REGISTRATION RIGHTS AGREEMENT dated June 26, 2002, between MEDICAL
TECHNOLOGY SYSTEMS, INC., a Delaware corporation (the "Company"), and EUREKA I,
L.P., a Delaware limited partnership ("Purchaser" ).
Pursuant to a Securities Purchase Agreement dated the date hereof (the
"Purchase Agreement"), Purchaser has agreed to purchase, subject to certain
conditions, the Notes, the Warrants and Preferred Shares (as hereinafter
defined). It is a condition to the Purchaser's obligation to complete the First
Closing (as defined in the Purchase Agreement) that the Company execute and
deliver this Agreement.
NOW, THEREFORE, in consideration of the mutual promises contained herein
and in the Purchase Agreement, and intending to be legally bound, the parties
agree as follows.
1. Certain Definitions. As used in this Agreement, the following terms have
the following respective meanings:
"Commission" means the Securities and Exchange Commission, or any other
federal agency at the time administering the Securities Act.
"Common Stock" means the Common Stock, $0.01 par value per share, of the
Company.
"Conversion Shares" mean shares of Common Stock issued upon conversion of
the Preferred Shares.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Commission promulgated thereunder, all as the
same shall be in effect from time to time.
"Intercreditor Agreement" means the Subordination Agreement of even date
herewith among LaSalle Business Credit, Inc., the Purchaser, the Company and MTS
Packaging Systems, Inc., as in effect from time to time.
"Permitted Liens" has the meaning set forth in the Purchase Agreement.
"Preferred Shares" means the shares of Series A Preferred Stock issued
under the Series A Stock Purchase Agreement at the First Closing.
"Registration Expenses" means the expenses so described in Section 6.
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"Restricted Stock" means the Warrant Shares, Conversion Shares, and any
additional shares of Common Stock issued or delivered pursuant to Section 11,
excluding Warrant Shares and Conversion Shares which shall have (a) been
registered under the Securities Act pursuant to an effective registration
statement filed thereunder and disposed of in accordance with the registration
statement covering them, or (b) been publicly sold pursuant to Rule 144 under
the Securities Act. When this Agreement refers to a number or percentage of the
Restricted Stock the number or percentage shall be calculated as a number or
percentage of Warrant Shares and Conversion Shares on the assumption that all
Warrants and Preferred Shares are exercised and all Warrant Shares and
Conversion Shares are issued.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder, all as the same
shall be in effect from time to time.
"Selling Expenses" means the expenses so described in Section 6.
"Series A Preferred Stock" means the Series A Convertible Participating
Preferred Stock, par value $0.0001 per share, of the Company.
"Warrant Agreement" means the Warrant Agreement dated the date hereof among
the Purchaser and the Company, executed and delivered pursuant to the Purchase
Agreement, as the same may be amended, modified, supplemented or restated from
time to time pursuant to the terms thereof.
"Warrants" means the warrants to purchase 566,517 shares of Common Stock
issued pursuant to the Warrant Agreement, as adjusted from time to time pursuant
to the Warrant Agreement.
"Warrant Shares" means the shares of Common Stock issued upon exercise of
the Warrants.
2. Required Registration.
(a) At any time, one or more holders of Restricted Stock may request
the Company to register under the Securities Act all or any portion of the
shares of Restricted Stock held by such requesting holder or holders for
sale in the manner specified in such notice, but only if the request is
made by the holders of Restricted Stock constituting at least 50% of the
number of shares of Restricted Stock outstanding at the time the request is
made.
Notwithstanding anything to the contrary contained herein, no request
may be made under this Section within 180 days after the effective date of
a registration statement filed by the Company covering a firm commitment
underwritten public offering in which the holders of Restricted Stock shall
have been entitled to join pursuant to Section 3 and in which all shares of
Restricted Stock as to which registration shall have been requested shall
have been effectively registered and sold.
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(b) Following receipt of any notice under this Section, the Company
shall immediately notify all holders of Restricted Stock from whom notice
has not been received and shall use commercially reasonable efforts to
register under the Securities Act, for public sale in accordance with the
method of disposition specified in such notice from requesting holders, the
number of shares of Restricted Stock specified in such notice (and in all
notices received by the Company from other holders within 15 days after the
giving of such notice by the Company). If such method of disposition shall
be an underwritten public offering, the holders of a majority of the shares
of Restricted Stock to be sold in such offering may designate the managing
underwriter of such offering, subject to the approval of the Company, which
approval shall not be unreasonably withheld or delayed. The Company shall
be obligated to register Restricted Stock pursuant to this Section on two
occasions only, but such obligation shall be deemed satisfied only when a
registration statement covering all shares of Restricted Stock specified in
notices received as aforesaid, for sale in accordance with the method of
disposition specified by the requesting holders, shall have become
effective and, if such method of disposition is a firm commitment
underwritten public offering, all such shares shall have been sold pursuant
thereto.
(c) No person other than the Company, its officers, directors, or
other stockholders entitled to registration rights under the circumstances
shall be entitled to include any securities in any registration statement
requested under this Section without the consent of the holders of a
majority of the Restricted Stock included in the registration statement,
which consent shall not be unreasonably withheld. The Company, its
officers, directors, or other stockholders entitled to registration rights
under the circumstances shall be entitled to include in any registration
statement referred to in this Section, for sale in accordance with the
method of disposition specified by the requesting holders, shares of Common
Stock to be sold by the Company or by its officers, directors, or other
stockholders entitled to registration rights under the circumstances for
its or their own account, except to the extent that, in the opinion of the
managing underwriter (if such method of disposition shall be an
underwritten public offering), confirmed in writing to the Company and the
holders requesting inclusion of Restricted Stock in the registration and
the underwriting, such inclusion would adversely affect the marketing of
the Restricted Stock to be sold. In such event, the number of shares of
Common Stock to be registered on behalf of the Company or its officers,
directors, and other holders entitled to registration rights under the
circumstances, if any, shall be computed as set forth in subsection (d).
Except for registration statements on Form X-0, X-0 or any successor
thereto, the Company will not file with the Commission any other
registration statement with respect to its Common Stock, whether for its
own account or that of other stockholders, from the date of receipt of a
notice from requesting holders pursuant to this Section 2 until the
completion of the period of distribution of the registration contemplated
thereby.
(d) Whenever a registration requested pursuant to this Section is for
an underwritten public offering, only shares of Common Stock which are to
be included in the underwriting may be included in the registration.
Notwithstanding the provisions of subsections (b) and (c), if the managing
underwriter determines that marketing factors require a limitation of the
total number of shares of Common Stock to be underwritten or a limitation
of the total number of shares of Common Stock to be sold by the Company or
its officers or directors or other stockholders entitled to registration
rights under the circumstances, then the number of shares to be included in
the registration and the underwriting shall first be allocated among all
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holders who indicated to the Company their decision to distribute any of
their Restricted Stock through such underwriting, in proportion, as nearly
as practicable, to the respective number of shares of Restricted Stock
requested to be included in the registration and the underwriting by such
holders, then the remainder, if any, to the Company or its officers or
directors or other stockholders entitled to registration rights under the
circumstances, in proportion, as nearly as practicable, to the respective
number of shares of Common Stock requested to be included in the
registration and the underwriting by the Company or its officers or
directors or other stockholders entitled to registration rights under the
circumstances. No stock excluded from the underwriting by reason of the
managing underwriter's marketing limitation shall be included in such
registration. If the Company or its officers or directors or other
stockholders entitled to registration rights under the circumstances, as
the case may be, determines not to participate in any such underwriting,
it, he or she may elect to withdraw therefrom by written notice, within
five (5) days of notice to the Company of the managing underwriter's
marketing limitation, to the holders of Restricted Stock and the
underwriter. The securities so withdrawn from such underwriting shall also
be withdrawn from such registration.
3. Incidental Registration.
(a) If the Company, at any time (other than pursuant to Section 2 or
Section 4) proposes to register any of its securities under the Securities
Act for sale to the public, whether for its own account or for the account
of other security holders or both (except with respect to registration
statements on Forms X-0, X-0 or their respective successors or another form
not available for registering the Restricted Stock for sale to the public),
each such time it will give written notice to all holders of outstanding
Restricted Stock of its intention so to do. Upon the written request of any
such holder, received by the Company within 15 days after the giving of any
such notice by the Company, to register any of its Restricted Stock (which
request shall state the intended method of disposition thereof), the
Company will cause the Restricted Stock as to which registration shall have
been so requested to be included in the securities to be covered by the
registration statement proposed to be filed by the Company, all to the
extent requisite to permit the sale or other disposition by the holder (in
accordance with its written request) of such Restricted Stock so
registered.
(b) In the event that any registration pursuant to this Section shall
be, in whole or in part, an underwritten public offering of Common Stock
for the account of the Company and the managing underwriter shall be of the
opinion, confirmed in writing to the Company and the holders requesting
inclusion of Restricted Stock in the registration and the underwriting,
that the inclusion in such offering of all shares of Common Stock proposed
to be included by the Company, the holders of Restricted Stock and other
holders of Common Stock (whether or not pursuant to registration rights)
would adversely affect the marketing of the securities to be sold by the
Company therein, then the number of shares of Common Stock to be included
in the registration and the offering shall be reduced as follows:
(1) first, the number of shares proposed to be included by
persons other than the Company and the holders of Restricted Stock
shall be reduced in accordance with the agreements, if any, that
entitle them to include shares in the registration, and otherwise as
determined by the Company, and
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(2) second, the number of shares requested to be included and the
holders of Restricted Stock shall be reduced pro rata among all such
holders in accordance with the number of shares requested to be
included by each.
No stock so excluded from the underwriting shall be included in the
registration.
(c) Notwithstanding the foregoing provisions, the Company shall have
the right to withdraw any registration statement referred to in this
Section at any time without thereby incurring any liability to the holders
of Restricted Stock.
(d) The Company shall have the right to select the underwriters in the
case of any registration pursuant to this Section 3 in its sole discretion.
4. Registration on Form S-3. If at any time (i) a holder or holders of
Restricted Stock request that the Company file a registration statement on Form
S-3 or any successor thereto for a public offering of all or any portion of the
shares of Restricted Stock held by such requesting holder or holders, and (ii)
the Company is a registrant entitled to use Form S-3 or any successor thereto to
register such shares, then the Company shall use commercially reasonable efforts
to register under the Securities Act on Form S-3 or any successor thereto, for
public sale in accordance with the method of disposition specified in such
notice, the number of shares of Restricted Stock specified in such notice.
Whenever the Company is required by this Section to use commercially reasonable
efforts to effect the registration of Restricted Stock, each of the procedures
and requirements of Section 2 (including but not limited to the requirement that
the Company notify all holders of Restricted Stock from whom notice has not been
received and provide them with the opportunity to participate in the offering)
shall apply to such registration, except that there shall be no limitation on
the number of registrations on Form S-3 which may be requested and obtained
under this Section, and the percentage requirement contained in the first
sentence of Section 2(a) shall not apply to any registration on Form S-3 which
may be requested and obtained under this Section. Notwithstanding anything to
the contrary contained herein, no request may be made under this Section (a)
within 180 days after the effective date of a registration statement filed by
the Company covering a firm commitment underwritten public offering in which the
holders of Restricted Stock shall have been entitled to join pursuant to Section
3 and in which all shares of Restricted Stock as to which registration shall
have been requested shall have been registered and sold, or (b) for the
registration of less than all the then outstanding shares of Restricted Stock
unless the request covers shares of Restricted Stock having an aggregate market
value of $2,000,000 or more, based on the closing price of the Common Stock on
the trading day before the request is made.
5. Registration Procedures.
(a) If and whenever the Company is required by the provisions of
Section 2, 3 or 4 to use commercially reasonable efforts to effect the
registration of any shares of Restricted Stock under the Securities Act,
the Company will, as expeditiously as possible:
(1) prepare and file with the Commission a registration statement
(which, in the case of an underwritten public offering pursuant to
Section 2, shall be on Form S-1 or other form of general
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applicability satisfactory to the managing underwriter selected as
therein provided) with respect to such securities and use commercially
reasonable efforts to cause such registration statement to become and
remain effective for the period of the distribution contemplated
thereby (determined as hereinafter provided);
(2) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for the period specified in paragraph (1) and
comply with the provisions of the Securities Act with respect to the
disposition of all Restricted Stock covered by such registration
statement in accordance with the sellers' intended method of
disposition set forth in such registration statement for such period;
(3) furnish to each seller of Restricted Stock and to each
underwriter such number of copies of the registration statement and
the prospectus included therein (including each preliminary
prospectus) as such persons reasonably may request in order to
facilitate the public sale or other disposition of the Restricted
Stock covered by such registration statement;
(4) use commercially reasonable efforts to register or qualify
the Restricted Stock covered by such registration statement under the
securities or "blue sky" laws of such jurisdictions as the sellers of
Restricted Stock or, in the case of an underwritten public offering,
the managing underwriter reasonably shall request, but the Company
shall not for any such purpose be required (A) to qualify generally to
transact business as a foreign corporation in any jurisdiction where
it is not so qualified; (B) to consent to general service of process
in any such jurisdiction; or (C) to subject itself to any material tax
in any such jurisdiction where it is not then so subject.
(5) use commercially reasonable efforts to list the Restricted
Stock covered by such registration statement on any securities
exchange or inter-dealer quotation system on which the Common Stock of
the Company is then listed;
(6) immediately notify each seller of Restricted Stock and each
underwriter under such registration statement, at any time when a
prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event of which the Company has
knowledge as a result of which the prospectus contained in such
registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing;
(7) if the offering is underwritten and any seller of Restricted
Stock or any underwriter so requests, use commercially reasonable
efforts to furnish on the date that Restricted Stock is delivered to
the underwriters for sale pursuant to such registration: (i) an
opinion dated such date of counsel representing the Company for the
purposes of such registration, addressed to the underwriters and to
such seller, in form reasonably satisfactory to them, covering such
matters of the type customarily covered by opinions as the
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underwriters or such seller may reasonably request; and (ii) a
"comfort letter" dated such date from the independent public
accountants retained by the Company, addressed to the underwriters and
to such seller, in customary form and covering such matters of the
type customarily covered by comfort letters as the underwriter or such
seller may reasonably request; and
(8) make available for inspection by each seller of Restricted
Stock, any underwriter participating in any distribution pursuant to
such registration statement, and any attorney, accountant or other
agent retained by such seller or underwriter, all financial and other
records, pertinent corporate documents and properties of the Company,
and cause the Company's officers, directors and employees to supply
all information reasonably requested by any such seller, underwriter,
attorney, accountant or agent in connection with such registration
statement.
As used in Section 5, the term "underwriter" does not include any
seller of Restricted Stock.
(b) For purposes of subsection (a)(1) and (2) and of Section 2(c), the
period of distribution of Restricted Stock in a firm commitment
underwritten public offering shall be deemed to extend until each
underwriter has completed the distribution of all securities purchased by
it, but not to exceed 30 days, and the period of distribution of Restricted
Stock in any other registration shall be deemed to extend until the earlier
of the sale of all Restricted Stock covered thereby or 90 days after the
effective date thereof.
(c) Notwithstanding the foregoing provisions of subsection (a), the
Company shall not be obligated to effect the filing of a registration
statement under subsection (a), (1) during the period starting with the
date 30 days prior to the Company's good faith estimate of the date of
filing of, and ending on the date 90 days following the effective date of,
a registration statement pertaining to an underwritten public offering of
securities for the account of the Company, provided the Company is at all
times during such period diligently pursuing such registration, or (2) if
the Company shall furnish to the Purchaser requesting a registration
statement pursuant to subsection (a) (or under any other relevant section
of this Agreement) a certificate signed by the President of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would not be in the best interests of the Company and its
shareholders generally for such registration statement to be filed. Under
clause (2), the Company shall have the right to defer such filing for a
period of not more than 90 days after receipt of the request for a
registration under subsection (a); provided, however, that the Company may
not utilize the right set forth in clause (2) until 90 days after the
termination of any earlier period during which it shall have deferred
filing a registration statement pursuant to clause (2).
(d) In connection with each registration hereunder, the sellers of
Restricted Stock will furnish to the Company in writing such information
with respect to themselves and the proposed distribution by them as shall
be necessary in order to assure compliance with federal and applicable
state securities laws. Each holder of Restricted Stock as to which any
registration is being effected agrees to notify the Company as promptly as
practicable of any inaccuracy or change in information previously furnished
by such holder to the Company or of the happening of any event as a result
of which any prospectus relating to such registration contains an untrue
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statement of a material fact regarding such holder or the distribution of
such Restricted Stock or omits to state any material fact regarding such
holder or the distribution of such Restricted Stock required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and to promptly
furnish to the Company any additional information required to correct and
update any previously furnished information or required so that such
prospectus shall not, with respect to such holder or the distribution of
such Restricted Stock, contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading.
(e) In connection with each registration pursuant to Sections 2, 3 or
4 covering an underwritten public offering, the Company and each seller
agree to enter into a written underwriting agreement with the underwriters
selected in the manner herein provided, in such form and containing such
provisions as are customary in the securities business for such an
underwriting agreement between such underwriters and companies of the
Company's size and investment stature.
(f) If the Company provides notice pursuant to subsection (a)(6), each
seller of Restricted Stock agrees to stop all offers and sales of
Restricted Stock until the prospectus contained in any registration
statement has been supplemented or amended, as the case may be, so as to
correct any untrue statements or add information relating to any omissions.
The Company will effect such supplement or amendment as promptly as
reasonably practicable.
6. Expenses. All expenses incurred by the Company in complying with
Sections 2, 3 and 4, including, without limitation, all registration and filing
fees, printing expenses, fees and disbursements of counsel and independent
public accountants for the Company, fees and expenses (including counsel fees)
incurred in connection with complying with state securities or "blue sky" laws,
fees of the National Association of Securities Dealers, Inc., transfer taxes,
fees of transfer agents and registrars, costs of insurance and fees and
disbursements of one counsel (up to maximum aggregate counsel fees and
disbursements per registration of $50,000) for the sellers of Restricted Stock,
but excluding any Selling Expenses, are called "Registration Expenses." All fees
and disbursements of counsel for the sellers of Restricted Stock in excess of
$50,000 (as adjusted herein) for one counsel and all underwriting discounts,
brokerage fees and selling commissions applicable to the sale of Restricted
Stock are called "Selling Expenses."
The Company will pay all Registration Expenses in connection with each
registration statement under Sections 2, 3 or 4. All Selling Expenses in
connection with each registration statement under Sections 2, 3 or 4 shall be
borne by the participating sellers in proportion to the number of shares sold by
each, or by such participating sellers other than the Company (except to the
extent the Company shall be a seller) as they may agree.
7. Indemnification and Contribution.
(a) In the event of a registration of any of the Restricted Stock
under the Securities Act pursuant to Sections 2, 3 or 4, the Company will
indemnify and hold harmless each seller of such Restricted Stock
thereunder, each underwriter of such Restricted Stock thereunder and each
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other person, if any, who controls such seller or underwriter within the
meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which such seller, underwriter or
controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which such Restricted Stock is registered
under the Securities Act pursuant to Sections 2, 3 or 4, any preliminary
prospectus or final prospectus contained therein, or any amendment or
supplement thereof, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and
will reimburse each such seller, each such underwriter and each such
controlling person for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
damage, liability or action, but the Company will not be liable in any such
case if and to the extent that any such loss, claim, damage or liability
arises out of or is based upon (i) an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with
information furnished in writing by any such seller, any such underwriter
or any such controlling person in writing specifically for use in such
registration statement or prospectus, or (ii) any failure by an
underwriter, or a person controlling such underwriter, to give a final
prospectus to the person claiming an untrue statement or omission, if such
statement or omission appeared in or was omitted from a preliminary
prospectus and was corrected in the final prospectus.
(b) In the event of a registration of any of the Restricted Stock
under the Securities Act pursuant to Sections 2, 3 or 4, each seller of
such Restricted Stock thereunder, severally and not jointly, will indemnify
and hold harmless the Company, each person, if any, who controls the
Company within the meaning of the Securities Act, each officer of the
Company who signs the registration statement, each director of the Company,
each underwriter and each person who controls any underwriter within the
meaning of the Securities Act, against all losses, claims, damages or
liabilities, joint or several, to which the Company or such officer,
director, underwriter or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact
contained in the registration statement under which such Restricted Stock
is registered under the Securities Act pursuant to Sections 2, 3 or 4, any
preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading, or arise out of the failure of such holder of Restricted Stock
to deliver a prospectus to any purchaser of Restricted Stock from such
holder, and will reimburse the Company and each such officer, director,
underwriter and controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending
any such loss, claim, damage, liability or action, but only if and only to
the extent that any such loss, claim, damage or liability arises out of or
is based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in reliance upon and in conformity with
information pertaining to such seller, as such, furnished in writing to the
Company by such seller specifically for use in such registration statement
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or prospectus, or from such holder's failure to deliver a prospectus. The
liability of each seller hereunder shall be limited to the proportion of
any such loss, claim, damage, liability or expense which is equal to the
proportion that the public offering price of the shares sold by such seller
under such registration statement bears to the total public offering price
of all securities sold thereunder, but not in any event to exceed the net
proceeds received by such seller from the sale of Restricted Stock covered
by such registration statement.
(c) Promptly after receipt by an indemnified party hereunder of notice
of the commencement of any action, such indemnified party shall, if a claim
in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to
notify the indemnifying party shall not relieve it from any liability which
it may have to such indemnified party other than under this Section and
shall relieve it from any liability which it may have to such indemnified
party under this Section only if and to the extent the indemnifying party
is prejudiced by such omission. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of
the commencement thereof, the indemnifying party shall be entitled to
participate in and, to the extent it shall wish, to assume and undertake
the defense thereof with counsel reasonably satisfactory to such
indemnified party, and, after notice from the indemnifying party to such
indemnified party of its election so to assume and undertake the defense
thereof, the indemnifying party shall not be liable to such indemnified
party under this Section for any legal expenses subsequently incurred by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation and of liaison with counsel so selected,
but if the interests of the indemnified party reasonably may be deemed to
conflict with the interests of the indemnifying party, the indemnified
party shall have the right to select a separate counsel and to assume such
legal defenses and otherwise to participate in the defense of such action,
with the expenses and fees of such separate counsel and other expenses
related to such participation to be reimbursed by the indemnifying party.
The indemnifying party shall not, in connection with any proceeding or
related proceeding, be liable for the fees and expenses of more than one
separate firm (plus one firm of local counsel in each jurisdiction in which
an action is brought). The indemnified party shall cooperate fully with the
indemnifying party in connection with any negotiation or defense of any
such action or claim by the indemnifying party and shall furnish to the
indemnifying party all information reasonably available to the indemnified
party that relates to such action or claim. The indemnifying party shall
keep the indemnified party fully apprised at all times as to the status of
the defense or any settlement negotiations with respect thereto. If the
indemnifying party elects to defend any such action or claim, then the
indemnified party shall be entitled to participate in such defense with
counsel of its choice at its sole cost and expense. If the indemnifying
party does not assume such defense, the indemnified party shall keep the
indemnifying party apprised at all times as is reasonably practicable as to
the status of the defense; provided, however, that the failure to keep the
indemnifying party so informed shall not affect the obligations of the
indemnifying party hereunder. No indemnifying party shall be liable for any
settlement of any action, claim or proceeding effected without its written
consent; provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No indemnifying
party shall, without the consent of the indemnified party (not to be
unreasonably withheld), consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release
from all liability in respect to such claim or litigation or that requires
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the indemnified party to take any future action (other than the payment of
money that the indemnifying party pays under this section) or refrain from
taking any future action.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any
holder of Restricted Stock exercising rights under this Agreement, or any
controlling person of any such holder, makes a claim for indemnification
pursuant to this Section 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 provides for indemnification in such case, or
(ii) contribution under the Securities Act may be required on the part of
any such selling holder or any such controlling person in circumstances for
which indemnification is provided under this Section; then, and in each
such case, the Company and such holder will contribute to the aggregate
losses, claims, damages or liabilities to which they may be subject (after
contribution from others) in such proportion so that such holder is
responsible for the portion represented by the percentage that the public
offering price of its Restricted Stock offered by the registration
statement bears to the public offering price of all securities offered by
such registration statement, and the Company is responsible for the
remaining portion; but in any such case, (A) no such holder will be
required to contribute any amount in excess of the public offering price of
all such Restricted Stock offered by it pursuant to such registration
statement; and (B) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) will be entitled to contribution from any person or entity who was not
guilty of such fraudulent misrepresentation.
8. Changes in Common Stock or Preferred Stock. If, and as often as, there
is any change in the Common Stock or the Series A Preferred Stock by way of a
stock split, stock dividend, combination or reclassification, or through a
merger, consolidation, reorganization or recapitalization, or by any other
means, appropriate adjustment shall be made in the provisions hereof so that the
rights and privileges granted hereby shall continue with respect to the Common
Stock as so changed.
9. Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Restricted Stock to the public without registration, at all times
when the Company is subject to the reporting requirements of the Exchange Act,
the Company agrees to furnish to each holder of Restricted Stock forthwith upon
request a written statement by the Company as to its compliance with the
reporting requirements of Rule 144 under the Securities Act and of the Exchange
Act, a copy of the most recent annual or quarterly report of the Company, and
such other reports and documents so filed by the Company as such holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing such holder to sell any Restricted Stock without
registration.
10. Representations and Warranties of the Company. The Company represents
and warrants to the Purchaser as follows:
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(a) The execution, delivery and performance of this Agreement by the
Company have been duly authorized by all requisite corporate action and
will not violate any provision of law, any order of any court or other
agency of government, the certificate of incorporation or by-laws of the
Company or any provision of any material indenture, agreement or other
instrument to which it or any or its properties or assets is bound,
conflict with, result in a breach of or constitute (with due notice or
lapse of time or both) a default under any such indenture, agreement or
other instrument or result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever upon any of the properties
or assets of the Company.
(b) This Agreement has been duly executed and delivered by the Company
and constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms (subject to equitable principles
and to applicable bankruptcy, reorganization, insolvency, fraudulent
conveyance and transfer, moratorium and other similar laws affecting the
enforceability of creditors' rights generally and to applicable
restrictions on the enforceability of indemnification and contribution).
11. Make-Whole Provision.
(a) Subject to the terms of the Intercreditor Agreement, if a holder
of Preferred Shares converts them to Common Stock at any time, or a holder
of Warrants exercises them after the earlier of the prepayment in full or
final maturity of the Notes, and, in either case, such holder sells the
Conversion Shares or the Warrant Shares under a registration statement
filed by the Company pursuant to this Agreement at an average price per
share (the "Average Sale Price") less than the average of the closing price
per share of the Company's Common Stock for five trading days prior to the
date of conversion of such Preferred Shares or the exercise of such
Warrants (the "Exercise Date Market Price"), the Company will pay to such
holder in cash an amount determined by multiplying the number of shares of
Common Stock so sold by the excess of the Exercise Date Market Price over
the Average Sale Price. In lieu of making such payment in cash, the Company
shall have the option of delivering to such holder a number of shares of
Common Stock determined by dividing the amount of cash otherwise payable by
the Average Sale Price.
(b) Subsection (a) will not apply to the Warrant Shares or Conversion
Shares if, following the sale of all of the Warrant Shares and Conversion
Shares at the actual sale prices therefor and the receipt of the proceeds
thereof, the Purchaser shall have achieved an Investment Multiple of 4.5.
"Investment Multiple" has the meaning given to that term in Section 11 of
the Warrant Agreement, except that proceeds not actually received shall not
be deemed to have been received.
(c) The number of shares of Common Stock that the Company shall be
required to issue pursuant to this Section shall not exceed 12,500,000 less
the number of Warrant Shares issuable on the exercise of Warrants issued
pursuant to Section 11 of the Warrant Agreement.
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(d) The Company will reserve sufficient shares of its Common Stock for
issuance pursuant to this Section. If for any reason the authorized but
unissued shares of Common Stock, together with shares of Common Stock held
by the Company in treasury or held by any subsidiary of the Company, are
insufficient for the Company to issue shares as required by this Section,
the Company will use commercially reasonable efforts to amend its
certificate of incorporation to increase its authorized Common Stock to an
amount that is sufficient (it being understood that failure to effect such
amendment despite the Company's use of commercially reasonable efforts will
not constitute a violation of this Agreement).
12. Miscellaneous.
(a) The rights of the Purchaser hereunder, including the right to have
the Company register for resale the shares of Restricted Stock in
accordance with the terms of this Agreement, shall be automatically
assignable by the Purchaser to any transferee of such Purchaser of all or a
portion of the shares of the Restricted Stock if: (i) the Purchaser agrees
in writing with the transferee or assignee to assign such rights, and a
copy of such agreement is furnished to the Company within a reasonable time
after such assignment, (ii) the Company is, within a reasonable time after
such transfer or assignment, furnished with written notice of (A) the name
and address of such transferee or assignee, and (B) the securities with
respect to which such registration rights are being transferred or
assigned, (iii) following such transfer or assignment the further
disposition of such securities by the transferee or assignees is restricted
under the Securities Act and applicable state securities laws, (iv) the
transferee or assignee agrees in writing with the Company to be bound by
all of the provisions of this Agreement, (v) the transferee or assignee
agrees to be bound by all of the provisions of the Intercreditor Agreement
and executes a counterpart thereof or a joinder thereto, and (vi) such
transfer shall have been made in accordance with the applicable
requirements of this Agreement and the Purchase Agreement. The rights to
assignment shall apply to the Purchaser and to subsequent successors and
permitted assigns. All covenants and agreements contained in this Agreement
by or on behalf of any of the parties hereto shall bind and inure to the
benefit of the respective successors and permitted assigns of the parties
hereto (but excluding any transferees of any Warrants, Preferred Shares or
Restricted Stock other than in compliance with the first sentence of this
subsection (a)), whether so expressed or not.
(b) All notices, requests, consents and other communications hereunder
to any party shall be deemed to be sufficient if contained in a written
instrument delivered in person or duly sent by overnight courier, facsimile
transmission or registered or certified mail, return receipt requested,
postage prepaid, addressed to such party at the address set forth below or
such other address as may hereafter be designated in writing by the
addressee to the other parties:
if to the Company or the Purchaser, at the address of such party set
forth in the Purchase Agreement;
if to any subsequent holder of Warrants, Preferred Shares or
Restricted Stock, to it at such address as may have been furnished to the
Company in writing by such holder.
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All such notices and communications shall be deemed to have been received in the
case of (a) facsimile transmission, on the date sent, (b) personal delivery, on
the date of such delivery, (c) overnight courier, on the first business day
following delivery to such courier and (d) mailing, on the fifth day after the
posting thereof.
(c) This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware.
(d) This Agreement, the Purchase Agreement and the other Transaction
Documents (as defined therein) constitute the entire agreement of the
parties with respect to the subject matter hereof and supersede and replace
all prior agreements and understanding concerning such subject matter. This
Agreement may be amended or modified, or any provision hereof may be
waived, with the written consent of the Company and the holders of a
majority of the outstanding shares of Restricted Stock, and not otherwise.
(e) 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.
(f) The obligations of the Company to register shares of Restricted
Stock under Sections 2, 3 or 4 shall terminate on the tenth anniversary of
the date of this Agreement.
(g) If requested in writing by the underwriters for an underwritten
public offering of securities of the Company, each holder of Restricted
Stock who is a party to this Agreement shall agree not to sell publicly any
shares of Restricted Stock or any other shares of Common Stock (other than
shares of Restricted Stock or other shares of Common Stock being registered
in such offering), without the consent of such underwriters, for a period
of not more than 180 days following the effective date of the registration
statement relating to such offering, but only if all persons entitled to
registration rights with respect to shares of Common Stock who are not
parties to this Agreement, all other persons selling shares of Common Stock
in such offering, and all executive officers and directors of the Company
shall also have agreed not to sell publicly their Common Stock under the
circumstances and pursuant to the terms set forth in this subsection.
(h) The Company shall not grant to any third party any registration
rights more favorable than or inconsistent with any of those contained
herein, so long as any of the registration rights under this Agreement
remains in effect, without the consent required by subsection (d).
(i) If any provision of this Agreement shall be held to be illegal,
invalid or unenforceable, such illegality, invalidity or unenforceability
shall attach only to such provision and shall not in any manner affect or
render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
- S-1-
IN WITNESS WHEREOF, the parties have executed this Agreement the date first
written above.
MEDICAL TECHNOLOGY SYSTEMS, INC.
By ___________________________________
Name:
Title:
EUREKA I, L.P.
By: EUREKA MANAGEMENT, L.P.,
its sole general partner
By: BERWIND CAPITAL PARTNERS, LLC,
its sole general partner
By: ________________________________
Xxxxxxxxx X. Xxxxx,
President
