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ORPHAN MEDICAL, INC.
STOCK PURCHASE AGREEMENT
Agreement, made and entered into as of the 2nd day of August, 1999,
between Orphan Medical, Inc., a Minnesota corporation (the "Company"), and each
of the persons listed on Schedule 1 to this agreement (the "Investors").
For good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the Company and the Investors agree as follows:
1. Authorization of Securities. The Company proposes to authorize,
issue and sell an aggregate of 2,950 shares of Series B Convertible Preferred
Stock, par value $0.01 per share (the "Series B Preferred Stock"), which shall
be issued pursuant to and shall be entitled to such preferences, rights and
benefits as are set forth in the capital stock provisions of the Company's
Certificate of Designation, which shall be in the form of the attached Exhibit
A. On or before the Closing Date (as that term is defined in Section 3 hereof),
the Company shall cause its Articles of Incorporation to be amended so that they
will contain provisions identical to Exhibit A. As used in this agreement, the
term "Preferred Shares" shall mean the shares of Series B Convertible Preferred
Stock to be sold pursuant to this agreement and all shares of Series B
Convertible Preferred Stock issued in exchange or substitution therefor.
2. Sale and Purchase of Preferred Shares.
(a) Subject to the terms and conditions hereof, the Company agrees
to sell to each Investor, and each Investor severally agrees to purchase
from the Company on the Closing Date (as that term is defined in Section 3
hereof), the number of Preferred Shares set forth opposite its name on
Schedule 1. Preferred Shares acquired by the Investors on the Closing Date
shall be accompanied by stock purchase warrants (the "Warrants") which
will give Investors the right to purchase that number of shares of either
Series C Convertible Preferred Stock, $0.01 par value (the "Series C
Preferred Stock") or Series D Non-Voting Preferred Stock, par value $0.01
per share (the "Series D Preferred Stock") as is designated on Schedule 1
after each Investor's name. The purchase price of Preferred Shares
acquired by the Investors on the Closing Date shall be $1,000 per share,
and there shall be no additional payment for the Warrants.
(b) The Warrants shall be evidenced by an instrument in the
identical form of the attached Exhibit B. Upon exercise of the Warrants,
the Series C Preferred Stock or Series D Preferred Stock, as the case may
be, shall be issued pursuant to, and shall be entitled to, such rights and
benefits as are set forth in Exhibit A.
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3. Closing. The closing of the transactions contemplated by Section
2 of this agreement shall take place at the offices of Xxxxxx & Xxxxxxx LLP, 000
Xxxxx Xxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000, at 10:00 A.M., Minneapolis
time, on August 2, 1999 (the "Closing Date") or at such other place or different
time or day as may be mutually acceptable to the Investors and the Company.
At the closing, the Company will deliver to each Investor a
certificate or other instrument, dated such Closing Date, representing the
Preferred Shares purchased by such Investor on such Closing Date and will also
deliver an instrument in the form attached hereto as Exhibit B evidencing the
Warrants to which each such Investor is entitled, registered in its name as
stated on Schedule 1 (or in the name of its nominee if it so specifies to the
Company at least 48 hours prior to such Closing Date) against payment to the
Company of the purchase price of Preferred Shares and Warrants being purchased
by such Investor.
4. Representations and Warranties by the Company. In order to induce
each Investor to enter into this agreement and to purchase the number of
Preferred Shares and Warrants set forth after its name on Schedule 1, the
Company hereby represents and warrants to each Investor that, except as
disclosed in the attached Exhibit C:
4.1 Organization, Standing, etc. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Minnesota, and has the requisite corporate power and authority to own
its properties and to carry on its business as it is now being conducted. The
Company has the requisite corporate power and authority to issue (i) the
Preferred Shares, (ii) the shares of its common stock into which the Preferred
Shares are convertible (the "Conversion Shares"), (iii) the Warrants, (iv) the
shares of Series C Preferred Stock issuable upon exercise of the Warrants, (v)
the shares of Series D Preferred Stock issuable upon exercise of the Warrants,
(vi) the shares of Series D Stock issuable upon conversion of the Series C
Preferred Stock (the "Series D Conversion Shares"), (vii) the common stock
issuable upon conversion of the Series D Preferred Stock issuable upon exercise
of the Warrants in the event of a Transfer Conversion (as that term is defined
in Section 7 of Exhibit B)(the "Transfer Conversion Shares") and to otherwise
perform its obligations under this agreement.
4.2 Governing Instruments. The copies of the Articles of
Incorporation and bylaws of the Company which have been delivered to legal
counsel for the Investors prior to the execution of this agreement are true and
complete copies of the duly and legally adopted Articles of Incorporation and
bylaws of the Company in effect as of the date of this agreement.
4.3 Subsidiaries, Etc. The Company does not have any direct or
indirect ownership interest in any corporation, partnership, joint venture,
association or other business enterprise. If any entity is listed on Exhibit C
and the Company owns a controlling interest in such entity, each of the
representations and warranties set forth in this Article 4 are
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being hereby restated with respect to such entity (modified as appropriate to
the nature of such entity).
4.4 Qualification. The Company is duly qualified, licensed or
domesticated as a foreign corporation in good standing in each jurisdiction
wherein the nature of its activities or the properties owned or leased by it
makes such qualification, licensing or domestication necessary and in which
failure to so qualify or be licensed or domesticated would have a material
adverse impact upon its business.
4.5 Financial Statements. Attached to this agreement as
Exhibit D are (a) a balance sheet, as at December 31, 1998 for the Company,
together with the related statements of income and retained earnings and changes
in financial position for the fiscal year then ended which balance sheet and
related statements have been audited by Ernst & Young LLP and (b) a balance
sheet, as at June 30, 1999 for the Company, together with the related statements
of operations and cash flows for the six (6)-month period then ended. Such
financial statements (i) are in accordance with the books and records of the
Company, (ii) present fairly the financial condition of the Company at the
balance sheets dates and the results of its operations for the periods therein
specified, and (iii) have been prepared in accordance with generally accepted
accounting principles applied on a basis consistent with prior accounting
periods other than as set forth in the footnotes thereto and, with respect to
the interim financial statements, normal year end adjustments which are
immaterial in the aggregate. Without limiting the generality of the foregoing,
the balance sheets or notes thereto disclose all of the debts, liabilities and
obligations of any nature (whether absolute, accrued or contingent and whether
due or to become due) of the Company at December 31, 1998 and June 30, 1999
which, individually or in the aggregate, are material and which in accordance
with generally accepted accounting principles would be required to be disclosed
in such balance sheets, and include appropriate reserves for all taxes and other
liabilities accrued as of such dates but not yet payable.
4.6 Tax Returns and Audits. All required federal, state and
local tax returns or appropriate extension requests of the Company have been
filed, and all federal, state and local taxes required to be paid with respect
to such returns have been paid or provision for the payment thereof has been
made. The Company is not delinquent in the payment of any such tax or in the
payment of any assessment or governmental charge. The Company has not received
notice of any tax deficiency proposed or assessed against it, and it has not
executed any waiver of any statute of limitations on the assessment or
collection of any tax. The Company has not received notice that any of the
Company's tax returns has been audited by governmental authorities. The Company
does not have any tax liabilities except those reflected on Exhibit D or those
incurred in the ordinary course of business since December 31, 1998.
4.7 Changes, Dividends, etc. Except for the transactions
contemplated by this agreement, since December 31, 1998, the Company has not:
(i) incurred any debts, obligations or liabilities, absolute, accrued or
contingent and whether due or to become due,
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except current liabilities incurred in the ordinary course of business which
(individually or in the aggregate) will not materially and adversely affect the
business, properties or prospects of the Company; (ii) paid any obligation or
liability other than, or discharged or satisfied any liens or encumbrances other
than those securing, current liabilities, in each case in the ordinary course of
business; (iii) except for distributions made with respect to the Senior
Convertible Preferred Stock (as that term is defined in Section 4.15(a) hereof),
declared or made any payment to or distribution to its shareholders as such, or
purchased or redeemed any of its shares of capital stock, or obligated itself to
do so; (iv) mortgaged, pledged or subjected to lien, charge, security interest
or other encumbrance any of its assets, tangible or intangible, except in the
ordinary course of business; (v) sold, transferred or leased any of its assets
except in the ordinary course of business; (vi) suffered any physical damage,
destruction or loss (whether or not covered by insurance) materially and
adversely affecting the properties, business or prospects of the Company; (vii)
entered into any transaction other than in the ordinary course of business;
(viii) encountered any labor difficulties or labor union organizing activities;
(ix) issued or sold any shares of capital stock or other securities (other than
shares issued upon exercise of warrants or options that were outstanding as of
December 31, 1998) or granted any options, warrants, or other purchase rights
with respect thereto other than pursuant to this agreement; (x) made any
acquisition or disposition of any material assets or became involved in any
other material transaction, other than for fair value in the ordinary course of
business; (xi) increased the compensation payable, or to become payable, to any
of its directors or employees, or made any bonus payment or similar arrangement
with any of its directors or employees or increased the scope or nature of any
fringe benefits provided for its employees or directors, other than normal
compensation adjustments and bonuses and adjustments and bonuses made in the
ordinary course of business consistent with industry custom and practices; or
(xii) agreed to do any of the foregoing other than pursuant hereto. There has
been no material adverse change in the financial condition, operations,
prospects, results of operations or business of the Company since December 31,
1998.
4.8 SEC Reports and Financial Statements. The Company has
filed with the Securities and Exchange Commission (the "SEC") all forms,
reports, schedules, statements and other documents required to be filed by it
with the SEC, including, without limitation, the Company's Registration
Statement filed on Form S-1 on March 3, 1995, Registration Statement filed on
Form S-1 on March 11, 1996, Annual Reports on Form 10-K and Quarterly Reports on
Form 10-Q (as such documents have been amended since the time of their filing,
collectively, the "SEC Documents"), and have filed all exhibits required to be
filed with the SEC Documents. As of their respective dates or, if amended, as of
the date of the last such amendment, the SEC Documents, including, without
limitation, any financial statements or schedules included therein, complied in
all material respects with the applicable requirements of the Securities Act and
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and did
not contain any untrue statement of a material fact or omit to state a material
fact
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required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
4.9 Title to Properties and Encumbrances. Except as otherwise
set forth in Exhibit D and the SEC Documents, and except for properties and
assets disposed of in the ordinary course of business since December 31, 1998,
the Company has good and marketable title to all of its properties and assets,
including without limitation the properties and assets included in the balance
sheet at December 31, 1998 and the properties and assets used in the conduct of
its business, which properties and assets are not subject to any mortgage,
pledge, lease, lien, charge, security interest, encumbrance or restriction,
except (a) those which are shown and described in Exhibit D, (b) liens for taxes
and assessments or governmental charges or levies not at the time due or in
respect of which the validity thereof shall currently be contested in good faith
by appropriate proceedings, or (c) those which do not materially affect the
value of or interfere with the use made of such properties and assets.
4.10 Conditions of Properties. The plant, offices and
equipment of the Company have been kept in good condition and repair, subject to
normal wear and tear.
4.11 Compliance With Applicable Laws and Other Instruments.
The business and operations of the Company have been and are being conducted in
all material respects in accordance with all applicable laws, rules and
regulations of all governmental authorities. Neither the execution nor delivery
of, nor the performance of or compliance with, this agreement nor the
consummation of the transactions contemplated hereby will, with or without the
giving of notice or passage of time, result in any breach of, or constitute a
default under, or result in the imposition of any lien or encumbrance upon any
asset or property of the Company pursuant to, any agreement or other instrument
to which the Company is a party or by which it or any of its properties, assets
or rights is bound or affected, and will not violate the Articles of
Incorporation or bylaws of the Company. The Company is not in violation of its
Articles of Incorporation or bylaws nor in violation of, or in default under,
any lien, indenture, mortgage, lease, agreement, instrument, commitment or
arrangement. The Company is not subject to any restriction which would prohibit
it from entering into or performing its obligations under this agreement.
4.12 Preferred Shares, Warrants, Conversion Shares, Series C
Preferred Stock, Series D Preferred Stock, Series D Conversion Shares and
Transfer Conversion Shares. The Preferred Shares, when issued and paid for
pursuant to the terms of this agreement, will be duly authorized, validly issued
and outstanding, fully paid, nonassessable shares and shall have all rights,
privileges and preferences specified in the Certificate of Designation and shall
be free and clear of all pledges, liens, encumbrances and restrictions. The
Warrants, when issued pursuant to the terms of this agreement, will be binding
obligations of the Company in accordance with their terms. The Conversion Shares
have been reserved for issuance and when issued upon conversion of the Preferred
Shares will be duly authorized, validly issued and outstanding, fully paid,
nonassessable and free and clear of all pledges, liens, encumbrances and
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restrictions. The shares of Series C Preferred Stock issuable upon exercise of
the Warrants, the shares of Series D Preferred Stock issuable upon exercise of
the Warrants, the Series D Conversion Shares and the Transfer Conversion Shares
have been reserved for issuance and when issued upon exercise of the Warrants or
any conversion rights thereunder will be duly authorized, validly issued and
outstanding, fully paid, nonassessable and free and clear of all pledges, liens,
encumbrances and restrictions.
4.13 Securities Laws. Based in part upon the representations
of the Investors in article 5, no consent, authorization, approval, permit or
order of or filing with any governmental or regulatory authority is required
under current laws and regulations in connection with the execution and delivery
of this agreement or the offer, issuance, sale or delivery of the Preferred
Shares, the Warrants, the Conversion Shares, the Series C Preferred Stock, the
Series D Preferred Stock, the Series D Conversion Shares or the Transfer
Conversion Shares, other than the qualification thereof, if required, under
applicable state securities laws, which qualification has been or will be
effected as a condition of these sales. The Company has not, directly or through
an agent, offered the Preferred Shares, the Warrants or any similar securities
for sale to, or solicited any offers to acquire such securities from, persons
other than the Investors and other accredited investors. Under the circumstances
contemplated by this agreement and assuming the accuracy of the representations
of the Investors in article 5, the offer, issuance, sale and delivery of the
Preferred Shares, the Warrants, the Conversion Shares, the Series C Preferred
Stock, the Series D Preferred Stock, the Series D Conversion Shares and the
Transfer Conversion Shares will not, under current laws and regulations, require
compliance with the prospectus delivery or registration requirements of the
federal Securities Act of 1933, as amended (the "Securities Act").
4.14 Intellectual Property.
(a) Intellectual Property Assets--The term "Intellectual Property
Assets" includes:
(1) the name "Orphan Medical," all fictional business names,
trading names, registered and unregistered trademarks, service
marks, and applications (collectively, "Marks");
(2) all patents, patent applications, and inventions and
discoveries that may be patentable (collectively, "Patents");
(3) all copyrights in both published works and unpublished
works (collectively, "Copyrights");
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(4) all know-how, trade secrets, confidential information,
customer lists, software, technical information, data, process
technology, plans, drawings, and blue prints (collectively, "Trade
Secrets"),
in each case owned, used, or licensed by the Company as licensee or licensor.
(b) Agreements--The SEC Documents contain a complete and accurate
list and summary description, including any royalties paid or received by the
Company, of all material contracts and agreements relating to the Intellectual
Property Assets to which the Company is a party or by which the Company is
bound, except for any license implied by the sale of a product and perpetual,
paid-up licenses for commonly available software programs with a value of less
than $50,000 under which the Company is the licensee. There is no outstanding
and, to the Company's knowledge, no threatened dispute or disagreement with
respect to any such agreement.
(c) Know-How Necessary to Conduct the Company's Business
(1) To the Company's knowledge, the Intellectual Property
Assets are all those necessary for the operation of the Company's
business as it is currently conducted. The Company either owns or
has licensed sufficient rights to each of the Intellectual Property
Assets, free and clear of all liens, security interests, charges,
encumbrances, equities, and other adverse claims, and has the right
to use without payment to a third party, except for royalties
described in the SEC Documents, all of the Intellectual Property
Assets.
(2) The Company has a policy that requires all current
employees of the Company to execute written contracts with the
Company that assign to the Company all rights to any inventions,
improvements, discoveries, or information relating to the business
of the Company, and all of the Company's former and current
employees have executed such a contract. No employee of the Company
has entered into any contract or agreement that restricts or limits
in any way the scope or type of work in which the employee may be
engaged or requires the employee to transfer, assign, or disclose
information concerning his work to anyone other than the Company.
(d) Patents
(1) The SEC Documents contain a complete and accurate list and
summary description of all Patents. Except as set forth on Exhibit
C, the Company owns no Patents. The Company has exclusive rights to
use the Patents that it uses or licenses, in each case free and
clear of all liens, security interests, charges, encumbrances,
entities, and other adverse claims except for any royalties
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described in the SEC Documents and for security interests in favor
of Riverside Bank.
(2) To the Company's knowledge, all of the Patents licensed to
or used by the Company, are currently in compliance with formal
legal requirements (including payment of filing, examination, and
maintenance fees and proofs of working or use), and, to the
Company's knowledge, are valid and enforceable.
(3) No Patent has been or is now involved in any interference,
reissue, reexamination, or opposition proceeding or has had an
unfavorable final ruling against its interests in any such
proceeding. To the Company's knowledge, there is no potentially
interfering patent or patent application of any third party.
(4) To the Company's knowledge, no Patent is infringed or has
been challenged or threatened in any way. To the Company's
knowledge, none of the products manufactured and sold, nor any
process or know-how used, by the Company infringes or is alleged to
infringe any patent or other proprietary right of any other person.
(5) All products made, used, or sold under the Patents have
been marked in compliance with 35 United States Code ss. 287 and the
comparable requirements of any jurisdiction in which the products
are made, used or sold.
(e) Trademarks
(1) The Company is the owner of all right, title, and interest
in and to each of its Marks, free and clear of all liens, security
interests, charges, encumbrances, equities, and other adverse
claims.
(2) All Marks that have been registered with the United States
Patent and Trademark Office are currently in compliance with all
formal legal requirements (including the timely post-registration
filing of affidavits of use and incontestability and renewal
applications), and, to the Company's knowledge, are valid and
enforceable.
(3) No Xxxx has been or is now involved in any opposition,
invalidation, or cancellation and, to the Company's knowledge, no
such action is threatened with the respect to any of the Marks.
(4) To the Company's knowledge, there is no potentially
interfering trademark or trademark application of any third party.
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(5) To the Company's knowledge, no Xxxx is infringed or has
been challenged or threatened in any way. To the Company's
knowledge, none of the Marks used by the Company infringes or is
alleged to infringe any trade name, trademark, or service xxxx of
any third party.
(6) All products and materials containing a Xxxx marking in
compliance with 15 United States Code ss. 1111 or the comparable
requirements of any jurisdiction in which such products and
materials are sold.
(f) Copyrights
(1) The Company is the owner of all right, title, and interest
in and to each of its copyrights, free and clear of all liens,
security interests, charges, encumbrances, equities, and other
adverse claims.
(2) All the Copyrights are currently in compliance with legal
requirements and are, to the Company's knowledge, valid and
enforceable.
(3) No Copyright is infringed or, to the Company's knowledge,
has been challenged or threatened in any way. To the Company's
knowledge, none of the subject matter of any of the Copyrights
infringes or is alleged to infringe any copyright of any third party
or is a derivative work based on the work of a third party.
(g) Trade Secrets
(1) The Company has taken reasonable precautions to protect
the confidentiality and value of the Trade Secrets.
(2) The Company either owns or has licensed the rights to use
the Trade Secrets that are necessary and sufficient for the
operation of the Company's business as it is currently conducted. To
the Company's knowledge, those Trade Secrets that are not part of
the public knowledge or literature have not been used, divulged, or
appropriated either for the benefit of any person or to the
detriment of the Company.
(3) The Company has not been charged with misappropriation of
know-how or trade secrets. To the Company's knowledge, no third
party has misappropriated or attempted to misappropriate the Trade
Secrets.
4.15 Capital Stock
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(a) At the date hereof, the authorized capital stock of the Company
consists of 25,000,000 shares, of which 14,000 shares are designated as
Senior Convertible Preferred Stock, $0.01 par value (the "Senior
Convertible Preferred Stock"). As of the date hereof, 6,588,707 shares of
undesignated capital stock, $.01 par value (the "Common Stock") are issued
and outstanding and 8,088 shares of Senior Convertible Preferred Stock are
issued and outstanding. All of the outstanding shares of the Company were
duly authorized, validly issued and are fully paid and nonassessable.
Except as set forth on Exhibit C, the SEC Documents (as that term is
defined in paragraph 4.8 hereof) contain an accurate and complete
description of all outstanding subscriptions, options, warrants, calls,
contracts, demands, commitments, convertible securities or other
agreements or arrangements of any character or nature whatever, other than
this agreement, under which the Company is obligated to issue any
securities of any kind representing an ownership interest in the Company.
Neither the offer nor the issuance or sale of the Preferred Shares or the
Warrants constitutes an event, under any anti-dilution provisions of any
securities issued or issuable by the Company or any agreements with
respect to the issuance of securities by the Company, which will either
increase the number of shares issuable pursuant to such provisions or
decrease the consideration per share to be received by the Company
pursuant to such provisions, except that such issuance and sale does
constitute such an event under the anti-dilution provisions of the
Company's Senior Convertible Preferred Stock. Except for the Senior
Convertible Preferred Stock and the warrants that, as of June 30, 1999,
entitled holders to purchase an aggregate of 206,725 shares of Common
Stock (which warrants were originally issued on May 19, 1995 to X.X.
Xxxxxxxx & Company and a portion of which were subsequently assigned to
employees and affiliates of X.X. Xxxxxxxx & Company) (the "Xxxxxxxx
Warrants"), the Company is not a party to any agreement or understanding
pursuant to which it is obligated to register any shares of its capital
stock or other securities under the Securities Act or any other state
securities laws. No holder of any security of the Company is entitled to
any preemptive or similar rights to purchase any securities of the Company
from the Company; provided, however, that nothing in this section 4.15
shall affect, alter or diminish any right granted to the Investors in this
agreement. All outstanding securities of the Company have been registered
in accordance with the Securities Act or issued in full compliance with an
exemption or exemptions from the registration and prospectus delivery
requirements of the Securities Act and from the registration and
qualification requirements of all applicable state securities laws.
(b) Upon consummation of the transactions contemplated herein, the
authorized capital stock of the Company shall consist of 25,000,000
shares, of which 14,000 shares are designated as Senior Convertible
Preferred Stock, 5,000 shares are designated as Series B Convertible
Preferred Stock, 4,000 shares are designated as Series C Convertible
Preferred Stock, 1,500,000 shares are designated as Series D Non-Voting
Preferred Stock and 6,588,707 shares are Common Stock.
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(c) Upon consummation of the transactions contemplated herein, the
Company shall have reserved a sufficient number of its shares of
undesignated capital stock for issuance as Conversion Shares and Transfer
Conversion Shares.
4.16 Outstanding Debt. The Company does not have any material
indebtedness incurred as the result of a direct borrowing of money, including,
but not limited to, indebtedness with respect to trade accounts, except as set
forth in Exhibit D or the notes thereto. The Company is not in default in the
payment of the principal of or interest or premium on any such indebtedness, and
no event has occurred or is continuing under the provisions of any instrument,
document or agreement evidencing or relating to any such indebtedness which with
the lapse of time or the giving of notice, or both, would constitute an event of
default thereunder.
4.17 Corporate Acts and Proceedings. This agreement and the
Warrants have been duly authorized by all necessary corporate action on behalf
of the Company, has been duly executed and delivered by authorized officers of
the Company, and is a valid and binding agreement on the part of the Company
that is enforceable against the Company in accordance with its terms, except as
the enforceability thereof may be limited by bankruptcy, insolvency, moratorium,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally and to judicial limitations on the enforcement of the remedy of
specific performance and other equitable remedies. All corporate and shareholder
action necessary to the authorization, creation, issuance and delivery of the
Preferred Shares, the Warrants, the Conversion Shares, the Series C Preferred
Stock, the Series D Preferred Stock, the Series D Conversion Shares and the
Transfer Conversion Shares has been taken by the Company, or will be taken by
the Company on or prior to the Closing Date.
4.18 Brokers or Finders. No person, firm or corporation has or
will have, as a result of any act or omission of the Company, any right,
interest or valid claim against the Company or any Investor for any commission,
fee or other compensation as a finder or broker in connection with the
transactions contemplated by this agreement. The Company will indemnify and hold
each of the Investors harmless against any and all liability with respect to any
such commission, fee or other compensation which may be payable or determined to
be payable in connection with the transactions contemplated by this agreement.
4.19 Litigation; Governmental Proceedings. There are no legal
actions, suits, arbitrations or other legal, administrative or governmental
proceedings or investigations pending or, to the knowledge of the Company,
threatened against the Company, or its properties or business, and the Company
is not aware of any facts which are likely to result in or form the basis for
any such action, suit or other proceeding. The Company is not in default with
respect to any judgment, order or decree of any court or any governmental agency
or instrumentality. The Company has not been threatened with any action or
proceeding under any business or zoning ordinance, law or regulation.
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4.20 No Undisclosed Liabilities. Except for liabilities not in
excess of $50,000 individually or $100,000 in the aggregate, each incurred in
the ordinary course of business and consistent with past practice, and
liabilities incurred in connection with the consummation of the transactions
contemplated hereby (none of which, individually or in the aggregate, could
reasonably have a material adverse effect on the business, operations, financial
condition, prospects or results of operation of the Company) since December 31,
1998, the Company has not incurred any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) which would be required by
GAAP to be reflected on a consolidated balance sheet of the Company (including
the notes thereto), or which individually or in the aggregate, could reasonably
be expected to have a material adverse effect on the business, operations,
financial condition, prospects or results of operations of the Company.
4.21 Insurance. There is in full force and effect one or more
policies of insurance issued by insurers of recognized responsibility, insuring
the Company and its properties and business against such losses and risks, and
in such amounts, as are customary in the case of corporations of established
reputation engaged in the same or similar businesses and similarly situated. The
Company has not been refused any insurance coverage sought or applied for, and
the Company has no reason to believe that it will be unable to renew its
existing insurance coverage as and when the same shall expire upon the terms
similar to those presently in effect, other than possible increases in premiums
that do not result from any act or omission of the Company.
4.22 Material Contracts.
(a) The SEC Documents contain a description, as of the date of
this agreement, of all material agreements or instruments to which
the Company is a party or by which the Company is bound
(collectively, the "Material Contracts").
(b) Each of the Material Contracts is in full force and effect
and constitutes a valid and binding obligation of the Company and,
to the Company's knowledge, the other party thereto.
4.23 Transactions with Affiliates. Except as set forth in the
SEC Documents, none of the officers, employees, directors or other affiliates of
the Company are a party to any transactions with the Company. There have been no
assumptions or guarantees by the Company of any obligations of such persons.
4.24 Completeness and Accuracy of Information. No
representation or warranty of the Company contained in this agreement contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained herein not misleading in
light of the circumstances in which the same were made.
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4.25 Products: Regulatory Matters.
(a) There are no regulatory actions by the United States Food
and Drug Administration ("FDA") or other such similar regulatory
body pending or, to the Company's knowledge, threatened against the
Company with respect to any pharmaceutical products that could
reasonably be expected to have a material adverse effect on the
business, operations, financial condition, prospects or results of
operation of the Company.
(b) All pharmaceutical products of the Company (i) have been
produced in accordance with good manufacturing practices, (ii)
comply with all applicable requirements of the FDA and applicable
state regulations and (iii) to the Company's knowledge, do not
violate or conflict with the rights of any third party.
(c) To the Company's knowledge, (i) there is no basis for a
recall, withdrawal or seizure by any governmental entity of any
pharmaceutical product of the Company and (ii) there are no facts
which would cause the Company to withdraw, recall or seize any
pharmaceutical product of the Company from the market or terminate
any applications for new drugs which have been submitted by the
Company to the FDA.
(d) (i) No pharmaceutical product of the Company has been
recalled by the Company (whether voluntary or otherwise) at any time
during the past two (2) years and (ii) there are no pending
proceedings, nor have there been any proceedings within the last two
(2) years, before any governmental entity seeking the recall,
withdrawal or seizure of any pharmaceutical product of the Company
from the market.
(e) All statements of the Company set forth in the SEC
Documents regarding the Company's orphan drug designations and the
status of its pharmaceutical products are true and correct in all
material respects.
4.26 Employee Benefits. The SEC Documents and Exhibit C hereto
contain all information regarding employee benefit plans that is material to the
business, operations and financial condition of the Company. To the Company's
knowledge, the execution and delivery of this agreement and the sale of the
Preferred Shares thereunder will not involve any prohibited transaction within
the meaning of the Employee Retirement Income Security Act of 1974, as amended
or Section 4975 of the Internal Revenue Code of 1986, as amended.
4.27. Issuance of Additional Equity Securities. The issuance
of the Preferred Shares, the Conversion Shares, the Series C Preferred Stock,
the Series D Preferred
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Stock, the Series D Conversion Shares and the Transfer Conversion Shares as
contemplated by this agreement, does not require the approval of the any of the
Company's shareholders under state or federal law or regulations, or Nasdaq
Marketplace Rules.
5. Representations of the Investors. Each Investor represents for
itself that:
5.1 Investment Intent. The Preferred Shares and Warrants being
acquired by such Investor are being purchased for investment for such Investor's
own account and not with the view to, or for resale in connection with, any
distribution or public offering thereof. Such Investor understands that the
Preferred Shares and Warrants have not been registered under the Securities Act
or any state securities laws by reason of their contemplated issuance in
transactions exempt from the registration requirements of the Securities Act
pursuant to Section 4(2) thereof and applicable state securities laws, and that
the reliance of the Company and others upon these exemptions is predicated in
part upon this representation by each Investor. Such Investor further
understands that the Preferred Shares and Warrants may not be transferred or
resold without (i) registration under the Securities Act and any applicable
state securities laws, or (ii) an exemption from the requirements of the
Securities Act and applicable state securities laws.
5.2 Location of Principal Office, Qualification as an
Accredited Investor, Etc. The state in which such Investor's principal office
(or domicile, if such Investor is an individual) is located is the state set
forth in such Investor's address on Schedule 1. Such Investor acknowledges that
the Company has made available to such Investor at a reasonable time prior to
the execution of this agreement the opportunity to ask questions and receive
answers concerning the terms and conditions of the sale of securities
contemplated by this agreement and to obtain any additional information (which
the Company possesses or can acquire without unreasonable effort or expense) as
may be necessary to verify the accuracy of information furnished to such
Investor. Such Investor (a) is able to bear the loss of its entire investment in
the Preferred Shares without any material adverse effect on its business,
operations or prospects, and (b) has such knowledge and experience in financial
and business matters that it is capable of evaluating the merits and risks of
the investment to be made by it pursuant to this agreement.
5.3 Acts and Proceedings. This agreement has been duly
authorized by all necessary action on the part of such Investor, has been duly
executed and delivered by such Investor, and is a valid and binding agreement of
such Investor.
5.4 No Brokers or Finders. No person, firm or corporation has
or will have, as a result of any act or omission by such Investor, any right,
interest or valid claim against the Company for any commission, fee or other
compensation as a finder or broker, or in any similar capacity, in connection
with the transactions contemplated by this agreement. Such Investor will
indemnify and hold the Company harmless against any and all liability with
respect
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to any such commission, fee or other compensation which may be payable or
determined to be payable as a result of the actions of such Investor in
connection with the transactions contemplated by this agreement.
5.5 Exculpation Among Investors. Such Investor acknowledges
that in making its decision to invest in the Company, it is not relying on any
other Investor or upon any person, firm or company, other than the Company and
its officers, employees and/or directors. Such Investor agrees that no other
Investor, nor the partners, employees, officers or controlling persons of any
other Investor shall be liable for any actions taken by such Investor, or
omitted to be taken by such Investor, in connection with such investment.
5.6 Accredited Investor. Such Investor is an "Accredited
Investor" within the meaning of Rule 501 promulgated under the Securities Act.
6. Conditions of Each Investor's Obligation. The obligation to
purchase and pay for the Preferred Shares and Warrants which each Investor has
agreed to purchase is subject to the fulfillment prior to or on the Closing Date
of the conditions set forth in this article 6.
6.1 No Errors, etc. The representations and warranties of the
Company under this agreement shall be true and correct in all material respects
as of the closing date with the same effect as though made on and as of the
Closing Date.
6.2 Compliance with Agreement. The Company shall have
performed and complied with all agreements or covenants required by this
agreement to be performed and complied with by it prior to or as of the Closing
Date.
6.3 Certificate of Officer.
(a) The Company shall have delivered to the Investors a
certificate, dated the Closing Date, executed by the Chief
Executive Officer of the Company and certifying to the
satisfaction of the conditions specified in sections 6.1 and
6.2.
(b) The Company shall have delivered to the Investors a
certificate, dated the Closing Date, executed by the Chief
Executive Officer of the Company and certifying as to the
adjusted conversion price for the Senior Convertible Preferred
Stock calculated in accordance with Section 8 of the Company's
Certificate of Designation of Senior Convertible Preferred
Stock.
6.4 Opinion of Intellectual Property. The Company shall have
delivered to each Investor an opinion, satisfactory to each of the Investors, of
Schwegman,
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Xxxxxxxx, Woessmer & Xxxxx, P.A., intellectual property counsel for the Company,
dated the closing date substantially in the form attached hereto as Exhibit E
hereto.
6.5 Issuance of the Warrants. The Company shall have issued
the Warrants to the Investors.
6.6 Execution of the Promissory Note. The Company shall have
executed and delivered to Investors that certain Promissory Note of even date
herewith in the face amount of $2,050,000 along with stock purchase warrants
which will give Investors the right to purchase 282,353 shares of Series D
Preferred Stock.
6.7 Legal Opinion. The Investors shall have received an
originally executed opinion of Xxxxxx & Whitney LLP, counsel for the Company,
dated as of the Closing Date, in the form attached as Exhibit F.
6.8 Necessary Consents. On or before the Closing Date, the
Company shall have obtained any consents of any person or governmental authority
necessary for the consummation of the transactions contemplated under this
agreement and the Investors shall have received satisfactory evidence of such
consents.
6.9 No Material Adverse Effect. Since December 31, 1998 no
event, change or effect shall have occurred that is materially adverse to the
consolidated financial condition, business, results of operations, cash flows or
prospects of the Company or that materially impairs the ability of the Company
to perform or the Investor to enforce the obligations of the Company under this
agreement.
6.10 Certificate of Designation. On or prior to the Closing
Date, the Company shall have filed with the Secretary of State of the State of
Minnesota, the Certificate of Designation attached at Exhibit A and the
Certificate of Designation shall have become effective.
6.11 Payment of Fees and Expenses. The Company shall have paid
on or before the Closing Date, or on the date of receipt of invoices (if later),
the reasonable fees, charges and disbursements of the Investors, including the
fees and expenses of Xxxx, Scholer, Fierman, Xxxx & Handler, LLP, which shall
not exceed $35,000.
6.12 Injunctions, Restraining Order or Adverse Litigation. No
order, judgment or decree of any court, arbitral tribunal, administrative agency
or other governmental or regulatory authority or agency shall purport to enjoin
or restrain the Investors from acquiring the Preferred Shares or the Warrants on
the Closing Date .
6.13 Proceedings and Documents. All corporate and other
proceedings and actions taken in connection with the transactions contemplated
hereby and all certificates,
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opinions, agreements, instruments and documents mentioned herein or incident to
any such transaction shall be satisfactory in form and substance to legal
counsel for the Investors.
7. Conditions of Company's Obligations. The Company's obligation to
issue the Preferred Shares and the Warrants is subject to fulfillment prior to
or on the Closing Date of the following condition:
7.1 Execution of Waiver. Investors shall have executed and
delivered to the Company a Waiver in the form attached hereto as Exhibit G
waiving the Company's compliance with Section 7.1 of that certain Stock Purchase
Agreement dated as of July 23, 1998 by and between the Company and the investors
whose names are set forth on schedule 1 attached thereto.
8. Affirmative Covenants of the Company. The Company covenants and
agrees as follows:
8.1. Financial and Business Information. The Company will
maintain, and cause each of its Subsidiaries to maintain, a system of accounting
established in accordance with sound business practices to permit preparation of
financial statements in conformity with GAAP. The Company during the term of
this agreement will, and will cause its Subsidiaries to, deliver to the
Investors:
(a) As soon as practicable and in any event within 120 days
after the close of each fiscal year of the Company, a consolidated
and consolidating balance sheet of the Company and its Subsidiaries
as of the close of such fiscal year and consolidated statements of
operations, shareholders' equity and cash flows for the Company and
its Subsidiaries for the fiscal year then ended, together with the
report thereon of Ernst & Young LLP, the Company's independent
certified public accountants (it being understood by the parties
hereto that the delivery to the Investors of the Company's annual
report on Form 10-K will satisfy the requirements of this Section
8.1(a));
(b) As soon as practicable and in any event within 45 days
after the end of the first three fiscal quarters of each fiscal
year, the consolidated and consolidating balance sheet of the
Company and its Subsidiaries as at the end of such fiscal quarter
and the related consolidated and consolidating statements of
operations, shareholders' equity and cash flows of the Company and
its Subsidiaries for such fiscal quarter and for the period from the
beginning of the current fiscal year to the end of such fiscal
quarter, all in reasonable detail and certified by the chief
financial officer of the Company that they fairly present the
financial condition of Company and its Subsidiaries as the dates
indicated and the results of its operations and its cash flows for
the periods indicated, subject to
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changes resulting from audit and normal year-end adjustments (it
being understood by the parties hereto that the delivery to the
Investor of the Company's quarterly report on Form 10-Q will satisfy
the requirements of this Section 8.1(b));
(c) As soon as practicable and in any event within 30 days
after the end of each month, the internal financial statements of
the Company and its Subsidiaries for such month (other than the
months referred to in Section 8.1(a) and Section 8.1(b) above) and
certified by the chief executive officer or the chief financial
officer of the Company that such statements were prepared in
accordance with the Company's accounting policies, consistently
applied for the period indicated;
(d) Prompt notice of any event having a material adverse
effect on the business, operations, financial condition, prospects
or results of operation of the Company;
(e) Promptly upon their becoming available, copies of (a) all
financial statements, reports, notices and proxy statements sent or
made available generally by the Company to its security holders, (b)
all regular and periodic reports filed by the Company or any of its
Subsidiaries with any securities exchange or with the SEC or any
governmental or private regulatory authority, (c) all press releases
and other statements made available generally by the Company or any
of its Subsidiaries to the public concerning material developments
in the business of the Company or any of its Subsidiaries;
(f) Promptly upon any officer of Company or any of its
Subsidiaries obtaining knowledge of any condition or event that
constitutes a violation or default or potential event of default
under any indebtedness of the Company or any of its Subsidiaries, or
becoming aware that any person has given any notice or taken any
other action with respect to a claimed event of default or potential
event of default, notice of any such event; and
(e) Within a reasonable time, such other information about the
property, financial condition and operations of the Company and its
Subsidiaries as the Investors may from time to time reasonably
request.
8.2 Notice of Certain Events. The Company will, and will cause
its Subsidiaries to, promptly give notice in writing to each Investor of any
litigation or proceeding before any court or administrative body involving the
Company or any Subsidiary which, if determined adversely to the Company or such
subsidiary, would be reasonably likely to have a
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material adverse effect on the business, operations, financial condition,
prospects or results of operation of the Company.
9. Negative Covenants of the Company.
9.1 Sale of Preferred Stock. Without the prior written consent
of the Investors identified on Schedule 1 attached hereto, the Company shall not
(i) issue, grant or sell any shares of Series B Preferred Stock or Series C
Preferred Stock or warrants, options or other rights to purchase shares of
Series B Convertible Preferred Stock or Series C Preferred Stock, at a price per
share less than $1,000; or (ii) issue any shares of the Company's preferred
stock having rights and preferences equal to or senior in rank to the rights and
preferences of the Preferred Shares, the Series C Preferred Stock or the Series
D Preferred Stock.
10. Conversion of Preferred Shares.
10.1 Conversion of Preferred Shares.
(a) Any holder of any Preferred Shares may, at its option,
from and after the occurrence of such events as are set forth in the
relevant provisions of the Company's Articles of Incorporation,
convert such Preferred Shares, or any thereof, into Conversion
Shares at the Conversion Price and upon the terms and conditions and
subject to the adjustments set forth in the Company's Articles of
Incorporation.
(b) Each Preferred Share shall be automatically converted into
Conversion Shares on the terms and conditions set forth in the
Company's Articles of Incorporation.
10.2 Stock Fully Paid; Reservation of Shares. The Company
covenants and agrees that all Conversion Shares that may be issued upon the
exercise of the conversion privilege referred to in section 10.1 will, upon
issuance in accordance with the terms of the Company's Articles of
Incorporation, be fully paid and nonassessable and free from all taxes, liens
and charges (except for taxes, if any, upon the income of the holder and
applicable transfer taxes) with respect to the issue thereof, and that the
issuance thereof shall not give rise to any preemptive rights on the part of any
person. The Company further covenants and agrees that the Company will at all
times have authorized and
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reserved a sufficient number of shares of its capital stock for the purpose of
issuance upon the exercise of such conversion privilege.
10.3 Adjustment of Number of Shares and Conversion Price. The
number of common shares issuable upon conversion of Preferred Shares and the
Conversion Price with respect thereto shall be subject to adjustment from time
to time as set forth in the Company's Articles of Incorporation.
11. Redemption of Preferred Shares. The Company may redeem and
repurchase Preferred Shares from the holders thereof, and will redeem and
repurchase the Preferred Shares from the holders thereof, at the times and upon
the terms and conditions set forth in the Company's Articles of Incorporation.
12. Registration Rights. The Company acknowledges and agrees that
the Investors shall have the registration rights set forth on Exhibit H.
13. Restriction on Transfer of Shares.
13.1 Restrictions. The Preferred Shares, the Warrants, the
Conversion Shares, Series C Preferred Stock, Series D Preferred Stock, Series D
Conversion Shares and the Transfer Conversion Shares are only transferable
pursuant to (a) a public offering registered under the Securities Act, or (b)
pursuant to an exemption from the registration requirements of the Securities
Act and applicable state securities or blue sky laws.
13.2 Legend. Each certificate representing Preferred Shares
shall be endorsed with the following legend:
"The shares represented by this certificate may not be transferred
without (i) an exemption from the registration requirements under
the Federal Securities Act of 1933 and all applicable state
securities laws or (ii) such registration."
Upon the conversion of any Preferred Shares, or upon exercise of any Warrant,
unless the Company receives an opinion of counsel satisfactory to the Company to
the effect that a transfer of the Conversion Shares, Series C Preferred Stock,
Series D Preferred Stock, Series D Conversion Shares or the Transfer Conversion
Shares, as the case may be, may be made without registration or further
restriction on transfer, or unless such Conversion Shares, Series C Preferred
Stock, Series D Preferred Stock,
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Series D Conversion Shares or Transfer Conversion Shares are being disposed of
pursuant to a registration under the Securities Act, the same legend shall be
endorsed on the certificate evidencing such Conversion Shares.
13.3 Removal of Legend. Any legend endorsed on a certificate
evidencing a security pursuant to section 13.2 hereof shall be removed, and the
Company shall issue a certificate without such legend to the holder of such
security, if such security is being disposed of pursuant to a registration under
the Securities Act or pursuant to Rule 144 or any similar rule then in effect or
if such holder provides the Company with an opinion of counsel satisfactory to
the Company to the effect that a transfer of such security may be made without
registration. In addition, if the holder of such security delivers to the
Company an opinion of such counsel to the effect that no subsequent transfer of
such security will require registration under the Securities Act, the Company
will promptly upon such contemplated transfer deliver new certificates
evidencing such security that do not bear the legend set forth in section 13.2.
14. Miscellaneous.
14.1 No Waivers; Cumulative Remedies. No failure or delay on
the part of the Investors, or any other holder of any Preferred Shares in
exercising any right, power or remedy hereunder or thereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy hereunder or thereunder. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
14.2 Amendments; Waiver and Consents. This agreement may be
amended or modified, and the obligations of the Company and the rights of the
holders of Preferred Shares purchased under this agreement may be waived only by
the written consent of holders of a majority of the Conversion Shares issuable
upon conversion and the Conversion Shares that have been issued as a result of
conversion and that have not been resold in a public offering or transferred
pursuant to Rule 144 promulgated under the Securities Act. Any waiver or consent
may be given subject to satisfaction of conditions stated therein and any waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given.
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14.3 Changes, Waivers, Etc. Neither this agreement nor any
provision hereof may be changed, waived, discharged or terminated orally, but
only by a statement in writing signed by the party against which enforcement of
the change, waiver, discharge or termination is sought, except to the extent
provided in Section 14.2.
14.4 Expenses. Whether or not the transactions contemplated
hereby shall be consummated, the Company agrees to pay promptly (a) the fees,
expenses and disbursements of counsel to the Investors in connection with the
negotiation, preparation, execution, delivery and administration of this
agreement, the Certificate of Designation and the transactions contemplated
hereby and thereby, not to exceed $35,000, and any consents, amendments, waivers
or other modifications hereto or thereto and any other documents or matters
requested by the Company; and (b) all costs and expenses, including reasonable
attorneys' fees and costs of settlement, incurred by the Investors in enforcing
any obligations of or in collecting any payments due from the Company hereunder
or as a holder of Preferred Shares or Conversion Shares by reason of any breach
or default by the Company or in connection with any refinancing or restructuring
of the arrangements provided hereunder in the nature of a "work-out" or pursuant
to any insolvency or bankruptcy proceedings.
14.5 Notices. All notices, requests, consents and other
communications required or permitted hereunder shall be in writing and shall be
delivered, or mailed first-class postage prepaid, registered or certified mail,
(a) if to any holder of any Preferred Shares addressed to such
holder at its address as shown on the books of the Company, or at
such other address as such holder may specify by written notice to
the Company, with a copy to:
Xxxxx Xxxxx, Esq.
Xxxx, Scholer, Fierman, Xxxx & Handler, LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
(b) if to the Company at 00000 Xxxxxxxxx Xxxxx, Xxxxxxxxxx,
Xxxxxxxxx 00000. Attention: Chief Executive Officer; or at such
other address as the Company may specify by written notice to the
Investors.
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14.6 Assignment.
(a) This agreement and all of the provisions hereof will be
binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
(b) The Investors may freely assign their rights, interests
and obligations attached to the Preferred Shares, the Warrants, the
Conversion Shares, Series C Preferred Stock, Series D Preferred
Stock, Series D Conversion Shares and Transfer Conversion Shares, as
applicable, upon transfer of such shares in accordance with Section
5.1 and Section 13 hereof.
(c) Neither this agreement nor any of the rights, interests or
obligations hereunder may be assigned by the Company without the
prior written consent of the Investors hereto.
14.7 Severability. Whenever possible, each provision of this
agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this agreement.
14.8 Complete Agreement. This agreement and other exhibits and
schedules hereto contain the complete agreement between the parties and
supersede any prior understandings, agreements or representations by or between
the parties, written or oral, which may have related to the subject matter
hereof in any way.
14.9 Governing Law. The internal law, without regard to
conflicts of laws principles, of the State of New York will govern all questions
concerning the construction, validity and interpretation of this agreement and
the performance of the obligations imposed by this agreement.
14.10 Counterparts. This agreement may be executed
concurrently 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.
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[REMAINING PORTION OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Company has caused this agreement to be executed
by its duly authorized representative and each of the Investors has caused this
agreement to be executed by signing in counterpart the acceptance form attached
to this agreement.
ORPHAN MEDICAL, INC.
By: /s/ Xxxx Xxxxxx Bullion
-------------------------
Xxxx Xxxxxx Bullion
Chief Executive Officer
UBS CAPITAL II LLC
By: /s/ Xxxxxxx Xxxxxx
-------------------------
Xxxxxxx Xxxxxx
By: /s/ Xxxxxxx Xxxxxx-Xxxx
-------------------------
Xxxxxxx Xxxxxx-Xxxx
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Schedule 1
Shares of Series C
Convertible Preferred
Stock and Series D Preferred
Preferred Shares Stock Subject to
Investor to be Purchased Warrants
-------- --------------- --------
UBS Capital II LLC 2,950 2,050 (Series C)
OR
315,385 (Series D)
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EXHIBIT H
REGISTRATION RIGHTS
-34-
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EXHIBIT H
REGISTRATION RIGHTS PROVISIONS
Capitalized terms used herein have the meanings set forth in Section 8 hereof.
1. Demand Registration.
(a) At any time and from time to time, a Majority-in-Interest of the
Holders shall have the right, by written notice (the "Demand Notice") given to
the Company, to request the Company to file with the SEC a Registration
Statement with respect to all or any portion of the Registrable Shares held by
such Holders and/or the Registrable Shares issuable upon conversion of Shares
held by such Holders, as designated by such Holders. Upon receipt of any such
Demand Notice, the Company shall promptly, but in no event more than five days
after receipt thereof, notify all other Holders of the receipt of such Demand
Notice and, subject to the limitations set forth below, shall include in the
proposed registration all Registrable Shares with respect to which the Company
has received written requests for inclusion therein within 20 days after
delivery of the Company's notice. In connection with any Demand Registration in
which more than one holder of securities participates, in the event that such
Demand Registration involves an underwritten offering and the managing
underwriter or underwriters participating in such offering advise in writing the
Holders of Registrable Shares and the holders of other securities to be included
in such offering that the total number of Registrable Shares and other
securities to be included in such offering exceeds the amount that can be sold
in (or during the time of) such offering without delaying or jeopardizing the
success of such offering (including the price per share of the Registrable
Shares and other securities to be sold), then the amount of Registrable Shares
and other securities to be offered for the account of such Holders shall be
reduced as follows: first, pro rata on the basis of the number of securities
other than (i) Registrable Shares and (ii) shares of stock being registered at
the request of holders of the Company's Senior Convertible Preferred Stock,
requested to be registered by the holders of such securities; and second, pro
rata on the basis of the number of Registrable Shares and shares of Senior
Convertible Preferred Stock requested to be registered by the holders of such
securities. The Holders as a group shall be entitled to two Demand Registrations
pursuant to this Section 1; provided, that any Demand Registration that does not
become effective or is not maintained for the time period required in accordance
with Section 1(c) shall not count as one of such Demand Registrations, except as
set forth in Section 1(f); provided, further, that if the Demanding Holders have
requested inclusion in such Demand Registration and 75% or less of the
securities so requested to be included have been included, the Holders as a
group shall be entitled to an additional Demand Registration hereunder on the
same terms and conditions as would have applied to the Holders had such earlier
Demand Registration not been made. Anything herein to the contrary
notwithstanding, the Company shall not be required to effect a Demand
Registration
29
pursuant to this Section 1 within a period of six (6) months after the effective
date of any other Demand Registration.
(b) The Company, within 45 days of the date on which the Company
receives a Demand Notice given by Holders in accordance with Section 1(a)
hereof, shall file with the SEC, and the Company shall thereafter use its best
efforts to cause to be declared effective within 90 days following the date the
Company receives such Demand Notice, a Registration Statement on the appropriate
form for the registration and sale, in accordance with the intended method or
methods of distribution requested by the Holders, of the total number of
Registrable Shares specified by the Holders in such Demand Notice (a "Demand
Registration").
(c) The Company shall use commercially reasonable efforts to keep
each Registration Statement filed pursuant to this Section 1 continuously
effective and usable for the resale of the Registrable Shares covered thereby
for a period of 270 days from the date on which the SEC declares such
Registration Statement effective, as such period may be extended pursuant to
this Section 1, or in the case of a Shelf Registration, for a period of two
years from the date that the SEC declares such "shelf" Registration Statement
effective, or if shorter, until all the Registrable Shares covered by such
Registration Statement have been sold pursuant to such Registration Statement.
(d) The Company shall be entitled to postpone the filing of any
Registration Statement otherwise required to be prepared and filed by the
Company pursuant to this Section 1, or suspend the use of any effective
Registration Statement under this Section 1, for a reasonable period of time
which shall be as short as practicable, but in any event not in excess of 60
days (a "Delay Period"), if the Company determines in good faith that the
registration and distribution of the Registrable Shares covered or to be covered
by such Registration Statement would materially interfere with any pending
material financing, acquisition or corporate reorganization or other material
corporate development involving the Company or any of its Subsidiaries or would
require premature disclosure thereof and promptly gives the Holders written
notice of such determination, containing a statement of the reasons for such
postponement and an approximation of the period of the anticipated delay;
provided, however, that (i) the aggregate number of days included in all Delay
Periods during any consecutive 12 months shall not exceed the aggregate of (x)
180 days minus (y) the number of days occurring during all Interruption Periods
during such consecutive 12 months and (ii) a period of at least 60 days shall
elapse between the termination of any Delay Period or Interruption Period and
the commencement of the immediately succeeding Delay Period. If the Company
shall so postpone the filing of a Registration Statement, the Holders of
Registrable Shares to be registered shall have the right to withdraw the request
for registration by giving written notice to the Company from the Holders of a
majority of the Registrable Shares that were to be registered within 45 days
after receipt of the notice of postponement or, if earlier, the termination of
such Delay Period. The time period for which the Company is required to maintain
the effectiveness of any Registration Statement shall be extended by the
aggregate number of days of all Delay Periods and all Interruption Periods
occurring during such Registration and any extension thereof is hereinafter
referred to as the "Effectiveness Period". The Company shall not be entitled to
initiate a Delay Period unless it
30
shall (A) to the extent permitted by agreements with other security holders of
the Company, concurrently prohibit sales by such other security holders under
registration statements covering securities held by such other security holders
and (B) in accordance with the Company's policies from time to time in effect,
forbid purchases and sales in the open market by senior executives of the
Company.
(e) The Demanding Holders may, at any time prior to the effective
date of the Registration Statement relating to a Demand Registration, revoke
such request by providing a written notice to the Company revoking such request.
In the event of such revocation, the Demanding Holders shall reimburse the
Company for all of its out-of-pocket expenses incurred in connection with the
preparation, filing and processing of the Registration Statement, unless (i)
there has been a material adverse change in the business, assets, properties,
condition (financial or other), results of operations or prospects of the
Company and its Subsidiaries, since the time of the Demand Notice, (ii) such
revocation was based on the Company's failure to comply in any material respect
with its obligations hereunder or (iii) the Demanding Holders choose to count
the Demand Registration as one of the Demand Registrations to which the
Demanding Holders are entitled pursuant to the penultimate sentence of Section
1(a).
2. Piggyback Registration.
(a) Right to Piggyback. If at any time the Company proposes to file
a registration statement under the Securities Act with respect to a public
offering of securities of the same type as the Registrable Shares for its own
account (other than a registration statement (i) on Form S-8 or any successor
form thereto, (ii) filed solely in connection with a dividend reinvestment plan
or employee benefit plan covering officers or directors of the Company or its
Affiliates or (iii) on Form S-4 or any successor form thereto, in connection
with a merger, acquisition or similar corporate transaction) or for the account
of any holder of securities of the same type as the Registrable Shares, then the
Company shall give written notice of such proposed filing to the Holders at
least 30 days before the anticipated filing date. Such notice shall offer the
Holders the opportunity to register such number of Registrable Shares as they
may request (a "Piggyback Registration"). Subject to Section 2(b) hereof, the
Company shall include in each such Piggyback Registration all Registrable Shares
with respect to which the Company has received written requests for inclusion
therein within 20 days after notice has been given to the Holders. Each Holder
shall be permitted to withdraw all or any portion of the Registrable Shares of
such Holder from a Piggyback Registration at any time prior to the effective
date of such Piggyback Registration.
(b) Priority on Piggyback Registrations. The Company shall permit
the Holders to include all such Registrable Shares on the same terms and
conditions as any similar securities, if any, of the Company included therein.
Notwithstanding the foregoing, if the Company or the managing underwriter or
underwriters participating in such offering advise the Holders in writing that
the total number of securities requested to be included in such Piggyback
Registration exceeds the number which can be sold in (or during the time of)
such offering
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without delaying or jeopardizing the success of the offering (including the
price per share of the securities to be sold), then the number of securities to
be offered for the account of the Holders and other holders of securities who
requested to have securities included in such Piggyback Registration shall be
reduced (to zero if necessary) pro rata on the basis of the number or amount of
Common Stock (or the equivalent) requested to be registered by each such Holder
or holder participating in such offering.
(c) Right To Abandon. Nothing in this Section 2 shall create any
liability on the part of the Company to the Holders if the Company in its sole
discretion should decide not to file a registration statement proposed to be
filed pursuant to Section 2(a) hereof or to withdraw such registration statement
subsequent to its filing, regardless of any action whatsoever that a Holder may
have taken, whether as a result of the issuance by the Company of any notice
hereunder or otherwise.
3. Registration Procedures. In connection with the registration
obligations of the Company pursuant to and in accordance with Sections 1 and 2
hereof (and subject to Sections 1 and 2 hereof), the Company shall use
commercially reasonable efforts to effect such registration to permit the sale
of such Registrable Shares in accordance with the intended method or methods of
disposition thereof, and pursuant thereto the Company shall as expeditiously as
possible (but subject to Sections 1 and 2 hereof):
(a) prepare and file with the SEC a Registration Statement for the
sale of the Registrable Shares on any form for which the Company then qualifies
or which counsel for the Company shall deem appropriate in accordance with such
Holders' intended method or methods of distribution thereof, subject to Section
1(b) hereof, and use commercially reasonable efforts to cause such Registration
Statement to become effective and remain effective as provided herein;
(b) prepare and file with the SEC such amendments (including
post-effective amendments) to such Registration Statement, and such supplements
to the related Prospectus, as may be required by the applicable rules,
regulations or instructions under the Securities Act during the applicable
period in accordance with the intended methods of disposition specified by the
Holders of the Registrable Shares covered by such Registration Statement, make
generally available earnings statements satisfying the provisions of Section
11(a) of the Securities Act (provided that the Company shall be deemed to have
complied with this clause if it has complied with Rule 158 under the Securities
Act), and cause the related Prospectus as so supplemented to be filed pursuant
to Rule 424 under the Securities Act; provided, however, that before filing a
Registration Statement or Prospectus, or any amendments or supplements thereto
(other than reports required to be filed by it under the Exchange Act), the
Company shall furnish to the Holders of Registrable Shares covered by such
Registration Statement and their counsel for review and comment, copies of all
documents proposed to be filed;
(c) notify the Holders of any Registrable Shares covered by such
Registration Statement promptly and (if requested) confirm such notice in
writing, (i) when a Prospectus or
32
any Prospectus supplement or post-effective amendment has been filed, and, with
respect to such Registration Statement or any post-effective amendment, when the
same has become effective, (ii) of any request by the SEC for amendments or
supplements to such Registration Statement or the related Prospectus or for
additional information regarding such Holders, (iii) of the issuance by the SEC
of any stop order suspending the effectiveness of such Registration Statement or
the initiation of any proceedings for that purpose, (iv) of the receipt by the
Company of any notification with respect to the suspension of the qualification
or exemption from qualification of any of the Registrable Shares for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose, and (v) of the happening of any event that requires the making of any
changes in such Registration Statement, Prospectus or documents incorporated or
deemed to be incorporated therein by reference so that they will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading;
(d) use commercially reasonable efforts to obtain the withdrawal of
any order suspending the effectiveness of such Registration Statement, or the
lifting of any suspension of the qualification or exemption from qualification
of any Registrable Shares for sale in any jurisdiction in the United States;
(e) furnish to the Holder of any Registrable Shares covered by such
Registration Statement, each counsel for such Holders and each managing
underwriter, if any, without charge, one conformed copy of such Registration
Statement, as declared effective by the SEC, and of each post-effective
amendment thereto, in each case including financial statements and schedules and
all reports incorporated or deemed to be incorporated therein by reference; and
deliver, without charge, such number of copies of the preliminary prospectus,
any amended preliminary prospectus, each final Prospectus and any post-effective
amendment or supplement thereto, as such Holder may reasonably request in order
to facilitate the disposition of the Registrable Shares of such Holder covered
by such Registration Statement in conformity with the requirements of the
Securities Act;
(f) prior to any public offering of Registrable Shares covered by
such Registration Statement, use commercially reasonable efforts to register or
qualify such Registrable Shares for offer and sale under the securities or Blue
Sky laws of such jurisdictions as the Holders of such Registrable Shares shall
reasonably request in writing; provided, however, that the Company shall in no
event be required to qualify generally to do business as a foreign corporation
or as a dealer in any jurisdiction where it is not at the time so qualified or
to execute or file a general consent to service of process in any such
jurisdiction where it has not theretofore done so or to take any action that
would subject it to general service of process or taxation in any such
jurisdiction where it is not then subject;
(g) upon the occurrence of any event contemplated by paragraph
3(c)(v) above, prepare a supplement or post-effective amendment to such
Registration Statement or the related Prospectus or any document incorporated or
deemed to be incorporated therein by
33
reference and file any other required document so that, as thereafter delivered
to the purchaser of the Registrable Shares being sold thereunder (including upon
the termination of any Delay Period), such Prospectus will not contain an untrue
statement of a material fact or omit to state any 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;
(h) use its best efforts to cause all Registrable Shares covered by
such Registration Statement to be listed on each securities exchange, if any, on
which similar securities issued by the Company are then listed or quoted and, if
no such securities are so listed, to be listed on the Nasdaq Stock Market and,
if listed on the Nasdaq Stock Market, use its best efforts to secure designation
of all such Registrable Shares covered by such registration statement as "NASDAQ
Securities" within the meaning of Rule 11Aa2-1 promulgated under the Exchange
Act or, failing that, to secure Nasdaq Stock Market authorization for such
Registrable Shares;
(i) on or before the effective date of such Registration Statement,
provide the transfer agent of the Company for the Registrable Shares with
printed certificates for the Registrable Shares covered by such Registration
Statement, which are in a form eligible for deposit with The Depository Trust
Company;
(j) make available for inspection by any Holder of Registrable
Shares included in such Registration Statement, any underwriter participating in
any offering pursuant to such Registration Statement, and any attorney,
accountant or other agent retained by any such Holder or underwriter
(collectively, the "Inspectors"), all financial and other records and other
information, pertinent corporate documents and properties of any of the Company
and its Subsidiaries and affiliates (collectively, the "Records"), as shall be
reasonably necessary to enable them to exercise their due diligence
responsibilities; provided, however, that the Records that the Company
determines, in good faith, to be confidential and which it notifies the
Inspectors in writing are confidential shall not be disclosed to any Inspector
unless such Inspector signs a confidentiality agreement reasonably satisfactory
to the Company (which shall permit the disclosure of such Records in such
Registration Statement or the related Prospectus if necessary to avoid or
correct a material misstatement in or material omission from such Registration
Statement or Prospectus) or either (i) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in such Registration
Statement or (ii) the release of such Records is ordered pursuant to a subpoena
or other order from a court of competent jurisdiction; provided, further, that
(A) any decision regarding the disclosure of information pursuant to subclause
(i) shall be made only after consultation with counsel for the applicable
Inspectors and the Company and (B) with respect to any release of Records
pursuant to subclause (ii), each Holder of Registrable Shares agrees that it
shall, promptly after learning that disclosure of such Records is sought in a
court having jurisdiction, give notice to the Company so that the Company, at
the Company's expense, may undertake appropriate action to prevent disclosure of
such Records; and
34
(k) if such offering is an underwritten offering, enter into such
agreements (including an underwriting agreement in form, scope and substance as
is customary in underwritten offerings) and take all such other appropriate and
reasonable actions requested by the Holders of a majority of the Registrable
Shares being sold in connection therewith (including those reasonably requested
by the managing underwriters) in order to expedite or facilitate the disposition
of such Registrable Shares, and in such connection, (i) use commercially
reasonable efforts to obtain opinions of counsel to the Company and updates
thereof (which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the managing underwriters and counsel to the Holders
of the Registrable Shares being sold), addressed to each selling Holder of
Registrable Shares covered by such Registration Statement and each of the
underwriters as to the matters customarily covered in opinions requested in
underwritten offerings and such other matters as may be reasonably requested by
such counsel and underwriters, (ii) use commercially reasonable efforts to
obtain "cold comfort" letters and updates thereof from the independent certified
public accountants of the Company (and, if necessary, any other independent
certified public accountants of any subsidiary of the Company or of any business
acquired by the Company for which financial statements and financial data are,
or are required to be, included in the Registration Statement), addressed to
each selling holder of Registrable Shares covered by the Registration Statement
(unless such accountants shall be prohibited from so addressing such letters by
applicable standards of the accounting profession) and each of the underwriters,
such letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with underwritten
offerings, (iii) if requested and if an underwriting agreement is entered into,
provide indemnification provisions and procedures reasonably requested by such
underwriters. The above shall be done at each closing under such underwriting or
similar agreement, or as and to the extent required thereunder. The Company may
require each Holder of Registrable Shares covered by a Registration Statement to
furnish, within a period not less than 20 days from the date of receipt of such
request, such information regarding such Holder and such Holder's intended
method of disposition of such Registrable Shares as it may from time to time
reasonably request in writing. If any such information is not furnished within
such period, the Company may exclude such Holder's Registrable Shares from such
Registration Statement. Each Holder of Registrable Shares covered by a
Registration Statement agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 3(c)(ii),
3(c)(iii), 3(c)(iv) or 3(c)(v) hereof, that such Holder shall forthwith
discontinue disposition of any Registrable Shares covered by such Registration
Statement or the related Prospectus until receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 3(g) hereof, or until
such Holder is advised in writing by the Company that the use of the applicable
Prospectus may be resumed, and has received copies of any amended or
supplemented Prospectus or any additional or supplemental filings which are
incorporated, or deemed to be incorporated, by reference in such Prospectus
(such period during which disposition is discontinued being an "Interruption
Period") and, if requested by the Company, the Holder shall deliver to the
Company (at the expense of the Company) all copies then in its possession, other
than permanent file copies then in such holder's possession, of the Prospectus
covering such Registrable Shares at the time of receipt of such request. Each
Holder of Registrable Shares
35
covered by a Registration Statement further agrees not to utilize any material
other than the applicable current preliminary prospectus or Prospectus in
connection with the offering of such Registrable Shares.
4. Registration Expenses. Whether or not any Registration Statement
is filed or becomes effective but subject to Section 1(e), the Company shall pay
all costs, fees and expenses incident to the Company's performance of or
compliance with this Agreement, including (i) all registration and filing fees,
including National Association of Securities Dealers filing fees, (ii) all fees
and expenses of compliance with securities or Blue Sky laws, including
reasonable fees and disbursements of counsel in connection therewith, (iii)
printing expenses (including expenses of printing certificates for Registrable
Shares and of printing prospectuses if the printing of prospectuses is requested
by the Holders or the managing underwriter, if any), (iv) messenger, telephone
and delivery expenses, (v) fees and disbursements of counsel for the Company,
(vi) fees and disbursements of all independent certified public accountants of
the Company (including expenses of any "cold comfort" letters required in
connection with this Agreement) and all other persons retained by the Company in
connection with such Registration Statement, (vii) fees and disbursements of one
counsel, other than the Company's counsel, representing all of the Holders of
Registrable Shares being registered, selected by a Majority-in-Interest of
Holders of the Registrable Shares being registered, or in the event of a Demand
Registration, selected by the Demanding Holders and reasonably satisfactory to a
Majority-in-Interest of Holders of the Registrable Shares being registered other
than the Demanding Holders, (viii) fees and disbursements of underwriters
customarily paid by the issuers or sellers of securities and (ix) all other
costs, fees and expenses incident to the Company's performance or compliance
with this Agreement. Notwithstanding the foregoing, any discounts, commissions
or brokers' fees or fees of similar securities industry professionals and any
transfer taxes relating to the disposition of the Registrable Shares by a
Holder, will be payable by such Holder and the Company will have no obligation
to pay any such amounts.
5. Underwriting Requirements.
(a) Subject to Section 5(b) hereof, the Demanding Holders shall have
the right, by written notice, to require that any Demand Registration provide
for an underwritten offering.
(b) In the case of any underwritten offering pursuant to a Demand
Registration, the Demanding Holders shall select the institution or institutions
that shall manage or lead such offering, which institution or institutions shall
be reasonably satisfactory to the Company. In the case of any underwritten
offering pursuant to a Piggyback Registration, the Company shall select the
institution or institutions that shall manage or lead such offering. No Holder
shall be entitled to participate in an underwritten offering unless and until
such Holder has entered into an underwriting or other agreement with such
institution or institutions for such offering in such form as the Company and
such institution or institutions shall determine and such form is on terms
customary for such an offering.
36
(c) Each Holder participating in a Registration shall promptly
supply in writing such information as the Demanding Holders, the Company or the
underwriters reasonably request.
6. Indemnification.
(a) Indemnification by the Company. The Company shall indemnify and
hold harmless, to the full extent permitted by law, each Holder of Registrable
Shares whose Registrable Shares are covered by a Registration Statement or
Prospectus, the officers, directors and agents and employees of each of them,
each Person who controls each such Holder (within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, agents and employees of each such controlling Person, to the fullest
extent lawful, from and against any and all losses, claims, damages,
liabilities, judgment, costs (including, without limitation, costs of
investigation, preparation and reasonable attorneys' fees) and expenses
(collectively, "Losses"), as incurred, arising out of or based upon any untrue
or alleged untrue statement of a material fact contained in such Registration
Statement or Prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or based upon any omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as the same are based upon
information furnished in writing to the Company by or on behalf of such Holder
expressly for use therein.
(b) Indemnification by Holder of Registrable Shares. In connection
with any Registration Statement in which a Holder is participating, such Holder
shall indemnify and hold harmless, to the full extent permitted by law, the
Company, its directors, officers, agents or employees, each Person who controls
the Company (within the meaning of Section 15 of the Securities Act and Section
20 of the Exchange Act) and the directors, officers, agents or employees of such
controlling Persons, from and against all Losses arising out of or based upon
any untrue or alleged untrue statement of a material fact contained in such
Registration Statement or the related Prospectus or any amendment or supplement
thereto, or any preliminary prospectus, or arising out of or based upon any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, to the extent, but only
to the extent, that such untrue or alleged untrue statement or omission or
alleged omission is based upon any information furnished in writing by or on
behalf of such Holder to the Company expressly for use in such Registration
Statement or Prospectus. Each Holder's indemnity obligations under this Section
6 shall be limited to the total sales proceeds (net of all underwriting
discounts and commissions) actually received by such Holder in connection with
the applicable offering.
(c) Conduct of Indemnification Proceedings. If any Person shall be
entitled to indemnity hereunder (an "indemnified party"), such indemnified party
shall give prompt notice to the party from which such indemnity is sought (the
"indemnifying party") of any claim or of the commencement of any proceeding with
respect to which such indemnified party seeks
37
indemnification or contribution pursuant hereto; provided, however, that the
delay or failure to so notify the indemnifying party shall not relieve the
indemnifying party from any obligation or liability except to the extent that
the indemnifying party has been prejudiced by such delay or failure. The
indemnifying party shall have the right, exercisable by giving written notice to
an indemnified party promptly after the receipt of written notice from such
indemnified party of such claim or proceeding, to assume, at the indemnifying
party's expense, the defense of any such claim or proceeding, with counsel
reasonably satisfactory to such indemnified party; provided, however, that (i)
an indemnified party shall have the right to employ separate counsel in any such
claim or proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such indemnified party
unless: (1) the indemnifying party agrees to pay such fees and expenses; (2) the
indemnifying party fails promptly to assume the defense of such claim or
proceeding or fails to employ counsel reasonably satisfactory to such
indemnified party; or (3) the named parties to any proceeding (including
impleaded parties) include both such indemnified party and the indemnifying
party, and such indemnified party shall have been advised by counsel that there
may be one or more legal defenses available to it that are inconsistent with
those available to the indemnifying party or that a conflict of interest is
likely to exist among such indemnified party and any other indemnified parties
(in which case the indemnifying party shall not have the right to assume the
defense of such action on behalf of such indemnified party); and (ii) subject to
clause (3) above, the indemnifying party shall not, in connection with any one
such claim or proceeding or separate but substantially similar or related claims
or proceedings in the same jurisdiction, arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more than
one firm of attorneys (together with appropriate local counsel) at any time for
all of the indemnified parties, or for fees and expenses that are not
reasonable. Whether or not such defense is assumed by the indemnifying party,
such indemnified party shall not be subject to any liability for any settlement
made without its consent. The indemnifying party shall not consent to entry of
any judgment or enter into any settlement unless (i) there is no finding or
admission of any violation of any rights of any person and no effect on any
other claims that may be made against the indemnified party, (ii) the sole
relief provided is monetary damages that are paid in full by the indemnifying
party and (iii) such judgment or settlement includes as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release, in form and substance reasonably satisfactory to the indemnified party,
from all liability in respect of such claim or litigation for which such
indemnified party would be entitled to indemnification hereunder.
(d) Contribution. If the indemnification provided for in this
Section 6 is unavailable to an indemnified party in respect of any Losses (other
than in accordance with its terms), then each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such Losses, in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party, on the one hand, and such indemnified party, on the other hand, in
connection with the actions, statements or omissions that resulted in such
Losses as well as any other relevant equitable considerations. The relative
fault of such indemnifying party, on the one hand, and indemnified
38
party, on the other hand, shall be determined by reference to, among other
things, whether any action in question, including any untrue statement of a
material fact or omission or alleged omission to state a material fact, has been
taken by, or relates to information supplied by, such indemnifying party or
indemnified party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent any such action, statement or
omission. The amount paid or payable by a party as a result of any Losses shall
be deemed to include any legal or other fees or expenses incurred by such party
in connection with any investigation or proceeding. The parties hereto agree
that it would not be just and equitable if contribution pursuant to this Section
6(d) were determined by pro rata allocation or by any other method of allocation
that does not take account of the equitable considerations referred to in the
two immediately preceding sentences. Notwithstanding the provisions of this
Section 6(d), an indemnifying party that is a Holder shall not be required to
contribute any amount which is in excess of the amount by which the total
proceeds (net of all underwriting discounts and commissions) received by such
Holder from the sale of the Registrable Shares sold by such Holder in the
applicable offering exceed the amount of any damages that such indemnifying
party has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
7. Granting of Registration Rights. The Company shall not grant any
registration rights inconsistent with those granted hereunder or that give any
security holder a position with respect to cut-backs that are superior to the
Holders' position as granted herein, without the consent of a
Majority-in-Interest of the Holders of the Registrable Shares (voting together
as a single class).
8. Definitions. As used in this Exhibit G, the following terms shall
have the following meanings:
"Business Day" means any day that is not a Saturday, a Sunday or a
legal holiday on which banking institutions in the State of New York are not
required to be open.
"Common Stock" means the Company's Common Stock, $.01 par value and
any other securities into which such Common Stock may hereafter be changed.
"Delay Period" shall have the meaning set forth in Section 1(d)
hereof.
"Demand Notice" shall have the meaning set forth in Section 1(a)
hereof.
"Demand Registration" shall have the meaning set forth in Section
1(b) hereof.
"Demanding Holders" means the Holders delivering the Demand Notice
pursuant to Section 1(a) hereof.
39
"Effectiveness Period" shall have the meaning set forth in Section
1(d) hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.
"Holders" means UBS Capital II LLC and any other holder of
Registrable Shares or securities exercisable for Registrable Shares.
"Interruption Period" shall have the meaning set forth in Section
3(k) hereof.
"Majority-in-Interest" of any group of Holders means holders of more
than 50% of the Registrable Shares held by such Holders or issuable to such
Holders upon conversion of Shares.
"person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Piggyback Registration" shall have the meaning set forth in Section
2 hereof.
"Promissory Note" means that Promissory Note dated as of August 2,
1999 in the face amount of $2,050,000 in favor of UBS Capital II LLC.
"Prospectus" means the prospectus included in any Registration
Statement (including a prospectus that discloses information previously omitted
from a prospectus filed as part of an effective registration statement in
reliance upon Rule 430A), as amended or supplemented by any prospectus
supplement, with respect to the terms of the offering of any portion of the
Registrable Shares covered by such Registration Statement and all other
amendments and supplements to such prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such prospectus.
"Registrable Shares" means (i) shares of Common Stock directly or
indirectly issued or issuable upon conversion of the Shares or issued as
dividends on the Shares; (ii) shares of Common Stock issued as payment of
interest on the Promissory Note and (iii) any shares of Common Stock issued or
issuable with respect to the shares of Common Stock referred to in clauses (i)
and (ii) above upon any stock split, recapitalization or similar event;
provided, however, that shares of Common Stock shall only be registrable
pursuant to this Agreement if and so long as they have not been (i) sold to or
through a broker or dealer or underwriter in a public distribution or a public
securities transaction, or (ii) sold in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act under
Section 4(1) thereof so that all transfer restrictions and restrictive legends
with respect to such shares of Common Stock are removed upon the consummation of
such sale and the Company and the seller and
40
purchaser of such shares of Common Stock shall have received an opinion of
counsel for the seller, which shall be in form and content reasonably
satisfactory to the Company and the seller and purchaser and their respective
counsel, to the effect that such shares of Common Stock in the hands of the
purchaser are freely transferable without restriction or registration under the
Securities Act in any public or private transaction.
"Registration" means registration under the Securities Act of an
offering of Registrable Shares pursuant to a Demand Registration or a Piggyback
Registration.
"Registration Statement" means any registration statement under the
Securities Act of the Company that covers any of the Registrable Shares pursuant
to the provisions of this Agreement, including the related Prospectus, all
amendments and supplements to such registration statement, including pre- and
post-effective amendments, all exhibits thereto and all material incorporated by
reference or deemed to be incorporated by reference in such registration
statement.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder.
"Senior Convertible Preferred Stock" means share of the Company's
Senior Convertible Preferred Stock, par value $0.01 per share.
"Shares" means the shares of the Company's Series B Convertible
Preferred Stock, par value $.01 per share, Series C Convertible Preferred Stock,
par value $.01 per share, Series D Non-Voting Preferred Stock, par value $.01
per share, and any securities (other than Common Stock) into which such shares
may hereafter be changed, issued or issuable pursuant to the Stock Purchase
Agreement or upon the exercise of any warrant, option or other conversion right
entitling the holder thereof to receive shares of stock.
"Shelf Registration" means an offering on a delayed or continuous
basis pursuant to Rule 415 (or any similar rule that may be adopted by the SEC)
promulgated under the Securities Act.
"Stock Purchase Agreement" means the Stock Purchase Agreement, dated
as of August 2, 1999, between the Company and the investors signatory thereto.
"underwritten registration or underwritten offering" means a
registration under the Securities Act in which securities of the Company are
sold to an underwriter for reoffering to the public.
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Unless otherwise stated other capitalized terms contained herein
have the meanings set forth in the Stock Purchase Agreement.
9. Miscellaneous.
(a) Rules 144 and 144A. The Company covenants that it will file any
reports required to be filed by it under the Securities Act and the Exchange Act
so as to enable Holders holding Registrable Shares to sell such Registrable
Shares without registration under the Securities Act within the limitation of
the exemptions provided by (a) Rules 144 and 144A under the Securities Act, as
each such Rule may be amended from time to time, or (b) any similar rule or
rules hereafter adopted by the SEC. Upon the request of any such Holder, the
Company will forthwith deliver to such Holder a written statement as to whether
it has complied with such requirements.
(b) Termination. This Agreement and the obligations of the Company
and the Holders hereunder (other than Section 6 hereof) shall terminate on the
first date on which no Registrable Shares remain outstanding.
(c) Notices. All notices, demands, requests, or other communications
which may be or are required to be given, served, or sent by any party to any
other party pursuant to the Registration Rights set forth in this Exhibit G
shall be given in accordance with Section 15.5 of the Stock Purchase Agreement.
(d) Stock Purchase Agreement. This Exhibit G is deemed a part of the
Stock Purchase Agreement.
