor, and 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 securities under the Securities Act in connection with the public offering of such securities solely for cash (other than in an Excluded Registration), the Company shall, at such time, promptly give each Holder notice of such registration.  Upon the request of each Holder given within 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

 

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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 managing underwriter(s) advise(s) the Initiating Holders in writing that marketing factors require a limitation on the number of shares to be underwritten, then the Initiating Holders shall so advise all Holders of Registrable Securities that otherwise would be underwritten pursuant hereto, and the number of Registrable Securities that may be included in the underwriting shall be allocated among such Holders of Registrable Securities, including the Initiating Holders, in proportion (as nearly as practicable) to the number of Registrable Securities owned by each Holder or in such other proportion as shall mutually be agreed to by all such selling Holders; provided, however, that the number of Registrable Securities held by the Holders to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting.  To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder to the nearest 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 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

 

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provisions, the Company or the underwriters may round the number of shares allocated to any Holder to the nearest 100 shares.  Notwithstanding the foregoing, in no event shall (i) the number of Registrable Securities included in the offering be reduced unless all other securities (other than securities to be sold by the Company) are first entirely excluded from the offering, or (ii) the number of Registrable Securities included in the offering be reduced below 25% of the total number of securities included in such offering, unless such offering is the IPO, in which case the selling Holders may be excluded further if the underwriters make the determination described above and no other stockholder’s securities are included in such offering.  For purposes of the provision in this Section 2.3(b) concerning apportionment, for any selling Holder that is a partnership, limited liability company, or corporation, the partners, members, retired partners, retired members, stockholders, and Affiliates of such Holder, or the estates and Immediate Family Members of any such partners, retired partners, members, and retired members and any trusts for the benefit of any of the foregoing Persons, shall be deemed to be a single “selling Holder,” and any pro rata reduction with respect to such selling Holder shall be based upon the aggregate number of Registrable Securities owned by all Persons included in such selling Holder, as defined in this sentence.

 

(c)                                  For purposes of Section 2.1, 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 50% of the total number of Registrable Securities that Holders have requested to be included in such registration statement are actually included.

 

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

 

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

 

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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, however, that the Company shall not be required to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act;

 

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

 

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

 

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

 

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

 

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

 

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

 

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.

 

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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 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.

 

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(b)                                 To the extent permitted by law, each selling Holder, severally and not jointly, will indemnify and hold harmless the Company, and each of its directors, each of its officers who has signed the registration statement, each Person (if any), who controls the Company within the meaning of the Securities Act, legal counsel and accountants for the Company, any underwriter (as defined in the Securities Act), any other Holder selling securities in such registration statement, and any controlling Person of any such underwriter or other Holder, against any Damages, in each case only to the extent that such Damages arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of such selling Holder expressly for use in connection with such registration; and each such selling Holder will pay to the Company and each other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that the indemnity agreement contained in this 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 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

 

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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:

 

(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

 

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(c)                                  furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) to the extent accurate, a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144 (at any time after 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 majority of the Registrable Securities then outstanding, enter into any agreement with any holder or prospective holder of any securities of the Company that would allow such holder or prospective holder to include such securities in any registration unless, under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of such securities will not reduce the number of the Registrable Securities of the Holders that are included; provided, however, 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 registration by the Company of shares of its Common Stock or any other equity securities under the Securities Act on a registration statement on Form S-l, Form S-2, or Form S-3, and ending on the date specified by the Company and the managing underwriter (such period not to exceed (i) 180 days in the case of the IPO, which period may be extended upon the request of the managing underwriter, to the extent required by any NASD rules, for an additional period of up to 15 days if the Company issues or proposes to issue an earnings or other public release within fifteen 15 days of the expiration of the 180-day lockup period, or (ii) 90 days in the case of any registration other than the IPO, which period may be extended upon the request of the managing underwriter, to the extent required by any NASD rules, for an additional period of up to 15 days if the Company issues or proposes to issue an earnings or other public release within 15 days of the expiration of the 90-day lockup period), (A) 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 (B) 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 (A) or (B) 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

 

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apply to the sale of any shares to an underwriter pursuant to an underwriting agreement, 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 5%) 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.

 

2.12                        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 fifth anniversary of the IPO.

 

2.13                        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 2.13(c)) be stamped or otherwise imprinted with a legend substantially in the following form:

 

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

 

THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO, AND IN CERTAIN CASES PROHIBITED BY, THE TERMS AND CONDITIONS OF CERTAIN AGREEMENTS BY AND AMONG THE STOCKHOLDER, THE CORPORATION AND CERTAIN OTHER HOLDERS OF STOCK OF THE CORPORATION.  COPIES OF SUCH AGREEMENTS

 

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MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE CORPORATION.

 

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 2.13.

 

(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.  The Company will not require such a legal opinion or “no action” letter (i) in any transaction in compliance with SEC Rule 144 or (ii) in any transaction in which such Holder distributes Restricted Securities to an Affiliate of such Holder for no consideration; provided, however, that each transferee agrees in writing to be subject to the terms of this Section 2.13.  Each certificate or instrument evidencing the Restricted Securities transferred as above provided shall bear, except if such transfer is made pursuant to SEC Rule 144, the appropriate restrictive legend set forth in Section 2.13(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.

 

3.                                      Information and Observer Rights.

 

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

 

(a)                                 as soon as practicable, but in any event within 105 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 (A) the actual amounts as of and for such fiscal year and (B) 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

 

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such financial statements audited and certified by independent public accountants of nationally recognized standing selected by the Company;

 

(b)                                 as soon as practicable, but in any event within 45 days after the end of each of the first three 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 might be required by 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 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 of the end of each month, an unaudited income statement and statement of cash flows for such month, and an unaudited balance sheet and statement of stockholders’ equity as of the end of such month, 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 might be required by GAAP);

 

(e)                                  as soon as practicable, but in any event 30 days before 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 monthly 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;

 

(f)                                   with respect to the financial statements called for in Section 3.1(a), Section 3.1(b) and Section 3.1(d), an instrument executed 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 Section 3.1(d)) and fairly present the financial condition of the Company and its results of operation for the periods specified therein; and

 

(g)                                  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 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

 

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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 to the contrary, the Company may cease providing the information set forth in this Section 3 during the period starting with the date 45 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, however, that the Company’s covenants under this Section 3 shall be reinstated at such time as the Company is no longer actively employing its commercially reasonable efforts to cause such registration statement to become effective.

 

3.2                               Inspection.  The Company shall permit each Major Investor (provided, however, that the Board of Directors has not reasonably determined that such Major Investor is a competitor of the Company), at such Major Investor’s expense, to 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 (but in no event more than once during any 12-month period); 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.

 

3.3                               Observer Rights.  As long as any Investor owns, together with its Affiliates, not less than 600,000 shares (as adjusted for any stock combination, stock split, stock dividend, recapitalization or other similar transaction) of Series B Preferred Stock, Series B-l Preferred Stock and/or Series C Preferred Stock (or an equivalent amount of Common Stock issued upon conversion thereof), upon request by such Investor, the Company shall invite a representative of such Investor to attend all meetings of its Board of Directors in a nonvoting observer capacity and, in this respect, shall give such representative copies of all notices, minutes, consents, and other materials that it provides to its directors at the same time and in the same manner as provided to such directors; provided, however, that such representative shall agree (in a non-disclosure or confidentiality or such other agreement as the Company shall deem reasonable) to hold in confidence and trust and to act in a fiduciary manner with respect to all information so provided; and provided, further, that the Company reserves the right to withhold any information and to exclude such representative from any meeting or portion thereof if access to such information or attendance at such meeting could adversely affect the attorney-client privilege between the Company and its counsel or result in disclosure of trade secrets or a conflict of interest, or if such Investor or its representative is a competitor of the Company.

 

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3.4                               Termination of Information and Observer Rights.  The covenants set forth in Section 3, Section 3.2 and Section 3.3 shall terminate and be of no further force or effect (i) immediately before the consummation of the IPO, or (ii) when the Company first becomes subject to the periodic reporting requirements of Section 12(g) or 15(d) of the Exchange Act, whichever event occurs first.

 

3.5                               Confidentiality.  Each Investor agrees that such Investor will keep confidential and will not disclose, divulge, or use for any purpose (other than to monitor its investment in the Company) any confidential information obtained from the Company pursuant to the terms of this Agreement (including notice of the Company’s intention to file a registration statement), unless such confidential information (i) is known or becomes known to the public in general (other than as a result of a breach of this Section 3.5 by such Investor), (ii) is or has been independently developed or conceived by the Investor without use of the Company’s confidential information, or (iii) 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 (A) 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; (B) 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 3.5; (C) to any existing or prospective Affiliate, partner, member, stockholder, or wholly owned subsidiary of such Investor in the ordinary course of business, provided, however, that such Investor informs such Person that such information is confidential and directs such Person to maintain the confidentiality of such information; or (D) as may otherwise be required by law, provided, however, that the Investor promptly notifies the Company of such disclosure and takes reasonable steps to minimize the extent of any such required disclosure.  Notwithstanding the foregoing, each Investor agrees that such Investor will not disclose or divulge any such confidential information to a competitor of the Company.

 

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.  An Investor 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 Investor, stating (i) its bona fide intention to offer such New Securities, (ii) the number of such New Securities to be offered, and (iii) the price and terms, if any, upon which it proposes to offer such New Securities.

 

(b)                                 By notification to the Company within 10 business days after the Offer Notice is given, each Investor may elect to purchase or otherwise acquire, at the price and on the terms specified in the Offer Notice, up to that portion of such New Securities that equals the proportion that the Common Stock issued and held, or issuable (directly or indirectly) upon conversion and/or exercise, as applicable, of the Series B Preferred Stock, Series B-l Preferred Stock, Series C Preferred Stock and any other Derivative Securities then held, by such Investor

 

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bears to the total Common Stock of the Company then outstanding (assuming full conversion and/or exercise, as applicable, of all Series B Preferred Stock, Series B-l Preferred Stock, Series C Preferred Stock and other Derivative Securities); provided, however, that in the event that such issuance of New Securities would result in a downward adjustment of the Series B Conversion Price, the Series B-l Conversion Price or the Series C Conversion Price pursuant to Section 4.4.4 of the Company’s Third Amended and Restated Certificate of Incorporation, in addition to the foregoing, any Investor that, individually or together with such Investor’s Affiliates, holds at least 10% of the then outstanding shares of Series A Preferred Stock 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 that equals the proportion that the Common Stock issued and held, or issuable (directly or indirectly) upon conversion of the Series A Preferred Stock then held, by such Investor bears to the total Common Stock of the Company then outstanding (assuming full conversion and/or exercise, as applicable, of all Series B Preferred Stock, Series B-l Preferred Stock, Series C Preferred Stock, Series A Preferred Stock and Derivative Securities). At the expiration of such 10 business day period, the Company shall promptly notify each Investor that elects to purchase or acquire all the shares available to it (each, a “Fully Exercising Investor”) of any other Investor’s failure to do likewise.  During the 5 business 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 Investors were entitled to subscribe but that were not subscribed for by the Investors, which is equal to the proportion that the Common Stock issued and held, or issuable (directly or indirectly) upon conversion and/or exercise, as applicable, of Series B Preferred Stock, Series B-l Preferred Stock, Series C Preferred Stock, Series A Preferred Stock and any Derivative Securities then held, by such Fully Exercising Investor bears to the Common Stock issued and held, or issuable (directly or indirectly) upon conversion and/or exercise, as applicable, of the Series B Preferred Stock, Series B-l Preferred Stock, Series C Preferred Stock, Series A Preferred Stock and any 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 105 days of 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 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 30 days of the execution thereof, the right provided hereunder shall be deemed to be revived and such New Securities shall not be offered unless first reoffered to the Major Investors in accordance with this 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); (ii) shares of Common Stock issued in the IPO; (iii) the issuance of shares of Series B Preferred Stock in a subsequent closing pursuant to Section 1.3 of the Purchase Agreement; (iv) the issuance of

 

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shares of Series B-l Preferred Stock in a subsequent closing pursuant to Section 4.2 of those certain Subscription Agreements related to the offer and sale of shares of Series B-l Preferred Stock, by and between the Company and the purchasers party thereto; (v) the issuance of shares of Series C Preferred Stock in a subsequent closing pursuant to Section 3.2 of those certain Subscription Agreements related to the offer and sale of shares of Series C Preferred Stock, by and between the Company and the purchasers party thereto; and (vi) shares of Common Stock, Options or Convertible Securities (each as defined in the Company’s Certificate of Incorporation) issued pursuant to a bona fide business acquisition of or by the Company (whether by merger, consolidation, sale of assets, sale or exchange of stock or otherwise), provided such issuance is approved by the Board of Directors.

 

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 the IPO, or (ii) when the Company first becomes subject to the periodic reporting requirements of Section 12(g) or 15(d) of the Exchange Act, whichever event occurs first.

 

5.                                      Additional Covenants.

 

5.1                               Insurance.  The Company shall use its commercially reasonable efforts to obtain, within 90 days of the date hereof, 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, and will use commercially reasonable efforts to cause such insurance policy to be maintained until such time as the Board of Directors determines that such insurance should be discontinued.

 

5.2                               Employee Agreements.  The Company will cause each person 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 nondisclosure and proprietary rights assignment agreement.

 

5.3                               Employee Stock.  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 year period, with the first 25% of such shares vesting following 12 months of continued employment or service, and the remaining shares vesting in equal monthly installments over the following 36 months, 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 IPO and shall have the right to repurchase unvested shares at cost upon termination of employment of a holder of restricted stock.

 

5.4                               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.

 

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5.5                               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, its Certificate of Incorporation, or elsewhere, as the case may be.

 

5.6                               Termination of Covenants.  The covenants set forth in this Section 5, except for Section 5.5, shall terminate and be of no further force or effect immediately before the consummation of the IPO.

 

6.                                      Miscellaneous.

 

6.1                               Successors and Assigns.  The rights under this Agreement may be assigned (but only with all related obligations) by a Holder to a transferee of Registrable Securities that (i) is an Affiliate of a Holder; (ii) is a Holder’s Immediate Family Member or trust for the benefit of an individual Holder or one or more of such Holder’s Immediate Family Members; (iii) is a Holder at the time of such transfer or (iv) after such transfer, holds at least 1,000 shares of Registrable Securities (subject to appropriate adjustment for stock splits, stock dividends, combinations, and other recapitalizations); provided, however, that (A) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee and the Registrable Securities with respect to which such rights are being transferred; and (B) 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.  For the purposes of determining the number of shares of Registrable Securities held by a transferee, the holdings of a transferee (1) that is an Affiliate or stockholder of a Holder; (2) who is a Holder’s Immediate Family Member; or (3) that is a trust for the benefit of an individual Holder or such Holder’s Immediate Family Member shall be aggregated together and with those of the transferring Holder; provided, further that all transferees who would not qualify individually for assignment of rights shall have a single attorney-in-fact for the purpose of exercising any rights, receiving notices, or taking any action under this Agreement.  The terms and conditions of this Agreement inure to the benefit of and are binding upon the respective successors and permitted assignees of the parties.  Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and permitted assignees any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided herein.

 

6.2                               Governing Law.  This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of law.

 

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

 

20

 

or .pdf 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 days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (iv) one business day after the business day of deposit with a nationally recognized overnight courier, freight prepaid, specifying next-day delivery, with written verification of receipt.  All communications shall be sent to the respective parties as follows (or as subsequently modified by written notice given in accordance with this Section 6.5):

 

	
If   to the Company:
    	
Neos   Therapeutics, Inc.
    
	
 
    	
2940   N. HWY 360
    
	
 
    	
Suite 100
    
	
 
    	
Grand   Prairie, Texas 75050
    
	
 
    	
Attention:   Vipin Garg
    
	
 
    	
(972)   408-1143 (fax)
    
	
 
    	
 
    
	
With   a copy to:
    	
Joseph   C. Theis, Jr.
    
	
 
    	
Goodwin   Procter LLP
    
	
 
    	
Exchange   Place
    
	
 
    	
53   State Street
    
	
 
    	
Boston,   MA 02109
    
	
 
    	
(617)   801-8864 (fax)
    

 

If to the Investors, to their addresses set forth on Schedule A hereto.

 

6.6                               Amendments, Termination and Waivers.  This Agreement may be amended or terminated and the observance of any term hereof may be waived (either generally or in a particular instance and either retroactively or prospectively) only by a written instrument executed by (i) the Company and (ii) the holders of a majority of the then outstanding shares of Series B Preferred Stock, Series B-l Preferred Stock and Series C Preferred Stock, acting together as a single class held by the Investors.  Notwithstanding the foregoing:

 

(a)                                 this Agreement may not be amended or terminated and the observance of any term hereof may not be waived with respect to any Investor without the written consent of such Investor unless such amendment, termination or waiver applies to all Investors in the same fashion (it being agreed that a waiver of the provisions of Section 4 with respect to a particular transaction shall be deemed to apply to all Investors in the same fashion if

 

21

 

such waiver does so by its terms, notwithstanding the fact that certain Investors may nonetheless, by agreement with the Company, purchase securities in such transaction);

 

(b)                                 the provisions of Section 4.1(b) applicable to holders of shares of Series A Preferred Stock may not be amended or terminated and the observance of any term thereof may not be waived without consent of the holders of a majority of the shares of Series A Preferred Stock then held by the Investors;

 

(c)                                  the definition of “Major Investor” in Section 1 may not be amended without the consent of each Investor who was a Major Investor prior to such amendment;

 

(d)                                 Schedule A hereto may be amended by the Company from time to time to add information regarding additional Investors pursuant to Section 6.9 hereof, without the consent of the other parties hereto;

 

(e)                                  any provision hereof may be waived by the waiving party on such party’s own behalf, without the consent of any other party; and

 

(f)                                   the Company may in its sole discretion waive compliance with Section 2.13(c) (and the Company’s failure to object promptly in writing after notification of a proposed assignment allegedly in violation of Section 2.13(c) shall be deemed to be a waiver)

 

The Company shall give prompt written notice of any amendment, termination or waiver hereunder to any party that did not consent in writing thereto.  Any amendment, termination or waiver effected in accordance with this Section 6.6 shall be binding on each party and all of such party’s successors and permitted assigns, whether or not any such party, successor or assignee entered into or approved such amendment, termination or waiver.

 

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 the Company’s Series B Preferred Stock, Series B-l Preferred Stock or Series C Preferred Stock after the date hereof, any purchaser of such shares of Series B Preferred Stock, Series B-l Preferred Stock or Series C 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

 

22

 

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 Schedule A hereto) constitutes the full and entire understanding and agreement among the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties is expressly canceled.

 

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

 

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

 

6.13                        Acknowledgment.  The Company acknowledges that the Investors are in the business of venture capital investing and therefore review the business plans and related proprietary information of many enterprises, including enterprises which may have products or services which compete directly or indirectly with those of the Company.  Nothing in this Agreement shall preclude or in any way restrict the Investors from investing or participating in any particular enterprise whether or not such enterprise has products or services which compete with those of the Company.

 

6.14                        Construction.  This Agreement has been freely and fairly negotiated among the parties.  If an ambiguity or question of intent or interpretation arises, this Agreement will be construed as if drafted jointly by the parties and no presumption or burden of proof will arise favoring or disfavoring any party because of the authorship of any provision of this Agreement.  Any reference to any law will be deemed also to refer to such law as amended and all rules and regulations promulgated thereunder, unless the context requires otherwise.  The words “include,” “includes,” and “including” will be deemed to be followed by “without limitation.” Pronouns in masculine, feminine, and neuter genders will be construed to include any other gender, and words in the singular form will be construed to include the plural and vice

 

23

 

versa, unless the context otherwise requires.  The words “this Agreement,” “herein,” “hereof,” “hereby,” “hereunder,” and words of similar import refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited.

 

[Remainder of Page Intentionally Left Blank]

 

24

 

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

 

	
 
    	
NEOS   THERAPEUTICS, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Vipin Garg
    
	
 
    	
 
    	
Vipin   Garg
    
	
 
    	
 
    	
President   and Chief Executive Officer
    

 

Signature Page to Amended and Restated Investors’ Rights Agreement

 

 

	
 
    	
INVESTOR:
    
	
 
    	
 
    
	
 
    	
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Name   of Entity:
    	
Burrill Life Sciences   Capital Fund III
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Caley Castelein
    
	
 
    	
Print   Name:
    	
Caley Castelein
    
	
 
    	
Title:
    	
Managing Member of   General Partner
    
					

 

Signature Page to Amended and Restated Investors’ Rights Agreement

 

 

	
 
    	
INVESTOR:
    
	
 
    	
 
    
	
 
    	
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Name   of Entity:
    	
DRD Family Partnership,   LP
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Rod Dammeyer
    
	
 
    	
Print   Name:
    	
Rod Dammeyer
    
	
 
    	
Title:
    	
General Partner
    
					

 

Signature Page to Amended and Restated Investors’ Rights Agreement

 

 

	
 
    	
INVESTOR:
    
	
 
    	
 
    
	
 
    	
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Name   of Entity:
    	
CAC, LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Rod Dammeyer
    
	
 
    	
Print   Name:
    	
Rod Dammeyer
    
	
 
    	
Title:
    	
Managing Member
    
					

 

Signature Page to Amended and Restated Investors’ Rights Agreement

 

 

	
 
    	
INVESTOR:
    
	
 
    	
 
    
	
 
    	
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Name   of Entity:
    	
Delaware Street Capital   Master Fund, L.P.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Andrew G. Bluhm
    
	
 
    	
Print   Name:
    	
Andrew G. Bluhm
    
	
 
    	
Title:
    	
Director
    
					

 

Signature Page to Amended and Restated Investors’ Rights Agreement

 

 

	
 
    	
INVESTOR:
    
	
 
    	
 
    
	
 
    	
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Name   of Entity:
    	
ESSEX Capital   Corporation
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Ralph Iannelli
    
	
 
    	
Print   Name:
    	
Ralph Iannelli
    
	
 
    	
Title:
    	
President
    
					

 

Signature Page to Amended and Restated Investors’ Rights Agreement

 

 

	
 
    	
INVESTOR:
    
	
 
    	
 
    
	
 
    	
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Name   of Entity:
    	
SIU Capital LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Ralph Iannelli
    
	
 
    	
Print   Name:
    	
Ralph Iannelli
    
	
 
    	
Title:
    	
Managing Member
    
					

 

Signature Page to Amended and Restated Investors’ Rights Agreement

 

 

	
 
    	
INVESTOR:
    
	
 
    	
 
    
	
 
    	
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Name   of Entity:
    	
KF Investment
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Ralph Iannelli
    
	
 
    	
Print   Name:
    	
Ralph Iannelli
    
	
 
    	
Title:
    	
General Partner
    
					

 

Signature Page to Amended and Restated Investors’ Rights Agreement

 

 

	
 
    	
INVESTOR:
    
	
 
    	
 
    
	
 
    	
[Signature   block for individuals]
    
	
 
    	
 
    
	
 
    	
/s/ Alan Heller
    
	
 
    	
Print   Name:
    	
Alan Heller
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
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Title:
    	
 
    
					

 

Signature Page to Amended and Restated Investors’ Rights Agreement

 

 

	
 
    	
INVESTOR:
    
	
 
    	
 
    
	
 
    	
[Signature   block for individuals]
    
	
 
    	
 
    
	
 
    	
/s/ Dorothy J.   Engelking    06.08.15
    
	
 
    	
Print   Name:
    	
Dorothy J. Engelking
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
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Title:
    	
 
    
					

 

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INVESTOR:
    
	
 
    	
 
    
	
 
    	
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Name   of Entity:
    	
Legacy Capital Partners
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ John Q. Adams Jr
    
	
 
    	
Print   Name:
    	
John Q. Adams Jr
    
	
 
    	
Title:
    	
Managing Partner
    
					

 

 

	
 
    	
INVESTOR:
    
	
 
    	
 
    
	
 
    	
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Name   of Entity:
    	
Legacy N. Capital   Partners
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 /s/ John Q. Adams Jr
    
	
 
    	
Print   Name:
    	
John Q. Adams Jr
    
	
 
    	
Title:
    	
Managing Partner
    
					

 

 

	
 
    	
INVESTOR:
    
	
 
    	
 
    
	
 
    	
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Name   of Entity:
    	
Millenium Trust Co, LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ John Q. Adams Jr
    
	
 
    	
Print   Name:
    	
John Q. Adams Jr
    
	
 
    	
Title:
    	
Managing Partner
    
					

 

 

	
 
    	
INVESTOR:
    
	
 
    	
 
    
	
 
    	
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Presidio Partners 2007, L.P.
    
	
 
    	
 
    
	
 
    	
By:
    	
Presidio   Partners 2007 GP, L.P.,
    
	
 
    	
 
    	
Its   General Partner
    
	
 
    	
By:
    	
Presidio   Partners 2007 GP, LLC,
    
	
 
    	
 
    	
Its   General Partner
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ David Collier
    
	
 
    	
Print Name:
    	
David Collier
    
	
 
    	
Title:
    	
Manager
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Presidio Partners 2007 (Parallel), L.P.
    
	
 
    	
 
    
	
 
    	
By:
    	
Presidio   Partners 2007 GP, L.P.,
    
	
 
    	
 
    	
Its   General Partner
    
	
 
    	
By:
    	
Presidio   Partners 2007 GP, LLC,
    
	
 
    	
 
    	
Its   General Partner
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ David Collier
    
	
 
    	
Print   Name:
    	
David Collier
    
	
 
    	
Title:
    	
Manager
    
				

 

Signature Page to Amended and Restated Investors’ Rights Agreement

 

 

	
 
    	
INVESTOR:
    
	
 
    	
 
    
	
 
    	
[Signature   block for individuals]
    
	
 
    	
 
    
	
 
    	
/s/ Greg Robitaille
    
	
 
    	
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Greg Robitaille
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
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Title:
    	
 
    
					

 

Signature Page to Amended and Restated Investors’ Rights Agreement

 

 

SCHEDULE A

 

Investors

 

Burrill Life Sciences Capital Fund III, L.P.
 One Embarcadero Center
 Suite 2700
 ATTN:  Helena Sen
 San Francisco, CA 94111

 

Presidio Partners 2007, L.P.
 L.P. One Letterman Drive
 Building C, Suite CM500
 San Francisco, CA 94129
 ATTN:  Peter Gajdos

 

Presidio Partners (Parallel), L.P.
 One Letterman Drive
 Building C, Suite CM500
 San Francisco, CA 94129
 ATTN:  Peter Gajdo

 

Greg Robitaille

Alan Heller

CAC, LLC
 676 N. Michigan Ave
 Suite 2800
 Chicago, IL 60611
 Attn:  Tom Dammeyer

 

DRD Family Partnership, L.P.
 676 N. Michigan Ave
 Suite 2800 
 Chicago, IL 60611
 Attn:  Tom Dammeyer

 

Delaware Street Capital Master Fund LP
 900 N. Michigan Avenue
 Suite 1900
 Chicago, IL 60611

 

Schedule A-1

 

John H. Perry, III Revocable
 Trust dtd. 1/6/89
 John H. Perry, III, Trustee

Knighthead GRAT I
 15 Central Park West
 #4-D
 New York, NY 10023

 

Armorcast Products Company
 Paul Boghossian, President
 13230 Saticoy Street
 N. Hollywood, CA 91605

 

Gloria Coolidge
 c/o Salem Partners Wealth Management

The Berti Prough Trust
 Stephen Prough, Trustee
 c/o Salem Partners Wealth Management

Stephen K. Bone & Patricia I. Bone Trust
 c/o Salem Partners Wealth Management

Schedule A-2

 

Richard E. Kovacs Inter-Vivos Trust dated April 8, 1997
 c/o Rick Kovacs

David Heller
 Cloud Gate Capital LLC

 

Subhash Desai
 c/o Delaware Street Capital

Fazio Family Trust dated 12/19/99

Madsen Family Partners, LTD

Legacy/N Capital Partners
 c/o Salem Partners Wealth Management
 1111 Santa Monica Blvd.
 Suite 1070
 Los Angeles, CA 90025
 Attn:  John Q. Adams, Jr.

 

Millennium Trust Company, LLC, Custodian FBO John Q. Adams Jr. IRA
 c/o Millennium Trust Company, LLC
 820 Jorie Boulevard
 Suite 420
 Oak Brook, IL 60523-5122

 

Schedule A-3

 

AMS Capital LLC
 c/o Apothecary Capital LLC
 272 East Deerpath Road
 Suite 212
 Lake Forest, IL 60045
 Attn:  Alan M. Sebulsky

 

Ara Cohen Family LLC

Thomas A. Wagner, III

Dyett Family Trust
 c/o Salem Partners Wealth Management

SIU Capital LLC
 Attn:  Ralph Iannelli
 1486 East Valley Road
 Santa Barbara, CA 93108

 

Ed Milmeister

Darin Milmeister

Michael Rinzler

Schedule A-4

 

Paul Seeman

Essex Capital Corporation
 1486 East Valley Road
 Santa Barbara, CA 93108
 Attn:  Ralph Iannelli

 

Edwin G. Hiebert

Lary Snodgrass Family Ltd.

Snodgrass Children’s Ltd.

Shannon Knuckley Reilly

A. Paul Knuckley

Kevin Knuckley

Legacy Capital Partners, LLC
 2535 East Southlake Blvd.
 Suite 200
 Southlake, Texas 76092
 Attn:  John Q. Adams, Jr.

 

Lisa Perry

Schedule A-5

 

Ara D. Cohen
 c/o Knighthead Capital

Heiji Choy Black Trust Dated September 25, 2007

Jack W. Schuler

Jason M. Apple

Peter Jepsen

John Patience Trust Dated July 23, 1993

Ernest Mario

Edward Greenspan

Peter Richards

Schedule A-6

 

Victor Miller

Greg McElroy

Millennium Trust Company,
 LLC, Custodian FBO Greg
 McElroy IRA
 2423 East Lincoln Dr.
 Phoenix, AZ 85016

 

Ellen R. Hoffing

William A. Bermont II Trust Dated 7/28/86

PSKS Investments, LP
 6201 Forest River Drive
 Fort Worth, Texas 76112 

 

KF Investments, LP
 c/o Ralph Iannelli
 1486 East Valley Road
 Santa Barbara, CA 93108

 

Bryan Hill

James Cramer

Russ McMahen

Schedule A-7

 

Margaret Cabano

John Clark

Arlen Ewart

Christine Cherepy

Gregory T. Grochoski

Gregory T. Grochoski and Pamela A. Grochoski

Jamie Greenwald

William & Claudia LaWarre

Dorothy Engelking

Mark Tengler

JS Grandchildren 2010 Continuation Trust

Therese Heidi Schuler Trust

28161 N. Keith Drive
 Lake Forest, IL 60045

 

Schedule A-8

 

Tanya Eve Schuler Trust

28161 N. Keith Drive
 Lake Forest, IL 60045 

 

Tino Hans Schuler Trust

28161 N. Keith Drive
 Lake Forest, IL 60045

 

Schuler Grandchildren LLC

28161 N. Keith Drive
 Lake Forest, IL 60045

 

Patience Enterprises, L.P.
 77 East Walton Street, #28c
 Chicago, IL 60611

 

Vipin K. Garg

Hercules Technology III, L.P.
 400 Hamilton Ave., #310
 Palo Alto, CA 94301

 

Michael Quinn

 

Jesup & Lamont Securities Corp.

 

Bill Corbett

 

Schedule A-9Exhibit 10.2

 

NEOS THERAPEUTICS, INC. 2009 EQUITY PLAN

 

1.                                      GENERAL PURPOSE OF THE PLAN

 

Neos Therapeutics, Inc. (the “Company”) adopted the Neos Therapeutic, Inc. 2009 Equity Plan to encourage and enable officers, employees, non-employee directors and consultants and independent contractors of the Company and its Subsidiaries, upon whose judgment, initiative and efforts the Company largely depends for the successful conduct of its business, to acquire a proprietary interest in the Company.  It is anticipated that providing such persons with a direct stake in the Company’s welfare will assure a closer identification of their interests with those of the Company, thereby stimulating their efforts on the Company’s behalf and strengthening their desire to remain with the Company.

 

2.                                      DEFINITIONS

 

For purposes of this Plan, the following terms shall be defined as set forth below:

 

“Award” means any Incentive Stock Option, Non-Qualified Stock Option, Restricted Stock Award, Unrestricted Stock Award or any combination of the foregoing.

 

“Award Agreement” means a written or electronic agreement setting forth the terms, conditions and limitations applicable to an Award. 

 

“Board” means the Board of Directors of the Company.

 

“Cause” means one or more of the following:  (i) a failure by a Participant to render services to the Company in accordance with his or her assigned duties and responsibilities, and such failure of performance continues for a period of more than 15 days after notice thereof has been provided to the Participant by the Company (other than any such failure resulting from disability); (ii) any action or omission by a Participant involving willful misconduct or gross negligence relating to his or her duties to the Company or a Subsidiary, including fraud, disloyalty, dishonesty or breach of fiduciary duty; (iii) a Participant’s commission, as determined by the Committee, in its sole discretion, of or indictment for a crime, either in connection with the performance of his or her obligations to the Company or which otherwise shall adversely affect his or her ability to perform such obligations, or which shall materially adversely affect the business activities, reputation, goodwill or image of the Company or its Subsidiaries; or (iv) a Participant’s breach of any material obligations he or she has under any other agreement with the Company or which have been delegated to him or her or, in the event the Company deems such breach of material obligations capable of cure, a Participant’s failure to cure such breach within 5 days from receipt of notice from the Company.

 

“Code” means the Internal Revenue Code of 1986, as amended, and the rules and regulations thereunder.

 

“Committee” means a committee of the Board designated by the Board to administer the Plan pursuant to Section 3.

 

 

“Company” means Neos Therapeutics, Inc., a Delaware corporation, and any successor entity thereto. 

 

“Effective Date” means the date on which the Plan is approved by stockholders of the Company as set forth in Section 15.  

 

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

 

“Fair Market Value” of the Stock on any given date means (i) if shares are listed on a national securities exchange, the closing sales price per share of the Stock on the consolidated transaction reporting system for the principal national securities exchange on which shares of Stock are listed on that date, or, if there shall have been no such sale so reported on that date, on the date immediately preceding the date on which such a sale was so reported, (ii) if the Stock is not so listed, the average of the closing bid and asked price on that date, or, if there are no quotations available for such date, on the date immediately preceding the date on which such quotations are available, as reported by an inter-dealer quotation system, (iii) if shares of the Stock are not publicly traded, the most recent value determined by an independent appraiser appointed by the Company for such purpose, or (iv) if none of the above are applicable, the fair market value of a share of the Stock as determined in good faith by the Committee. 

 

“Holder” means, with respect to an Award or any Issued Shares, the Participant or Permitted Transferee granted or holding such Award or Issued Shares.

 

“Incentive Stock Option” means any Option designated and qualified as an “incentive stock option” as defined in section 422 of the Code. 

 

“Initial Public Offering” means a transaction which results in (i) sales of Shares being made to the public, in compliance with applicable securities laws, pursuant to an underwritten public offering of the Shares led by one or more underwriters, at least one of whom is an underwriter of recognized standing in the United States or (ii) a reverse merger or similar transaction involving a corporation listed on a national exchange or on a quotation or trade reporting system. 

 

“Issued Shares” means, collectively, all outstanding Shares issued pursuant to Restricted Stock Awards and Unrestricted Stock Awards and all Option Shares.

 

“ Non-Qualified Stock Option” means any Option that is not an Incentive Stock Option. 

 

“Option” means an option to purchase shares of Stock granted pursuant to Section 7. 

 

“Option Shares” means outstanding shares of Stock that were issued to a Holder upon the exercise of an Option.

 

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“Participant” means an officer, employee, non-employee director, consultant or independent contractor of the Company or its Subsidiary to whom an Award has been granted under the Plan. 

 

“Permitted Transferee” means any of the Holder’s spouse, children (natural or adopted), stepchildren, brothers, sisters, nephews, nieces, grandchildren or a trust for their sole benefit of which the Holder is the settlor or upon the death of the Holder, such deceased Holder’s estate, executions, administrations, personal representations, heirs, legatees and distributees, as the case, to whom Issued Shares may be transferred by the Holder in accordance with Section 10(a)(ii)(A). 

 

“Plan” means the Neos Therapeutic, Inc. 2009 Equity Plan set forth herein, as may be amended from time to time.  

 

“Repurchase Event” means (i) a Termination Event or (ii) the consummation of a Sale Event. 

 

“Restricted Stock” means a Share granted pursuant Section 8 that is subject to certain restrictions and to a risk of forfeiture. 

 

“Restricted Stock Award” means an Award of Restricted Stock. 

 

“Sale Event” means the consummation of (i) the dissolution or liquidation of the Company, (ii) the sale of all or substantially all of the assets of the Company on a consolidated basis to an unrelated person or entity, (iii) a merger, reorganization or consolidation in which the outstanding shares of Stock are converted into or exchanged for securities of the successor entity and the holders of the Company’s outstanding voting power immediately prior to such transaction do not own at least a majority of the outstanding voting power of the successor entity immediately upon completion of such transaction, (iv) the sale of all or a majority of the Stock of the Company to an unrelated person or entity, or (v) any other transaction in which the holders of the Company’s outstanding voting power immediately prior to such transaction do not own at least a majority of the outstanding voting power of the Company or a successor entity immediately upon completion of the transaction.

 

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

 

“Shares” means shares of Stock. 

 

“Stock” means the common stock, par value $.001 per share, of the Company, subject to adjustments pursuant to Section 4. 

 

“Stockholders Agreement” has the meaning provided in Section 4(d).

 

“Subsidiary” means (i) in the case of a corporation, any corporation of which the Company directly or indirectly owns shares representing 50% or more of the combined voting power of the shares of all classes or series of capital stock of such corporation

 

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which have the right to vote generally on matters submitted to a vote of the stockholders of such corporation and (ii) in the case of a partnership or other business entity not organized as a corporation, any such business entity of which the Company directly or indirectly owns 50% or more of the voting, capital or profits interests (whether in the form of partnership interests, membership interests or otherwise). 

 

“Termination Event” means, for purposes of the Plan, the termination of the Participant’s employment or service relationship with the Company and its Subsidiaries (other than due to a direct transfer to the employment or service of the Company from a Subsidiary or from the Company to a Subsidiary, or from one Subsidiary to another Subsidiary) for any reason whatsoever, regardless of the circumstances thereof, including, without limitation, upon death, disability, retirement, discharge or resignation for any reason, whether voluntarily or involuntarily. 

 

“Unrestricted Stock” means a Share granted pursuant to Section 9 that is not Restricted Stock. 

 

“Unrestricted Stock Award” means an Award of Unrestricted Stock.

 

3.                                      PLAN ADMINISTRATION

 

(a)                                 Administration of Plan.  The Plan shall be administered by the Board, or at the discretion of the Board, by the Committee.  The Committee shall serve at the discretion of the Board and the Board shall have the power to remove members from or add members to the Committee. Any individual serving as a Committee member shall have the right to resign from the Committee by providing at least 3 days’ written notice to the Board.  The Board, and not the remaining members of the Committee, shall have the power and authority to fill vacancies on the Committee, however caused.

 

(b)                                 Powers of Committee.  The Committee shall have the power and authority to grant Awards consistent with the terms of the Plan, including, but not limited to, the power and authority:

 

(i)                                     to select the Participants to whom Awards may from time to time be granted;

 

(ii)                                  to determine the time or times of grant, and the extent, if any, of Incentive Stock Options, Non-Qualified Stock Options, Restricted Stock Awards, Unrestricted Stock Awards or any combination of the foregoing, granted to any one or more grantees;

 

(iii)                               to determine the number of shares of Stock to be covered by any Award;

 

(iv)                              to determine and modify from time to time the terms and conditions, including restrictions, not inconsistent with the terms of the Plan, of any Award, which terms and conditions may differ among individual Awards and Participants, and to approve the form of Award Agreements;

 

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(v)                                 to accelerate at any time the exercisability or vesting of all or any portion of any Award;

 

(vi)                              to impose any limitations on Awards granted under the Plan, including limitations on transfers, repurchase provisions and the like and to exercise repurchase rights or obligations; 

 

(vii)                           subject to any restrictions applicable to Incentive Stock Options, to extend at any time the period in which Options may be exercised, but in no event more than 10 years from the original grant date (or such shorter period as may be required to avoid the applicable of section 409A of the Code); and 

 

(viii)                        at any time to adopt, alter and repeal such rules, guidelines and practices for administration of the Plan and for its own acts and proceedings as it shall deem advisable; to interpret the terms and provisions of the Plan and any Award (including related written instruments); to make all determinations it deems advisable for the administration of the Plan; to decide all disputes arising in connection with the Plan; and to otherwise supervise the administration of the Plan. 

 

All decisions and interpretations of the Committee shall be binding on all persons, including the Company and the Participants.

 

(c)                                  Indemnification.  Neither the Board nor the Committee, nor any member of either or any delegatee thereof, shall be liable for any act, omission, interpretation, construction or determination made in good faith in connection with the Plan, and the members of the Board and the Committee (and any delegatee thereof) shall be entitled in all cases to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including, without limitation, reasonable attorneys’ fees) arising or resulting therefrom to the fullest extent permitted by law and/or under any directors’ and officers’ liability insurance coverage which may be in effect from time to time.

 

4.                                      STOCK ISSUABLE UNDER THE PLAN; CHANGES IN STOCK; SUBSTITUTION

 

(a)                                 Stock Issuable.  The maximum number of Shares reserved and available for issuance under the Plan shall be 1,651,343 Shares, subject to adjustment as provided in Section 4(b), all of which Shares shall be available for grant pursuant to Incentive Stock Options.  For purposes of this limitation, the Shares underlying any Awards which are forfeited, canceled, reacquired by the Company, satisfied without the issuance of Stock or otherwise terminated (other than by exercise) shall be added back to the Shares available for issuance under the Plan.  Subject to such overall limitation, Shares may be issued up to such maximum number pursuant to any type or types of Award.  The Shares available for issuance under the Plan may be authorized but unissued Shares or Shares reacquired by the Company and held in its treasury. 

 

(b)                                 Changes in Stock.  Subject to Section 5 hereof, if, as a result of any reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other similar change in the Company’s capital stock, the outstanding shares of Stock are increased or decreased or are exchanged for a different number or kind of shares or other

 

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securities of the Company, or additional shares or new or different shares or other securities of the Company or other non-cash assets are distributed with respect to such shares of Stock or other securities, or, if, as a result of any merger, consolidation or sale of all or substantially all of the assets of the Company, the outstanding shares of Stock are converted into or exchanged for a different number or kind of securities of the Company or any successor entity (or a parent or subsidiary thereof), the Committee shall make an appropriate or proportionate adjustment in (i) the maximum number of shares reserved for issuance under the Plan, (ii) the number and kind of shares or other securities subject to any then outstanding Awards under the Plan, (iii) the repurchase price per share subject to each outstanding Award, if any, and (iv) the exercise price and/or exchange price for each share subject to any then outstanding Options under the Plan, without changing the aggregate exercise price (i.e., the exercise price multiplied by the number of Options) as to which such Options remain exercisable.  The adjustment by the Committee shall be final, binding and conclusive.  No fractional shares of Stock shall be issued under the Plan resulting from any such adjustment, but the Committee in its discretion may make a cash payment in lieu of fractional shares.

 

The Committee may also adjust the number of shares subject to outstanding Awards and the exercise price and the terms of outstanding Awards to take into consideration material changes in accounting practices or principles, extraordinary dividends, acquisitions or dispositions of stock or property or any other event if it is determined by the Committee that such adjustment is appropriate to avoid distortion in the operation of the Plan, provided that no such adjustment shall be made in the case of an Option, without the consent of the grantee, if it would constitute a modification, extension or renewal of the Option within the meaning of section 424(h) of the Code.

 

(c)                                  Substitute Awards.  The Committee may grant Awards under the Plan in substitution for stock and stock-based awards held by employees, non-employee directors or other key persons of another corporation in connection with a merger or consolidation of the employing corporation with the Company or a Subsidiary or the acquisition by the Company or a Subsidiary of property or stock of the employing corporation.  The Committee may direct that the substitute awards be granted on such terms and conditions as the Committee considers appropriate in the circumstances.  Any substitute Awards granted under the Plan shall not count against the share limitation set forth in Section 4(a).

 

(d)                                 Stockholders Agreement.  As a condition to the issuance of any Shares under the Plan, the proposed Holder of the Shares shall execute and deliver a joinder to any stockholders agreement, stock restriction agreement and/or similar agreement (as applicable, a “Stockholders Agreement”) as the Committee may from time to time require.

 

5.                                      TREATMENT UPON SALE EVENT OR OTHER EXTRAORDINARY TRANSACTION

 

(a)                                 Awards.

 

(i)                                     Sale Event.  Upon a Sale Event, the Committee, acting in its sole discretion without the consent or approval of any Holder, shall affect one or more of the following alternatives, which may vary among individual Holders and which may vary

 

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among the Awards held by any individual Holder: (A) accelerate the time at which Options then outstanding may be exercised so that such Awards may be exercised in full for a limited period of time on or before a specified date (before or after such Sale Event) fixed by the Committee, after which specified date all unexercised Options and all rights of Holders thereunder shall terminate, (B) accelerate the vesting or lapse the restrictions with respect to any Restricted Stock Awards as of a specified date (before or after such Sale Event) fixed by the Committee, (C) require the mandatory surrender to the Company by selected Holders of some or all of the outstanding Awards held by such Holders (irrespective of whether the Options are then exercisable under the provisions of the Plan) as of a date, before or after such Sale Event, specified by the Committee, in which event the Committee shall thereupon (I) cancel any vested Options and, in the Committee’s sole discretion, unvested Options and Restricted Stock Awards, pay to each Holder an amount of cash per share equal to the excess, if any, of the Sale Price (as calculated in Section 5(a)(ii)) of the Shares subject to such Options over the exercise price(s) under such Options for such Shares and (II) cancel any unvested Awards not so treated as provided in this clause (C) without any payment to the Holder, or (D) make such adjustments to Awards then outstanding (which may include the substitution of new Awards or other arrangement (which, if applicable, may be exercisable for such property or stock as the Committee determines which may include, without limitation, capital stock or other equity of the acquiring entity) for Awards or the assumption of the Awards) as the Committee deems appropriate to reflect such Sale Event; provided, however, that the Committee may determine in its sole discretion that no adjustment is necessary to Options then outstanding; provided, further, however, that the right to make such adjustments shall include, but not be limited to, the modification of Options such that the Holder of the Option shall be entitled to purchase or receive (in lieu of the total shares or other consideration that the Holder would otherwise be entitled to purchase or receive under the Option (the “Total Consideration”)), the number of shares of Stock, other securities, cash or property to which the Total Consideration would have been entitled to in connection with the Sale Event at an aggregate exercise price equal to the exercise price that would have been payable if the total Shares had been purchased upon the exercise of the Option immediately before the consummation of the Sale Event.  No adjustment or substitution pursuant to this Section 5(a) shall be made in a manner that results in noncompliance with the requirements of section 409A of the Code, to the extent applicable.

 

(ii)                                  Sale Price.  The “Sale Price” shall equal the amount determined in clause (A), (B), (C), (D) or (E), whichever is applicable, as follows: 

 

(A)                               the per share price offered to holders of Stock in any merger or consolidation; 

 

(B)                               the per share value of the Stock immediately before the Sale Event without regard to assets sold in the Sale Event and assuming the Company has received the consideration paid for the assets in the case of a sale of the assets; 

 

(C)                               the amount distributed per share of Stock in a dissolution transaction; 

 

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(D)                               the price per share offered to holders of Stock in any tender offer or exchange offer whereby a Sale Event takes place; or 

 

(E)                                if such Sale Event occurs other than pursuant to a transaction described in clauses (A), (B), (C) or (D) above, the Fair Market Value per share of the Shares that may otherwise be obtained with respect to such Options, as determined by the Committee as of the date determined by the Committee to be the date of cancellation and surrender of such Options. 

 

In the event that the consideration offered to stockholders of the Company in any transaction described in this Section 5(a) consists of anything other than cash, the Committee shall determine the fair cash equivalent of the portion of the consideration offered which is other than cash. 

 

(b)                                 Option Shares and Restricted Stock Awards.  Unless otherwise provided in the Award Agreement, in the case of and subject to the consummation of a Sale Event, Option Shares and shares of Restricted Stock shall be subject to the repurchase right set forth in Section 10(c)(i) and 10(c)(ii), respectively.

 

(c)                                  Unrestricted Stock Awards.  Unless otherwise provided in the Award Agreement, any shares of Unrestricted Stock shall be treated in a Sale Event the same as all other Shares then outstanding.

 

6.                                      ELIGIBILITY

 

All employees (including prospective employees), non-employee directors, independent contractors and consultants of the Company and its Subsidiaries are eligible for the grant of Awards under the Plan.  The Committee, in its sole discretion, shall determine the type or types of Awards to be made under the Plan and shall designate the employees (including prospective employees), independent contractors and consultants who are to be granted Awards under the Plan.  Any Awards, and the terms of such Awards, to non-employee directors shall be determined by the Board.

 

7.                                      STOCK OPTIONS

 

(a)                                 Nature of Options.  An Option is an Award granted to a Participant to acquire Stock at an exercise price determined by the Committee, subject to such restrictions and conditions as the Committee may determine at the time of grant.  Conditions may be based on continuing employment (or other service relationship) and/or achievement of pre-established performance goals and objectives.  The grant of an Option is contingent on the Participant executing an Award Agreement, which shall set forth the terms and conditions of the Option.  An Option’s terms and conditions may differ among individual Awards and Holders.  Options granted under the Plan may be either Incentive Stock Options or Non-Qualified Stock Options.  Incentive Stock Options may be granted only to Participants who are employees of the Company or any Subsidiary that is a “subsidiary corporation” within the meaning of section 424(f) of the Code.  To the extent that any Option does not qualify as an Incentive Stock Option, it shall be deemed a Non-Qualified Stock Option.  No Incentive Stock Option shall be granted under the Plan after the date which is 10 years from the date the Plan is approved by the Board.

 

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(b)                                 Exercise Price.  The exercise price per share for the Stock covered by an Option shall be determined by the Committee at the time of grant but shall not be less than 100% of the Fair Market Value on the date of grant.  If an employee owns or is deemed to own (by reason of the attribution rules of section 424(d) of the Code) more than 10% of the combined voting power of all classes of stock of the Company or any parent or subsidiary corporation (“10% Owner”) and an Incentive Stock Option is granted to such employee, the option price of an Incentive Stock Option shall be not less than 110% of the Fair Market Value on the grant date.

 

(c)                                  Option Term.  The term of each Option shall be fixed by the Committee, but no Option shall be exercisable more than 10 years after the date the Option is granted; provided, however, that if an employee is a 10% Owner and an Incentive Stock Option is granted to such employee, the term of such Option shall be no more than 5 years from the date of grant. 

 

(d)                                 Exercisability; Rights of a Stockholder.  Options shall become exercisable at such time or times, whether or not in installments, as shall be determined by the Committee at or after the grant date.  The Committee may at any time accelerate the exercisability of all or any portion of any Option.  An Holder shall have the rights of a stockholder only as to shares acquired upon the exercise of an Option and not as to unexercised Options.  A Holder shall not be deemed to have acquired any such shares unless and until an Option shall have been exercised pursuant to the terms hereof, the Company shall have issued and delivered the shares to the Holder, and the Holder’s name shall have been entered on the books of the Company as a stockholder. 

 

(e)                                  Method of Exercise.  Options may be exercised in whole or in part, by giving written notice of exercise to the Company, in the form and manner prescribed by the Committee, specifying the number of shares to be purchased.  Payment of the exercise price may be made by one or more of the following methods or as otherwise provided by the Committee: 

 

(i)                                     In cash, by certified or bank check or other instrument acceptable to the Committee in U.S. funds payable to the order of the Company in an amount equal to the exercise price of such Option Shares;  

 

(ii)                                  By the Holder delivering to the Company a promissory note if the Board has expressly authorized the loan of funds to the Holder for the purpose of enabling or assisting the Holder to effect the exercise of his or her Option; provided, however, that at least so much of the exercise price as represents the par value of the Stock shall be paid other than with a promissory note if otherwise required by state law; or 

 

(iii)                               If permitted by the Committee, through the delivery (or attestation to the ownership) of shares of Stock that have been beneficially owned by the Holder for at least six months and are not then subject to restrictions under any Company plan, with such surrendered shares valued at their Fair Market Value on the exercise date.

 

Payment instruments will be received subject to collection.  No certificates for shares of Stock so purchased will be issued to the Holder until the Company has executed and delivered a joinder to the Stockholders Agreement agreeing to be bound by the terms thereof, completed all steps required by law to be taken in connection with the issuance and sale of the shares, including, without limitation, (i) receipt of a representation from the Holder at the time of

 

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exercise of the Option that the Holder is purchasing the shares for the Holder’s own account and not with a view to any sale or distribution thereof, (ii) the legending of any certificate representing the shares to evidence the foregoing representations and restrictions, and (iii) obtaining from Holder payment or provision for all withholding taxes due as a result of the exercise of the Option.  The delivery of certificates representing the shares of Stock to be purchased pursuant to the exercise of an Option will be contingent upon receipt from the Holder (or a purchaser acting in his stead in accordance with the provisions of the Option) by the Company of the full exercise price for such shares and the fulfillment of any other requirements contained in the Option Award agreement or applicable provisions of laws.  In the event a Holder chooses to pay the exercise price with previously-owned shares of Stock through the attestation method, the number of shares of Stock transferred to the Holder upon the exercise of the Option shall be net of the number of shares attested to. 

 

(f)                                   Annual Limit on Incentive Stock Options.  To the extent required for “incentive stock option” treatment under section 422 of the Code, the aggregate Fair Market Value (determined as of the time of grant) of the shares of Stock with respect to which Incentive Stock Options granted under this Plan and any other plan of the Company or its parent and subsidiary corporations become exercisable for the first time by a Holder during any calendar year shall not exceed $100,000.  To the extent that any Incentive Stock Option exceeds this limit, it shall constitute a Non-Qualified Stock Option. 

 

(g)                                  Termination of Options Upon a Termination Event.  Except as otherwise provided in the Plan or the Award Agreement, the unvested portion of all Options held by a Participant shall immediately terminate and be of no further force and effect as of the date of the Participant’s Termination Event.  In addition, if a Participant’s Termination Event is by the Company for Cause, the vested and unvested portions of all Options held by such Participant shall immediately terminate and be of no further force and effect as of the date of the Participant’s Termination Event.

 

(h)                                 Cashing-Out of Options.  Except when such right is not permitted under applicable law, the Committee may, in its sole discretion, permit an Option, or any portion thereof, to be surrendered, unexercised to the Company in consideration of the receipt by the Holder of such Option of an amount (the “Settlement Amount”) equal to the excess, if any of the aggregate Fair Market Value of the Shares able to be purchased pursuant to the vested and exercisable portion of such Option on the date of surrender (the “Surrender Date”), over the aggregate exercise price for all Shares pursuant to the Option.  The Settlement Amount is payable in cash, Shares or a combination thereof, as the Committee determines in its sole discretion.  In the event that the Committee permits the exchange of a portion of the Options, but not all of the Options, a Holder shall have the right to specify which vested and unexercised Options held by such Holder are surrendered.  The exchange payment of the Settlement Amount, in cash, in Shares or a combination thereof, shall constitute a final disposal of the Option to acquire Shares underlying such portion of the Option so surrendered.  The Company will withhold from the Settlement Amount such amounts as may be required to be withheld according to law.

 

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8.                                      RESTRICTED STOCK AWARDS

 

(a)                                 Nature of Restricted Stock Awards.  A Restricted Stock Award is an Award pursuant to which the Company may, in its sole discretion, grant or sell, at such purchase price, if any, as determined by the Committee, in its sole discretion, shares of Stock subject to such restrictions and conditions as the Committee may determine at the time of grant, which purchase price shall be payable in cash or other form of consideration acceptable to the Committee.  Conditions may be based on continuing employment (or other service relationship) and/or achievement of pre-established performance goals and objectives.  The grant of a Restricted Stock Award, and issuance of the Shares subject to such Award, are contingent on the Participant (i) executing an Award Agreement and (ii) executing and delivering a joinder to the Stockholders Agreement agreeing to be bound by the terms thereof.  The terms and conditions of each Award Agreement shall be determined by the Committee, in its sole discretion, and such terms and conditions may differ among individual Awards and Participants.  The Committee may elect to hold the Issued Shares under the restrictions lapse.

 

(b)                                 Rights as a Stockholder.  Upon execution of the Award Agreement for the Restricted Stock Award and payment of any applicable purchase price, a Participant shall have the rights of a stockholder with respect to the voting of the Restricted Stock, subject to such conditions contained in the Award Agreement and the Plan.

 

(c)                                  Vesting of Restricted Stock.  The Committee, in its sole discretion, at the time of grant shall specify the date or dates and/or the attainment of pre-established performance goals, objectives and other conditions on which Restricted Stock shall become vested, subject to such further rights of the Company or its assigns as may be specified in the Award Agreement for the Restricted Stock Award. 

 

(d)                                 Record Owner; Dividends.  The Holder of Restricted Stock shall be considered the record owners of and shall be entitled to vote the Shares of Restricted Stock if and to the extent such Shares are entitled to voting rights.  The Holder shall be entitled to receive all dividends and any other distributions declared on the Shares; provided, however, that the Company is under no duty to declare any such dividends or to make any such distribution. 

 

(e)                                  Forfeiture of Unvested Restricted Stock Upon a Termination Event.  Except as otherwise provided in the Plan or Award Agreement, the unvested portion of a Restricted Stock Award shall immediately terminate and be of no further force and effect as of the date of a Participant’s Termination Event.

 

9.                                      UNRESTRICTED STOCK AWARDS

 

(a)                                 Grant or Sale of Unrestricted Stock.  The Committee may grant or sell at par value or such higher purchase price determined by the Committee an Unrestricted Stock Award to any Participant, pursuant to which such Participant may receive shares of Stock free of any vesting restrictions under the Plan.  Unrestricted Stock Awards may be granted or sold as described in the preceding sentence in respect of past services or other valid consideration, or in lieu of any cash compensation due to such individual.  Any such Award is subject to the

 

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Participant’s executing and delivering to the Committee a joinder to the Stockholders Agreement agreeing to be bound by the terms thereof. 

 

(b)                                 Elections to Receive Unrestricted Stock In Lieu of Compensation.  Upon the request of Participant, and with the consent of the Committee, a Participant may, pursuant to an advance written election delivered to the Company no later than the date specified by the Committee, in the form and manner prescribed by the Committee, receive a portion of the cash compensation otherwise due to such Participant in the form of shares of Unrestricted Stock either currently or on a deferred basis. 

 

 

10.                               TRANSFER RESTRICTIONS; COMPANY RIGHTS OF FIRST REFUSAL, REPURCHASE AND DRAG ALONG; ESCROW ARRANGEMENT

 

(a)                                 Restrictions on Transfer.

 

(i)                                     Options.  No Option shall be transferable by the Holder optionee otherwise than by will or by the laws of descent and distribution and all Options shall be exercisable, during the Holder’s lifetime, only by the Holder, or by the Holder’s legal representative or guardian in the event of the Holder’s incapacity.  The Holder may elect to designate a beneficiary by providing written notice of the name of such beneficiary to the Company, and may revoke or change such designation at any time by filing written notice of revocation or change with the Company, and any such beneficiary may exercise the Holder’s Option in the event of the Holder’s death to the extent provided herein.  If the Holder does not designate a beneficiary, or if the designated beneficiary predeceases the Holder, the legal representative of the Holder may exercise the Option in the event of the Holder’s death to the extent provided herein.  Notwithstanding the foregoing, the Committee, in its sole discretion, may provide in the Award Agreement for a given Option that the Holder may transfer, without consideration for the transfer, his or her Non-Qualified Stock Options to members of his or her immediate family, to trusts for the benefit of such family members, or to partnerships in which such family members are the only partners, provided that the transferee agrees in writing with the Company to be bound by all of the terms and conditions of this Plan and the applicable Option. 

 

(ii)                                  Issued Shares.  No Issued Shares shall be sold, assigned, transferred, pledged, hypothecated, given away or in any other manner disposed of or encumbered, whether voluntarily or by operation of law, unless (i) such transfer is in compliance with the terms of the applicable Award, all applicable securities laws, the terms of any Stockholders Agreement to which the Holder of the Issued Shares is a party and with the terms and conditions of this Section 10, (ii) such transfer does not cause the Company to become subject to the reporting requirements of the Exchange Act, and (iii) the transferee consents in writing to be bound by the provisions of the Plan, including this Section 10.  In connection with any proposed transfer, the Committee may require the transferor to provide at the transferor’s own expense an opinion of counsel to the transferor, satisfactory to the Committee, that such transfer is in compliance with all foreign, federal and state securities laws, including, without limitation, the Securities Act. Any attempted disposition of Issued Shares not in accordance with the terms and conditions of this Section 10 shall be null and void, and the Company shall not reflect on its records any change in record ownership of any Issued Shares as a result of any such disposition, shall otherwise refuse to recognize any such disposition and shall not in any way give effect to any

 

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such disposition of Issued Shares.  Subject to the foregoing general provisions, and unless otherwise provided in the agreement with respect to a particular Award, Issued Shares may be transferred pursuant to the following specific terms and conditions (provided that with respect to any transfer of Restricted Stock, all vesting and forfeiture provisions shall continue to apply only with respect to the original recipient): 

 

(A)                               Transfers to Permitted Transferees.  Subject to the terms of any Stockholders Agreement to which the Holder of the Issued Shares is a party, the Holder may sell, assign, transfer or give away any or all of the Issued Shares to Permitted Transferees; provided, however, that following such sale, assignment, or other transfer, such Issued Shares shall continue to be subject to the terms of this Plan (including this Section 10) and such Permitted Transferee(s) shall, as a condition to any such transfer, deliver a written acknowledgment to that effect to the Company.

 

(B)                               Transfers Upon Death.  Upon the death of the Holder, any Issued Shares then held by the Holder at the time of such death and any Issued Shares acquired thereafter by the Holder’s legal representative shall be subject to the provisions of this Plan, and the Holder’s estate, executors, administrators, personal representatives, heirs, legatees and distributees shall be obligated to convey such Issued Shares to the Company or its assigns under the terms contemplated hereby. 

 

(b)                                 Right of First Refusal.  In the event that a Holder desires at any time to sell or otherwise transfer all or any part of such Holder’s Issued Shares, the Holder first shall give written notice to the Company of the Holder’s intention to make such transfer.  Such notice shall state the number of Issued Shares which the Holder proposes to sell (the “Offered Shares”), the price and the terms at which the proposed sale is to be made and the name and address of the proposed transferee.  At any time within 30 days after the receipt of such notice by the Company, the Company or its assigns may elect to purchase all or any portion of the Offered Shares at the price and on the terms offered by the proposed transferee and specified in the notice.  The Company or its assigns shall exercise this right by mailing or delivering written notice to the Holder within the foregoing 30-day period.  If the Company or its assigns elect to exercise its purchase rights under this Section 10(b), the closing for such purchase shall, in any event, take place within 45 days after the receipt by the Company of the initial notice from the Holder.  In the event that the Company or its assigns do not elect to exercise such purchase right, or in the event that the Company or its assigns do not pay the full purchase price within such 45-day period, the Holder may, within 60 days thereafter, sell the Offered Shares to the proposed transferee and at the same price and on the same terms as specified in the Holder’s notice.  Any Shares purchased by such proposed transferee shall no longer be subject to the terms of the Plan.  Any Shares not sold to the proposed transferee shall remain subject to the Plan. 

 

(c)                                  Company’s Right of Repurchase. 

 

(i)                                     Right of Repurchase for Option Shares.  The Company or its assigns shall have the right and option upon a Repurchase Event to repurchase from a Holder of Option Shares some or all (as determined by the Company) of the Option Shares held or subsequently acquired upon exercise of an Option by such Holder at the price per share specified below.  Such repurchase right may be exercised by the Company within the later of (A) 6 months following

 

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the date of such Repurchase Event or (B) 7 months after the acquisition of such Option Shares upon exercise of an Option (the “Option Shares Repurchase Period”).  The “Option Shares Repurchase Price” shall be equal to the Fair Market Value of the Option Shares, determined as of the date the Committee elects to exercise its repurchase rights in connection with a Repurchase Event.  

 

(ii)                                  Right of Repurchase With Respect to Restricted Stock.  Unless otherwise set forth in the Award Agreement for a Restricted Stock Award, the Company or its assigns shall have the right and option upon a Repurchase Event to repurchase from a Holder of Issued Shares received pursuant to a Restricted Stock Award some or all (as determined by the Company) of such Issued Shares at the price per share specified below.  Such repurchase right may be exercised by the Company within six months following the date of such Repurchase Event (the “Non-Option Shares Repurchase Period”).  The “Non-Option Shares Repurchase Price” shall be (i) in the case of Issued Shares which are vested as of the date of the Repurchase Event, the Fair Market Value of such Issued Shares as of the date the Committee elects to exercise its repurchase rights in connection with a Repurchase Event and (ii) in the case of Issued Shares which have not vested as of the date of the Repurchase Event, subject to adjustment as provided in Section 4(b), the original per share purchase price paid by the recipient. 

 

(iii)                               Procedure.  Any repurchase right of the Company shall be exercised by the Company or its assigns by giving the Holder written notice on or before the last day of the Option Shares Repurchase Period or Non-Option Shares Repurchase Period, as applicable, of its intention to exercise such repurchase right.  Upon such notification, the Holder shall promptly surrender to the Company, free and clear of any liens or encumbrances, any certificates representing the Shares being purchased, together with a duly executed stock power for the transfer of such Shares to the Company or the Company’s assignee or assignees.  Upon the Company’s or its assignee’s receipt of the certificates from the Holder, the Company or its assignee or assignees shall deliver to him, her or them a check for the Option Shares Repurchase Price or the Non-Option Shares Repurchase Price, as applicable; provided, however, that the Company may pay the Option Shares Repurchase Price or Non-Option Shares Repurchase Price, as applicable, by offsetting and canceling any indebtedness then owed by the Holder to the Company.

 

(d)                                 Drag Along Right.  In the event the holders of a majority of the Company’s equity securities then outstanding (the “Majority Stockholders”) determine to sell or otherwise dispose of all or substantially all of the assets of the Company or all or 50% or more of the capital stock of the Company, in each case in a transaction constituting a change in control of the Company, to any non-Affiliate(s) of the Company or any of the Majority Stockholders, or to cause the Company to merge with or into or consolidate with any non-Affiliate(s) of the Company or any of the Majority Stockholders (in each case, the “Buyer”) in a bona fide negotiated transaction (a “Sale”), a Holder of Issued Shares, including any Permitted Transferees, shall be obligated to and shall upon the written request of the Majority Stockholders:  (a) sell, transfer and deliver, or cause to be sold, transferred and delivered, to the Buyer, his or her Issued Shares (including for this purpose all of such Holder’s or his or her Permitted Transferee’s Issued Shares that presently or as a result of any such transaction may be acquired upon the exercise of an Option (following the payment of the exercise price therefor)) on substantially the same terms applicable to the Majority Stockholders (with appropriate adjustments to reflect the conversion of convertible

 

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securities, the redemption of redeemable securities and the exercise of exercisable securities as well as the relative preferences and priorities of preferred stock); and (b) execute and deliver such instruments of conveyance and transfer and take such other action, including voting such Issued Shares in favor of any Sale proposed by the Majority Stockholders and executing any purchase agreements, merger agreements, indemnity agreements, escrow agreements or related documents as the Majority Stockholders or the Buyer may reasonably require in order to carry out the terms and provisions of this Section 10(d).  For purposes of this Section 10, (i) “Affiliate” of any Person means a Person that directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with the first mentioned Person, with one Person deemed to control another Person if such first Person possesses directly or indirectly the power to direct, or cause the direction of, the management and policies of the second Person, whether through the ownership of voting securities, by contract or otherwise; and (ii) “Person” means any individual, corporation, partnership (limited or general), limited liability company, limited liability partnership, association, trust, joint venture, unincorporated organization or any similar entity. 

 

(e)                                  Escrow Arrangement. 

 

(i)                                     Escrow.  In order to carry out the provisions of Sections 10(b), (c), and (d), the Company shall hold any Issued Shares in escrow together with separate stock powers executed by the Holder in blank for transfer, and any Permitted Transferee shall, as an additional condition to any transfer of Issued Shares, execute a like stock power as to such Issued Shares.  The Company shall not dispose of the Issued Shares except as otherwise provided in this Agreement.  In the event of any repurchase by the Company (or any of its assigns), the Company is hereby authorized by the Holder and any Permitted Transferee, as the Holder’s and each such Permitted Transferee’s attorney-in-fact, to date and complete the stock powers necessary for the transfer of the Issued Shares being purchased and to transfer such Issued Shares in accordance with the terms hereof.  At such time as any Issued Shares are no longer subject to the Company’s repurchase, first refusal and drag along rights, the Company shall, at the written request of the Holder, deliver to the Holder (or the relevant Permitted Transferee) a certificate representing such Issued Shares with the balance of the Issued Shares to be held in escrow pursuant to this Section 10(e).

 

(ii)                                  Remedy.  Without limitation of any other provision of the Plan or other rights, in the event that a Holder, any Permitted Transferees or any other Person is required to sell a Holder’s Issued Shares pursuant to the provisions of Sections 10(b), (c), or (d) hereof and in the further event that he or she refuses or for any reason fails to deliver to the Company or its designated purchaser of such Issued Shares the certificate or certificates evidencing such Issued Shares together with a related stock power, the Company or such designated purchaser may deposit the applicable purchase price for such Issued Shares with a bank designated by the Company, or with the Company’s independent public accounting firm, as agent or trustee, or in escrow, for such Holder, any Permitted Transferees or other Person, to be held by such bank or accounting firm for the benefit of and for delivery to him, her, them or it, and/or, in its discretion, pay such purchase price by offsetting any indebtedness then owed by such Holder as provided above.  Upon any such deposit and/or offset by the Company or its designated purchaser of such amount and upon notice to the Person who was required to sell the Issued Shares to be sold pursuant to the provisions of Sections 10(b), (c), or (d), such Issued Shares shall at such time be

 

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deemed to have been sold, assigned, transferred and conveyed to such purchaser, such Holder shall have no further rights thereto (other than the right to withdraw the payment thereof held in escrow, if applicable), and the Company shall record such transfer in its stock transfer book or in any appropriate manner. 

 

(f)                                   Lockup Provision.  As a condition to the issuance of any Award under the Plan, each Holder shall agree, if requested by the Company and any underwriter engaged by the Company, not to sell or otherwise transfer or dispose of any Issued Shares, including, without limitation, pursuant to Rule 144 under the Securities Act, held by him or her for such period following the effective date of any registration statement of the Company filed under the Securities Act as the Company or such underwriter shall specify reasonably and in good faith, not to exceed 180 days in the case of the Company’s Initial Public Offering or 90 days in the case of any other public offering.

 

(g)                                  Adjustments for Changes in Capital Structure.  If, as a result of any reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other similar change in the Stock, the outstanding shares of Stock are increased or decreased or are exchanged for a different number or kind of shares of the Company’s stock, the restrictions contained in this Section 10 shall apply with equal force to additional and/or substitute securities, if any, received by the Holder in exchange for, or by virtue of his or her ownership of, Issued Shares.

 

(h)                                 Termination.  The terms and provisions of Section 10(b), Section 10(c) and Section 10(d) shall terminate upon the closing of the Company’s Initial Public Offering or upon consummation of any Sale Event, in either case as a result of which shares of the Company (or a successor entity) of the same class as the Issued Shares are registered under Section 12 of the Exchange Act and publicly traded on any national security exchange. 

 

11.                               TAX WITHHOLDING

 

(a)                                 Payment by Holder.  Each Holder shall, no later than the date as of which the value of an Award or of any Stock or other amounts received thereunder first becomes includable in the gross income of the Holder for Federal income tax purposes, pay to the Company, or make arrangements satisfactory to the Committee regarding payment of, any Federal, state, or local taxes of any kind required by law to be withheld with respect to such income.  The Company and its Subsidiaries shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Holder.  The Company’s obligation to deliver stock certificates to any grantee is subject to and conditioned on any such tax obligations being satisfied by the Holder. 

 

(b)                                 Payment in Stock.  Subject to approval by the Committee, a Holder may elect to have the minimum required tax withholding obligation satisfied, in whole or in part, by (i) authorizing the Company to withhold from shares of Stock to be issued pursuant to any Award a number of shares with an aggregate Fair Market Value (as of the date the withholding is effected) that would satisfy the withholding amount due, or (ii) transferring to the Company shares of Stock owned by the grantee with an aggregate Fair Market Value (as of the date the withholding is effected) that would satisfy the minimum withholding amount due.

 

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12.                               AMENDMENTS AND TERMINATION

 

The Board may, at any time, amend or discontinue the Plan and the Committee may, at any time, amend or cancel any outstanding Award (or provide substitute Awards at the same or a reduced exercise or purchase price or with no exercise or purchase price) in a manner not inconsistent with the terms of the Plan, provided that such price, if any, must satisfy the requirements which would apply to the substitute or amended Award if it were then initially granted under this Plan for the purpose of satisfying changes in law or for any other lawful purpose, but no such action shall adversely affect rights under any outstanding Award without the Holder’s consent.  In addition, to the extent determined by the Committee to be required by the Code to ensure that Incentive Stock Options granted under the Plan are qualified under section 422 of the Code, Plan amendments shall be subject to approval by the Company’s stockholders who are entitled to vote at a meeting of stockholders.  Nothing in this Section 12 shall limit the Committee’s authority to take any action permitted pursuant to Section 4(c). 

 

13.                               STATUS OF PLAN

 

With respect to the portion of any Award that has not been exercised and any payments in cash, Stock or other consideration not received by a Holder, a Holder shall have no rights greater than those of a general creditor of the Company unless the Committee shall otherwise expressly determine in connection with any Award or Awards.  In its sole discretion, the Committee may authorize the creation of trusts or other arrangements to meet the Company’s obligations to deliver Stock or make payments with respect to Awards hereunder, provided that the existence of such trusts or other arrangements is consistent with the foregoing sentence. 

 

14.                               GENERAL PROVISIONS

 

(a)                                 No Distribution; Compliance with Legal Requirements.  The Committee may require each person acquiring Stock pursuant to an Award to represent to and agree with the Company in writing that such person is acquiring the shares without a view to distribution thereof.  No shares of Stock shall be issued pursuant to an Award until all applicable securities law and other legal requirements have been satisfied.  The Committee may require the placing of restrictive legends on certificates for Stock and Awards as it deems appropriate.

 

(b)                                 Delivery of Stock Certificates.  Stock certificates to grantees under this Plan shall be deemed delivered for all purposes when the Company or a stock transfer agent of the Company shall have mailed such certificates in the United States mail, addressed to the grantee, at the grantee’s last known address on file with the Company. 

 

(c)                                  Non-Competition Agreement.  Each Participant to whom an Award is granted under this Plan may be required to agree in writing as a condition to the granting of such Award not to engage in conduct in competition with the Company or any of its Subsidiaries for a period after the termination of such Participant’s employment with the Company and its Subsidiaries as determined by the Committee.

 

(d)                                 Other Compensation Arrangements.  Nothing contained in this Plan shall prevent the Board from adopting other or additional compensation arrangements, including trusts, and such arrangements may be either generally applicable or applicable only in specific cases.  The

 

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adoption of this Plan and the grant of Awards do not confer upon any employee any right to continued employment with the Company or any Subsidiary. 

 

(e)                                  No Right to Continued Employment or Service.  Nothing in the Plan or an Award Agreement shall interfere with or limit in any way the right of the Company or any of its Subsidiaries to terminate any Participant’s employment or other service relationship with the Company or its Subsidiaries at any time, nor confer upon any Participant any right to continue in the capacity in which he or she is employed or otherwise serves the Company or its Subsidiaries. 

 

(f)                                   Successors. All obligations of the Company under the Plan with respect to Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.  

 

(g)                                  Designation of Beneficiary.  Each Participant to whom an Award has been made under the Plan may designate a beneficiary or beneficiaries to exercise any Award or receive any payment under any Award payable on or after the Participant’s death.  Any such designation shall be on a form provided for that purpose by the Committee and shall not be effective until received by the Committee.  If no beneficiary has been designated by a deceased Participant, or if the designated beneficiaries have predeceased the Participant, the beneficiary shall be the Participant’s estate. 

 

(h)                                 Legend.  Any certificate(s) representing the Issued Shares shall carry substantially the following legend: 

 

The transferability of this certificate and the shares of stock represented hereby are subject to the restrictions, terms and conditions (including repurchase and restrictions against transfers) contained in the Neos Therapeutic, Inc. 2009 Equity Plan and any agreement entered into thereunder by and between the Company and the Holder of this certificate (a copy of which is available at the offices of the Company for examination). 

 

15.                               EFFECTIVE DATE AND TERM OF PLAN

 

The Plan was approved by the Board on November 25, 2009 (the “Effective Date”).  Awards may be granted hereunder on and after the Effective Date.  Unless previously terminated, the Plan shall terminate and the Board may grant no more Awards on the expiration of 10 years after adoption of the Plan.  The Plan shall continue in effect with respect to Awards granted before termination of this Plan and until such Awards have expired or been settled, terminated, cancelled, or forfeited in accordance with their terms and the provisions of this Plan. 

 

16.                               GOVERNING LAW

 

This Plan and all Awards and actions taken thereunder shall be governed by, and construed in accordance with, the laws of the State of Delaware, applied without regard to conflict of law principles.

 

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17.                               DISPUTE RESOLUTION

 

(a)                                 Except as provided below, any dispute arising out of or relating to this Plan or any Award made hereunder, or any agreement executed in connection herewith, or the breach, termination or validity of this Plan, any such Award or any such agreement, shall be finally settled by binding arbitration conducted expeditiously in accordance with the J.A.M.S./Endispute Comprehensive Arbitration Rules and Procedures (the “J.A.M.S. Rules”).  The arbitration shall be governed by the United States Arbitration Act, 9 U.S.C. Sections 1-16, and judgment upon the award rendered by the arbitrators may be entered by any court having jurisdiction thereof.  The place of arbitration shall be Boston, Massachusetts.

 

(b)                                 The arbitration shall commence within 60 days of the date on which a written demand for arbitration is filed by any party hereto.  In connection with the arbitration proceeding, the arbitrator shall have the power to order the production of documents by each party and any third-party witnesses.  In addition, each party may take up to three (3) depositions as of right, and the arbitrator may in his or her discretion allow additional depositions upon good cause shown by the moving party.  However, the arbitrator shall not have the power to order the answering of interrogatories or the response to requests for admission.  In connection with any arbitration, each party to the arbitration shall provide to the other, no later than seven (7) business days before the date of the arbitration, the identity of all persons that may testify at the arbitration and a copy of all documents that may be introduced at the arbitration or considered or used by a party’s witness or expert.  The arbitrator’s decision and award shall be made and delivered within six (6) months of the selection of the arbitrator.  The arbitrator’s decision shall set forth a reasoned basis for any award of damages or finding of liability.  The arbitrator shall not have power to award damages in excess of actual compensatory damages and shall not multiply actual damages or award punitive damages, and each party hereby irrevocably waives any claim to such damages. 

 

(c)                                  The Company, each recipient of an Award hereunder, each party to an agreement governed hereby and any other holder of Stock issued under this Plan (each, a “Party”) covenants and agrees that such party will participate in the arbitration in good faith.  This Section 17 applies equally to requests for temporary, preliminary or permanent injunctive relief, except that in the case of temporary or preliminary injunctive relief any party may proceed in court without prior arbitration for the limited purpose of avoiding immediate and irreparable harm. 

 

(d)                                 Each Party (i) hereby irrevocably submits to the jurisdiction of any United States District Court of competent jurisdiction for the purpose of enforcing the award or decision in any such proceeding, (ii) hereby waives, and agrees not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution (except as protected by applicable law), that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court, and (iii) hereby waives and agrees not to seek any review by any court of any other jurisdiction which may be called upon to grant an enforcement of the judgment of any such court.  Each Party hereby consents to service of process by registered mail at the address to which notices are to be given.  Each Party agrees that its, his or her submission to jurisdiction and its, his or her consent to

 

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service of process by mail is made for the express benefit of each other Party.  Final judgment against any Party in any such action, suit or proceeding may be enforced in other jurisdictions by suit, action or proceeding on the judgment, or in any other manner provided by or pursuant to the laws of such other jurisdiction.

 

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