1
EXHIBIT 10.20
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (the "Agreement") dated as of July 23,
1991, between Educational Medical, Inc., a Delaware corporation (the "Company")
and the persons named on Schedules I and II attached to this Agreement (each of
such persons being referred to individually as an "Investor" and collectively
referred to as the "Investors").
PRELIMINARY STATEMENT
The Company and the Investors named on Schedule I (the "Preferred
Stock Investors") are parties to the Stock Purchase Agreement dated March 31,
1988, the Warrant Purchase Agreement dated March 31, 1988, the Note and Warrant
Purchase Agreement dated March 31, 1988 and the Letter Agreements dated
November 14, 1989 (collectively the "Preferred Stock Agreements") Pursuant to
the Preferred Stock Agreements, the Company has issued Preferred Stock,
Warrants to purchase Preferred Stock, Common Stock, and Warrants to purchase
Common Stock (collectively the "Preferred Stock Investors' Securities") to the
Preferred Stock Investors in the amounts set forth opposite each of their names
on Schedule I.
The Company and the Investors "named on Schedule II (the "Warrant
Investors') are parties to the Securities Purchase Agreement dated as of July
23, 1991 (the "Purchase Agreement"), pursuant to which the Company has agreed,
among other things, to issue to the Investors an aggregate of 4,000 units (the
"Units"), each Unit comprising (i) $1,000 principal amount of 12.5% Senior
Subordinated Promissory Notes of the Company in the aggregate principal amounts
set forth on the respective Purchaser Schedule attached to the Purchase
Agreement (the "Notes") and (ii) warrants (the "Warrants") to purchase 200
shares of common stock (the "Warrant Shares") all in the amounts set forth
opposite of their names on Schedule II.
The Preferred Stock Investors have been granted certain registration
rights with respect to the Preferred Stock Investors' Securities pursuant to
the Preferred Stock Agreements. The Company has agreed to grant certain
registration rights to the warrant Investors with respect to the Warrants. The
Investors have agreed to enter into this single Agreement with the Company
setting forth their respective registration rights, replacing the related
provisions of the Preferred Stock Agreements.
In connection with the acquisition of Xxxxxxx College of Business, the
Company issued a single parent fixed rate secured promissory note dated October
13, 1989 (the "Xxxxxxx Note") which provides for the contingent issuance of
Common Stock (the "Xxxxxxx Common Stock") in connection with an Initial Public
Offering. The Xxxxxxx Note contains certain registration rights relating to
the Xxxxxxx Common Stock, and the Investors have agreed to accommodate the
exercise of such rights in this Agreement.
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1. Definitions.
For purposes of this Agreement, the capitalized terms used in the
Preliminary Statement shall have the meanings given to them in such statement;
in addition, as used in this Agreement the following terms shall have the
following meanings, in all cases unless the context otherwise requires:
(a) Commission: The Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
(b) Common Stock: The Common Stock of the Company.
(c) Company: As defined in the recital paragraph hereof.
(d) Exchange Act: The Securities Exchange Act of 1934.
(e) Person: An individual, a partnership, a joint venture, a
corporation, a trust, an unincorporated association or a government or any
department or agency thereof.
(f) Registrable Common Stock: The shares of the Company's Common
Stock included in the Restricted Securities or issuable with respect to the
Restricted Securities.
(g) Restricted Securities: The Preferred Stock Investors'
Securities, the Warrants, and any shares of capital stock received in respect
of them, whether by reason of their exercise, a stock split or share
reclassification, a stock dividend, or otherwise. As to any particular
Restricted Securities, once issued such securities shall cease to be Restricted
Securities when (a) a registration statement with respect to the sale of such
securities shall have become effective under the Securities Act and such
securities shall have been disposed of in accordance with such registration
statement, (b) they shall have been distributed to the public pursuant to Rule
144 (or any successor provision) under the Securities Act, (c) they shall have
been otherwise transferred, new certificates for them not bearing a legend
restricting further transfer shall have been delivered by the Company and
subsequent disposition of them shall not require registration or qualification
of them under the Securities Act or any similar state law then in force, or (d)
they shall have ceased to be outstanding. The term "holder of Restricted
Securities" shall mean a holder of Warrants, a holder of the Preferred Stock
Investors Securities, a holder of shares of Common Stock issued pursuant to the
exercise or otherwise issued as described in the first sentence of this
definition. Wherever in this Agreement reference is made to a percentage or a
majority (by number of shares) of Registrable Common Stock or Restricted
Securities, the term "number of shares" shall mean and include both issued and
issuable shares.
(h) Registration Expenses: All expenses incident to the Company's
performance of or compliance with this Agreement, including, without
limitation, all registration, filing and National Association of Securities
Dealers, Inc. fees, all fees and expenses of complying with securities or blue
sky laws, all word processing, duplicating and printing expenses, messenger and
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EXECUTION A
delivery expenses, the reasonable fees and disbursements of counsel for the
Company and of its independent public accountants, including the expenses of
any special audits or "cold comfort" letters required by or incident to such
performance and compliance, reasonable fees and disbursements of not more than
one counsel for the holders of Restricted Securities requesting registration
hereunder, premiums and other costs of policies of insurance obtained by the
Company against liabilities arising out of the public offering of the
Registrable Common Stock being registered and any fees and disbursements of
underwriters customarily paid by issuers or sellers of securities, but
excluding underwriting discounts and commissions and transfer taxes applicable
to Registrable Common Stock sold by Investors, which costs shall be borne in
each case by such Investors.
(i) Securities Act: The Securities Act of 1933, as amended.
2. Restrictions on Transfer.
(a) Not Transferable. The Preferred Stock Investors and the
Warrant Investors each agree that the Restricted Securities shall not be
transferable except upon the conditions specified in this Agreement, which
conditions are intended to insure compliance with the provisions of the
Securities Act in respect of their transfer.
(b) Legends. In addition to any other legends such certificates
may bear, each certificate for the Restricted Securities, and each certificate
for any such securities issued to subsequent transferees of any such
certificate shall (unless otherwise permitted by the provisions of Section 2
(c) be stamped or otherwise imprinted with a legend in substantially the
following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THESE
SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID
ACT AND SUCH LAWS AND RESPECTIVE RULES AND REGULATIONS THEREUNDER.
THE SECURITIES ARE ALSO SUBJECT TO COMPLIANCE WITH CONDITIONS OF A
REGISTRATION RIGHTS AGREEMENT DATED AS OF JULY 23, 1991 AMONG THE
COMPANY AND CERTAIN OTHER PARTIES. NO TRANSFER OF THESE SECURITIES
SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED.
COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST
MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF
THE COMPANY."
(c) Notice of Transfer. The holder of any Restricted Securities,
by acceptance thereof agrees, that prior to any transfer of any Restricted
Securities, such holder will give written notice
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EXECUTION A
to the Company of such holder's intention to effect such transfer and to comply
in all other respects with the provisions of this Section 2. Each such notice
shall describe the manner and circumstances of the proposed transfer and shall
be accompanied by (a) the written opinion, addressed to the Company, of counsel
for the holder of Restricted Securities (which counsel shall be reasonably
satisfactory to the Company), as to whether in the opinion of such counsel
(which opinion shall be reasonably satisfactory to counsel to the Company) such
proposed transfer involves a transaction requiring registration of such
Restricted Securities under the Securities Act, and (b) in the case of
Registrable Common Stock, if in the opinion of such counsel such registration
is required, a written request addressed to the Company by the holder of such
Registrable Common Stock or Restricted Securities convertible or exercisable
into Registrable Common Stock, describing in detail the proposed method of
disposition and requesting the Company to effect the registration of the
offering of such Registrable Common Stock pursuant to the terms and provisions
of Sections 3 or 4 hereof, as the case may be; provided, however, that in the
case of any holder of Restricted Securities which is a partnership or
corporation, no such opinion of counsel shall be necessary for a transfer by
such holder to a partner of such holder, or a retired partner of such holder
who retires after the date hereof, or the estate of any such partner or retired
partner, or by such corporation to another corporation controlling, controlled
by, or under common control with, such corporation, or in the case of any
individual holder, upon his death for a transfer to any of his beneficiaries or
estate, if the transferee agrees in writing to be subject to the terms of this
Section 2 to the same extent as if such transferee were originally a signatory
to this Agreement; provided further, however, that no such opinion shall be
required in connection with a transaction complying with the requirements of
Rule 144 (as amended from time to time) promulgated under the Securities Act
(or successor Rule thereto), subject to confirmation by counsel to the Company
that such transaction complies with the requirements of Rule 144. If in the
opinion of such counsel (if such opinion is required hereunder) the proposed
transfer of Restricted Securities may be effected without registration under
the Securities Act, the holder of Restricted Securities shall thereupon be
entitled to transfer Restricted Securities in accordance with the terms of the
notice delivered by it to the Company. Each certificate or other instrument
evidencing the securities issued upon the transfer of any Restricted Securities
(and each certificate or other instrument evidencing any untransferred balance
of such securities) shall bear the legend set forth in Section 2 (b) hereof
unless (a) in the opinion of counsel to the Company registration of future
transfer is not required by the applicable provisions of the Securities Act or
(b) the Company shall have waived the requirement of such legend; provided,
however, that such legend shall not be required (i) on any certificate or other
instrument evidencing the securities issued upon such transfer in the event
such transfer shall be made in compliance with the requirements of Rule 144 (as
amended from time to time) promulgated under the Securities Act (or successor
Rule thereto) or (ii) on any certificate or other instrument which is
immediately resaleable under Rule 144(k) (or any successor rule thereto). The
holder of Restricted Securities shall not transfer such Restricted Securities
until such opinion of counsel has been given to the Company, unless waived by
the Company or unless such opinion is not required in accordance with the
provisions of this Section or until registration of sale of the Registrable
Common Stock involved in the above-mentioned request has become effective under
the Securities Act.
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EXECUTION A
3. Required Registration. If at any time the Company shall be
requested by any holder or holders of not less than (x) 25% (by voting power)
of the outstanding Restricted Securities issued to the Preferred Stock
Investors (each such request called a "Preferred Stock Investors Section 3
Request") or (y) 50% (by voting power) of the outstanding Restricted Securities
issued to the Warrant Investors (each such request called a "Warrant Investors
Section 3 Request") (in each case assuming all of the related outstanding
securities that are convertible into or exercisable for Registrable Common
Stock have been converted into or exercised for the maximum number of shares of
Common Stock into or for which such securities are then convertible or
exercisable) to effect the registration under the Securities Act of the sale of
Registrable Common Stock, the Company shall promptly give written notice of
such proposed registration to all holders of outstanding Restricted Securities,
and thereupon the Company shall promptly use its best efforts to effect the
registration under the Securities Act of the Registrable Common Stock that the
Company has been requested to register for disposition described (i) in the
request of said holder or holders of Restricted Securities and (ii) in any
response, which response is received from the holders of Restricted Securities
within 30 days after the giving of the written notice to the other holders of
Registrable Common Stock by the Company; provided, however, that the Company
shall not be obligated to effect any registration under the Securities Act
except in accordance with the following provisions:
(a) the Company shall not be obligated to file and cause to become
effective more than (x) up to two registration statements in which Registrable
Common Stock is registered under the Securities Act pursuant to this Section 3
and effectively sold thereunder pursuant to a Preferred Stock Investors Section
3 Request and (y) up to two registration statements in which Registrable Common
Stock is registered under the Securities Act pursuant to this Section 3 and
effectively sold thereunder pursuant to a Warrant Investors Section 3 Request,
nor any registration statement within a period of six months after a prior
registration statement under this Section 3 or under Section 4 in which
Registrable Common Stock was included or with respect to which the holders of
Restricted Securities did not request inclusion.
(b) anything contained herein to the contrary notwithstanding,
with respect to each registration requested pursuant to this Section 3, the
Company may include in such registration any authorized but unissued shares of
Common Stock for sale by the Company or any issued and outstanding shares of
Common Stock for sale by others; provided, however, that if the number of
shares of Common Stock so included pursuant to this clause (b) exceeds the
number of Registrable Common Stock registered by the holder or holders of
outstanding Restricted Securities requesting such registration, then such
registration shall be deemed to be a registration in accordance with and
pursuant to Section 4; provided further, however, that the inclusion of such
previously authorized but unissued shares by the Company or issued and
outstanding shares of Common Stock by others in such registration shall not
prevent the holder or holders of outstanding Restricted Securities requesting
such registration from registering the entire number of Registrable Common
Stock requested by them and, in the event the registration is, in whole or in
part, an underwritten public offering and the managing underwriter determines
and advises in writing that the inclusion of all Registrable Common Stock
proposed to be included in such registration and such previously authorized but
unissued shares of Common Stock by the
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Company and/or issued and outstanding shares of Common Stock by persons other
than the holders of Restricted Securities proposed to be included in such
registration would interfere with the successful marketing (including pricing)
of such securities, then the number of shares of Registrable Common Stock and
such other previously authorized but unissued shares of Common Stock proposed
to be included by the Company and issued and outstanding shares of Common Stock
proposed to be included by persons other than the holders of Restricted
Securities shall be reduced, first, rata among the Company and the holders of
shares of Common Stock other than the holders of Restricted Securities and the
holders of "the Xxxxxxx Common Stock, if included, and thereafter, if
necessary, rata among the holders of Restricted Securities and the Xxxxxxx
Common Stock, (based upon the number of shares of Common Stock which each such
person proposes to include in such offering).
4. Incidental Registration. If the Company at any time proposes
for any reason to register any of its securities under the Securities Act
(other than pursuant to a registration statement on Form 5-4 or 5-8 or similar
or successor form or another form which is not available for registering
Registrable Common Stock for sale to the public), it shall each such time
promptly give written notice to all holders of outstanding Restricted
Securities of its intention so to do, and, upon the written request, given
within 30 days after receipt of any such notice, of the holder of any such
Restricted Securities to register any Registrable Common Stock (which request
shall specify the Registrable Common Stock intended to be sold or disposed of
by such holders and shall state the intended method of disposition of such
Registrable Common Stock by the prospective seller), the Company shall use its
best efforts to cause all such Registrable Common Stock to be registered under
the Securities Act promptly upon receipt of the written request of such holders
for such registration, all to the extent required to permit the sale or other
disposition (in accordance with the intended methods thereof, as aforesaid) by
the prospective seller or sellers of the Registrable Common Stock so
registered. In the event that the proposed registration by the Company is, in
whole or in part, an underwritten public offering of securities of the Company,
any request pursuant to this Section 4 to register Registrable Common Stock
must specify that such shares are to be included in the underwriting (a) on the
same terms and conditions as the shares of Common Stock, if any, otherwise
being sold through underwriters under such registration or (b) on terms and
conditions comparable to those normally applicable to offerings of common stock
in reasonably similar circumstances in the event that no shares of Common Stock
other than Registrable Common Stock are being sold through underwriters under
such registration; provided, however, that (i) if the managing underwriter
determines and advises in writing that the inclusion in the underwritten public
offering of (x) all Registrable Common Stock and any Xxxxxxx Common Stock
proposed to be included in the underwritten public offering, (y) authorized but
unissued shares of Common Stock to be offered by the Company other than shares
to be issued pursuant to the exercise of options, rights, or warrants to
purchase Common Stock or the conversion of other securities convertible into
Common Stock, and (z) other shares of Common Stock proposed to be included
therein by Persons other than holders of Restricted Securities or the Xxxxxxx
Common Stock (shares of Common Stock included in preceding clauses (y) and (z)
are called the "Other Shares"), would interfere with the successful marketing
(including pricing) of such securities, then the number of shares of
Registrable Common Stock, Xxxxxxx Common Stock and Other Shares to be included
in such underwritten
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EXECUTION A
public offering shall be reduced, first, rata among the holders of Other
Shares, and secondly if necessary, rata among the holders of Registrable Common
Stock and the Xxxxxxx Common Stock, based upon the number of shares of
Registrable Common Stock and Xxxxxxx Common Stock requested by the holders
thereof to be registered in such underwritten public offering and (ii) in each
case those shares of Common Stock which are excluded from the underwritten
public offering and all shares of Common Stock held by the Investors shall be
withheld from the market by the holders thereof for a period, not to exceed 90
days, which the managing underwriter reasonably determines as necessary in
order to effect the underwritten public offering.
If, at any time after giving written notice of its intention to
register any securities pursuant to this Section 4, and prior to the effective
date of the registration statement filed in connection with such registration,
the Company shall determine for any reason not to register or to delay
registration of such securities, the Company may, at its election, give written
notice of such determination to each holder of Registrable Common Stock and,
thereupon, (i) in the case of a determination not to register, shall be
relieved of its obligation to register any Registrable Common Stock in
connection with such registration (but not from its obligation to pay the
Registration Expenses in connection therewith), without prejudice, however, to
the rights of any holder or holders of Registrable Common Stock entitled to do
so to request that such registration be effected as a registration under
Section 3, and (ii) in the case of a determination to delay registering, shall
be permitted to delay registering any Registrable Common Stock, for the same
period as the delay in registering such other securities. The Company will pay
all Registration Expenses in connection with each registration of Registrable
Common Stock requested pursuant to this Section 4.
5. Registrations on Forms 5-2 and 5-3. The Company shall use its
best efforts to qualify for registration under the Securities Act on Forms 5-2
and/or 5-3. At such time as the Company shall have qualified for the use of
Forms 5-2 and/or 5-3 (or any similar form or forms promulgated under the
Securities Act), the holders of Restricted Securities shall each have the right
to request registrations on Form 5-2 or 5-3 (which request or requests shall be
in writing, shall specify the Registrable Common Stock intended to be sold or
disposed of by the holders thereof, shall state the intended method of
disposition of such Registrable Common Stock by the holder(s) requesting such
registration and shall relate to Registrable Common Stock having a proposed
aggregate gross offering price (before "deduction of underwriting discounts and
expenses of sale) of at least $500,000), and the Company shall be obligated to
use its best efforts to effect such registration or registrations on Forms 5-2
and/or 5-3 (as the case may be).
6. Granting of Registration Rights. The Company shall not,
without the prior written consent of persons holding a majority (by number of
shares) of the Restricted Securities then outstanding and held by the Preferred
Stock Investors and the Warrant Investors, respectively, grant any rights to
any persons to register any shares of capital stock or other securities of the
Company if such rights could reasonably be expected to conflict with, or be on
parity with, the rights of the holders of Restricted Securities granted
pursuant to this Agreement.
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EXECUTION A
7. Registration Procedures. If and whenever the Company is
required to use its best efforts to effect the registration of any Registrable
Common Stock pursuant to the Securities Act as provided in Sections 3 and 4,
the Company will as expeditiously as possible:
(i) prepare and (as soon thereafter as possible or in any event no
later than 60 days after the end of the period within which requests for
registration may be given to the Company or such longer period, not to exceed
90 days, as the Company shall in good faith require to produce the financial
statements required in connection with such registration) file with the
Commission the requisite registration statement to effect such registration and
thereafter use its best efforts to cause such registration statement to become
effective, provided that the Company may discontinue any registration of its
securities which are not Registrable Common Stock and, under the circumstances
specified in Section 4, its securities which are Registrable Common Stock at
any time prior to the effective date of the registration statement relating
thereto;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective for a period ending the earlier of: (a) one year from the effective
date; and (b) such time as all of such securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof set forth in such registration statement and to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement until the end of such period;
(iii) furnish to each seller of Registrable Common Stock covered by
such registration statement such number of conformed copies of such
registration statement and of each such amendment and supplement thereto, such
number of copies of the prospectus contained in such registration statement
(including each preliminary prospectus and any summary prospectus) and any
other prospectus filed under Rule 424 or Rule 430A under the Securities Act, in
conformity with the requirements of the Securities Act, and such other
documents, as such seller may reasonably request;
(iv) use its best efforts to register or qualify all Registrable
Common Stock and other securities covered by such registration statement under
such other securities or blue sky laws or such jurisdictions as each seller
thereof shall reasonably request, to keep such registration or qualification in
effect for so long as such registration statement remains in effect, and take
any other action which may be reasonably necessary or advisable to enable such
seller to consummate the disposition in such jurisdictions of the securities
owned by such seller, except that the Company shall not for any such purpose be
required to qualify generally to do business as a foregoing corporation in any
jurisdiction wherein it would not but for the requirements of this subdivision
(iv) be obligated to be so qualified or to consent to general service of
process in any such jurisdiction;
(v) use its best efforts to cause all Registrable Common Stock
covered by such registration statement to be registered with or approved by
such other governmental agencies or
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EXECUTION A
authorities as may be necessary to enable the seller or sellers thereof to
consummate the disposition of such Registrable Common Stock;
(vi) if an underwritten offering, furnish to each seller of
Registrable Common Stock a signed counterpart, addressed to such seller (and
the underwriters, if any) of
(a) an opinion of counsel for the Company, dated the
effective date of such registration statement (or, if such registration
includes an underwritten public offering, dated the date of the closing under
the underwriting agreement), of such matters that are customarily covered in an
opinion of counsel including that the registration is valid and effective and
which, if such registration includes an underwritten public offering, will be
deemed satisfactory if in the same form and of the same substance as the
opinion addressed to the underwriter, all of which is reasonably satisfactory
in form and substance to such seller, and
(b) a "comfort" letter, dated the effective date of such
registration statement (and, if such registration includes an underwritten
public offering, dated the date of the closing under the underwriting
agreement), signed by the independent public accountants who have certified the
Company's financial statements included in such registration statement,
addressed to each seller, to the extent the same can be reasonably obtained,
and addressed to the underwriters, if any, covering substantially the same
matters with respect to such registration statement (and the prospectus
included therein) and, in the case of the accountants' letter, with respect to
events subsequent to the date of such financial statements, as are customarily
covered in accountants' letters delivered to the underwriters in underwritten
public offerings of securities and such other financial matters as such seller
or such holder (or the underwriters, if any) may reasonably request;
(vii) notify each seller of Registrable Common Stock covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, upon discovery that, or upon
the happening of any event as a result of which, the prospectus included in
such registration statement, as then in effect, includes an untrue statement of
a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading in the light
of the circumstances under which they were made, and at the request of any such
seller or holder promptly prepare to furnish to such seller or holder a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
the light of the circumstances under which they were made;
(viii) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earning statement covering the
period of at least twelve months, but not more than eighteen months, beginning
with the first full calendar month after the effective date of such
registration statement, which earning statement shall satisfy the provisions of
Section 11 (a) of the Securities
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EXECUTION A
Act, and will furnish to each such seller at least two business days prior to
the filing thereof a copy of any amendment or supplement to such registration
statement or prospectus and shall not file any thereof to which any such seller
shall have reasonably objected on the grounds that such amendment or supplement
does not comply in all material respects with the requirements of the
Securities Act or of the rules or regulations thereunder;
(ix) provide and cause to be maintained a transfer agent, and (if
required by the applicable rules of any national securities exchange or NASDAQ)
a registrar, for all Registrable Common Stock covered by such registration
statement from and after a date not later than the effective date of such
registration statement; and
(x) use its best efforts to list all Registrable Common Stock
covered by such registration statement on any securities exchange on which any
of the Registrable Common Stock is then listed.
The Company may require each proposed seller of Registrable Common Stock as to
which any registration is being effected to promptly furnish the Company, as a
condition precedent to including such holder's Registrable Common Stock in any
registration, such information regarding such seller and the distribution of
such securities as the Company may from time to time reasonably request in
writing.
Each holder of Restricted Securities agrees by acquisition of such
Restricted Securities that upon receipt of any notice from the Company of the
happening of any event of the kind described in subdivision (vii) of this
Section 7, such holder will forthwith discontinue such holder's disposition of
Registrable Common Stock pursuant to the registration statement relating to
such Registrable Common Stock until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by subdivision (vii) of this
Section 7 and, if so directed by the Company, will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies, then in
such holder's possession of the prospectus relating to such Registrable Common
Stock current at the time of receipt of such notice.
8. Underwritten Offerings.
(a) Requested Underwritten Offerings. If requested by the
underwriters, if any, for any offering by holders of Registrable Common Stock
pursuant to a registration requested under Section 3, the Company will enter
into an underwriting agreement with such underwriters for such offering, such
agreement to be satisfactory in substance and form to the Company, to holders
of more than 50% (by number of shares) of the Registrable Common Stock held by
the Preferred Stock Investors and 50% (by number of shares) of the Registrable
Common Stock held by the Warrant Investors, included in such registration and
the underwriters and to contain such representations and warranties by the
Company and such other terms as are generally prevailing in agreements of this
type, including, without limitation, indemnities to the effect and to the
extent provided in Section 10. The holders of the Registrable Common Stock
will cooperate with the Company in the negotiation of the underwriting
agreement and will give consideration to the
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EXECUTION A
reasonable requests of the Company regarding the form thereof, provided that
nothing herein contained shall diminish the foregoing obligations of the
Company. The holders of Registrable Common Stock to be distributed by such
underwriters shall be parties to such underwriting agreement and may, at their
option, require that any or all of the representations and warranties by, and
the other agreements on the part of the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of such holders of
Registrable Common Stock and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be
conditions precedent to the obligations of such holders of Registrable Common
Stock. Any such holder of Registrable Common Stock shall not be required to
make any representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding
such holder, such holder's Registrable Common Stock and such holder's intended
method of distribution, any other information supplied by such holder to the
Company for use in the Registration Statement and any other representation
required by law.
(b) Incidental Underwritten Offerings. If the Company at any time
proposes to register any of its securities under the Securities Act as
contemplated by Section 4 and such securities are to be distributed by or
through one or more underwriters, the Company will, if requested by any holder
of Registrable Common Stock as provided in Section 4 and subject to the
provisions of Section 4, arrange for such underwriters to include all the
Registrable Common Stock to be offered and sold by such holder among the
securities to be distributed by such underwriters. The holders of Registrable
Common Stock to be distributed by such underwriters shall be parties to the
underwriting agreement between the Company and such underwriters and may, at
their option, require that any or all of the representations and warranties by,
and the other agreements on the part of, the Company to and for the benefit of
such underwriters shall also be made to and for the benefit of such holders of
Registrable Common Stock and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be
conditions precedent to the obligations of such holders of Registrable Common
Stock. Any such holder of Registrable Common Stock shall not be required to
make any representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties, or agreements regarding
such holder, such holder's Registrable Common Stock and such holders intended
method of distribution, any other information supplied by such holder to the
Company for use in the Registration Statement and any other representation
required by law.
(c) Holdback Agreements.
(i) Each holder of Restricted Securities agrees, if so
required by the managing underwriter, not to effect any sale or distribution of
any equity securities of the Company during the seven days prior to and the
90-day period beginning on the effective date of any underwritten registration
pursuant to Section 3 or 4 hereof in which Registrable Common Stock are
included (except as part of such underwritten registration)
(ii) The Company agrees (x) not to effect any sale or
distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities,
12
EXECUTION A
during the seven days prior to and during the 90-day period beginning on the
effective date of any underwritten registration pursuant to Section 3 hereof
(except as part of such underwritten registration or pursuant to registrations
on Form 5-8 or any successor form), and (y) to use its best efforts to cause
each holder of at least 5% of the Common Stock to agree not to effect any sale
or distribution of any such securities during such period (except as part of
such underwritten registration, if otherwise permitted).
9. Expenses. All Registration Expenses shall be paid by the
Company.
10. Indemnification.
(a) Indemnification by the Company. In the event of any
registration of any securities of the Company under the Securities Act, the
Company will, and hereby does, indemnify and hold harmless the seller of any
Registrable Common Stock covered by such registration statement, its directors
and officers, each other Person who participates as an underwriter in the
offering or sale of such securities and such other Person, if any, who controls
such seller or any such underwriter within the meaning of the Securities Act,
against any losses, claims, damages or liabilities, joint or several, to which
such seller or any such director or officer or underwriter or controlling
person may become subject under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any registration statement pursuant to which such securities were registered
under the Securities Act, any preliminary prospectus, final prospectus or
summary prospectus contained therein, or any amendment or supplement thereto,
or any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, and the Company will reimburse such seller and each such director,
officer, underwriter and controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding; provided that the Company
shall only be required to reimburse such seller, its directors and officers and
such other Person, if any, who controls such seller, for one counsel and firm
of accountants unless a conflict of interest exists between such Persons; and
provided further that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in such
registration statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in conformity
with written information furnished to the Company by such seller specifically
for use in the preparation thereof and, provided further that the Company shall
not be liable to any Person who participates as an underwriter, in the offering
or sale of Registrable Common Stock or any other Person, if any, who controls
such underwriters within the meaning of the Securities Act, in any such case to
the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of such Person's failure
to send or give a copy of the final prospectus, as the same may be then
supplemented or amended, to the Person asserting an untrue statement or alleged
untrue statement
13
EXECUTION A
or omission or alleged omission at or prior to the written confirmation of the
sale of Registrable Common Stock to such Person if such statement or omission
was corrected in such final prospectus. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
seller or any such director, officer, underwriter or controlling person and
shall survive the transfer of such securities by such seller.
(b) Indemnification by the Sellers. In the event of any
registration of any securities of an Investor (or any subsequent holder
exercising the rights of an Investor pursuant to this Agreement, which person,
is specifically called an "Investor" for purposes of the obligations contained
in this Section) pursuant to Section 3 or 4 hereof, such Investor will, and
hereby does, indemnify and hold harmless (in the same manner and to the same
extent as set forth in subdivision (a) of this Section 10) the Company, each
director of the Company, each officer of the Company and each other Person, if
any, who controls the Company within the meaning of the Securities Act, with
respect to any statement or meaning alleged statement in or omission or alleged
omission from such registration statement, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement hereto, if such statement or alleged statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by such seller specifically for use in the
preparation of such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement. Such indemnity shall
remain in full force and effect, regardless of any investigation made by or on
behalf of the Company or any such director, officer or controlling Person and
shall survive the transfer of such securities by such seller.
(c) Notices of Claims, etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subdivisions of this Section 10,
such indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party, give written notice to the latter of the
commencement of such action, provided that the failure of any indemnified party
to give notice as provided herein shall not relieve the indemnifying party of
its obligations under the preceding subdivisions of this Section 10, except to
the extent that the indemnifying party is actually prejudiced by such failure
to give notice. In case any such action is brought against an indemnified
party, unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified party and indemnifying parties may exist in
respect of such claim, the indemnifying party shall be entitled to participate
in and to assume the defense thereof, jointly with any other indemnifying party
similarly notified to the extent that it may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such indemnified party
for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof other than reasonable costs of
investigation, provided that if any indemnified party shall have reasonably
concluded that there may be one or more legal defenses available to such
indemnified party which are different from or additional to and are
inconsistent with those available to the indemnifying party, or that such claim
or litigation involves or could have an effect upon matters beyond the scope of
the indemnity agreement provided in this Section 10, the indemnifying party
shall not have the right to assume the defense
14
EXECUTION A
of such action on behalf of such indemnified party and such indemnifying party
shall reimburse such indemnified party and any person controlling such
indemnified party for that portion of the fees and expenses of any counsel
retained by the indemnified party which are reasonably related to the matters
covered by the indemnity agreement provided in this Section 10. No
indemnifying party shall, without the consent of the indemnified party, consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation.
(d) Other Indemnification. Indemnification similar to that
specified in the preceding subdivisions of this Section 10 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Common Stock with respect to any required registration or other qualification
of securities under any Federal or state law or regulation of any governmental
authority other than the Securities Act.
(e) Indemnification Payments. The indemnification required by
this Section 10 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred, subject to repayment in the
event indemnification was not required by this Section 10.
(f) Contribution. If the indemnification provided for in this
Agreement shall for any reason be unavailable or insufficient to an indemnified
party under Section 10(a), 10(b) or 10(d) hereof in respect to any loss, claim,
damage or liability, or any action in respect thereof, or referred to therein,
then each indemnifying party shall, in lieu of indemnifying such party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect thereof, in such
proportion as shall be appropriate to reflect (i) the relative benefits
received by the Company on the one hand and the holders of the Registrable
Common Stock included in the offering on the other hand, from the offering of
the Registrable Common Stock, and (ii) the relative fault of the Company on the
one hand and the holders of the Registrable Common Stock included in the
offering on the other, with respect to the statements or omissions which
resulted in such loss, claim, damage or liability, or action in respect
thereof, as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the holders of the
Registrable Common Stock on the other with respect to such offering shall be
deemed to be in the same proportion as the sum of the total subscription price
paid to the Company in respect of the Registrable Common Stock plus the total
net proceeds from the offering of the securities (before deducting expenses)
received by the Company bears to the amount by which the total net proceeds
from the offering of the securities (before deducting expenses) received by the
holders of the Registrable Common Stock with respect to such offering exceeds
the subscription price paid to the Company in respect of the Registrable Common
Stock, and in each case the net proceeds received from such offering shall be
determined as set forth on the table of the cover page of the prospectus. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by
the Company or the holders of the Registrable Common Stock, the
15
EXECUTION A
intent of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
the holders of the Registrable Common Stock agree that it would not be just and
equitable if contribution pursuant to this Section 10 were to be determined by
pro rata allocation or by any other method of allocation which does not take
into account the equitable consideration referred to herein. The amount paid
or payable by an indemnified party as a result of the loss, claim, damage or
liability, or action in respect thereof, referred to in this Section 10 shall
be deemed to include, for purposes of this Section 10, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigation or defending any such action or claim. 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.
11. Removal of Legends, Etc. Notwithstanding the foregoing
provisions of this Agreement, the restrictions imposed by this Agreement upon
the transferability of any Restricted Securities shall cease and terminate when
(a) such Restricted Securities are sold or otherwise disposed of in accordance
with the intended method of disposition by the seller or sellers thereof set
forth in the registration statement or as otherwise contemplated by Section 2
hereof which does not require that the securities transferred bear any
restrictive legend making reference to the Securities Act of 1933 hereof or (b)
the holder of Restricted Securities has met the requirements for transfer of
such Restricted Securities pursuant to subparagraph (k) of Rule 144 (as amended
from time to time) promulgated by the Commission under the Securities Act.
Whenever the restrictions imposed by this Agreement shall terminate, as herein
provided, the holder of any Restricted Securities as to which such restrictions
have terminated shall be entitled to receive from the Company, without expense,
a new certificate not bearing a restrictive legend making reference to the
Securities Act.
12. Rule 144. If the Company shall have filed a registration
statement pursuant to the requirements of Section 12 of the Exchange Act or a
registration statement pursuant to the requirements of the Securities Act, the
Company will file the reports required to be filed by it under the Securities
Act and the Exchange Act (or, if the Company is not required to file such
reports, will, upon the request of any holder of Registrable Common Stock, make
publicly available other information) and will take such further action as any
holder of Registrable Common Stock may reasonably request, all to the extent
required from time to time to enable such holder to sell Registrable Common
Stock without registration under the Securities Act within the limitation of
the exemptions provided by (a) Rule 144 under the Securities Act, as such Rule
may be amended from time to time or (b) any similar rule or regulation
hereafter adopted by the Commission ("Rule 144"), Upon the request of any
holder of Restricted Securities, the Company will deliver to such holder a
written statement as to whether it has complied with such requirements.
13. Amendments and Waivers. This Agreement may be amended and the
Company may take any action herein prohibited or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of the holder or
holders of 50% or more (by number of shares) of Registrable
16
EXECUTION A
Common Stock held by (x) the Preferred Stock Investors and (y) the Warrant
Investors, voting as separate classes. Any consent provided for in the
previous sentence may be made by only the Preferred Stock Investors or Warrant
Investors if, and only to the extent, such holders are the sole holders
affected by such action. Each holder of any Restricted Securities at the time
or thereafter outstanding shall be bound by any consent authorized by this
Section 13, whether or not such Registrable Common Stock shall have been marked
to indicate such consent.
14. Nominees for Beneficial Owners. In the event that any
Registrable Common Stock are held by a nominee for the beneficial owner
thereof, the beneficial owner thereof may, at its election, be treated as the
holder of such Registrable Common Stock for purposes of any request or other
action by any holder or holders of Registrable Common Stock pursuant to this
Agreement or any determination of any number or percentage of shares of
Registrable Common Stock held by any holder or holders of Registrable Common
Stock contemplated by this Agreement. If the beneficial owner of any
Registrable Common Stock so elects, the Company may require assurances
reasonably satisfactory to it of such owner's beneficial ownership of such
Registrable Common Stock.
15. Notices. All communications provided for hereunder shall be
sent by first-class mail, overnight courier or by telecopier provided that
within a reasonable time a permanent copy is transmitted by any of the other
methods described above and (a) if addressed to a party other than the Company,
addressed to such party at such address as such party shall have furnished to
the Company in writing, or (b) if addressed to any other holder of Registrable
Common Stock at the address that such holder shall have furnished to the
Company in writing, or, until any such other holder so furnishes to the Company
an address, then to and at the address of the last holder of such Registrable
Common Stock who has furnished an address to the Company, or (c) if addressed
to the Company, at 0000 Xxxxxxxxx Xxxxxx, Xxxxx X, Xxxxxxxxxx, Xxxxxxx 00000 to
the attention of the President, or at such other address, or to the attention
of such other officer, as the Company shall have furnished to each holder of
Registrable Common Stock at the time outstanding.
16. Assignment. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the parties hereto and their respective
successors and assigns. In addition, and whether or not any express assignment
shall have been made, the provisions of this Agreement which are for the
benefit of the parties hereto other than the Company shall also be for the
benefit of and enforceable by any subsequent holder of any Restricted
Securities, subject to the provisions respecting the minimum numbers or
percentages of shares of Restricted Securities or Registrable Common Stock
required in order to be entitled to certain rights, or take certain actions,
contained herein.
17. Descriptive Headings. The descriptive headings of the several
sections and paragraphs of this Agreement are inserted for reference only and
shall not limit or otherwise affect the meaning hereof.
17
EXECUTION A
18. Governing Law. This Agreement shall be construed and enforced
in accordance with, and the rights of the parties shall be governed by, the
laws of the State of New York.
19. Counterparts. This Agreement may be executed simultaneously
in any number of counterparts, each of which shall be deemed an original, but
all such counterparts shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized
as of the date first above written.
EDUCATIONAL MEDICAL, INC.
By:
------------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
STATE EMPLOYEES' RETIREMENT FUND
OF THE STATE OF DELAWARE
By: Pecks Management Partners, Ltd.,
its Investment Adviser
By:
-------------------------------------
Xxxxxx X. Xxxxxx
Managing Director
TRUST FOR DEFINED BENEFIT PLAN OF
ICI AMERICAN HOLDINGS INC.
By: Pecks Management Partners, Ltd.,
its Investment Adviser
By:
-------------------------------------
Xxxxxx X. Xxxxxx
Managing Director
SPROUT CAPITAL V
By:
------------------------------------------
18
EXECUTION A
SPROUT TECHNOLOGY FUND, L.P.
By:
------------------------------------------
DLJ VENTURE CAPITAL FUND II, L.P.
By:
------------------------------------------
INVESTECH, L.P.
By:
------------------------------------------
LAWRENCE, TYRRELL, XXXXXX & XXXXX
By:
------------------------------------------
19
EXECUTION A
SCHEDULE I
TO REGISTRATION RIGHTS AGREEMENT
Common Stock(1):
============================================================================================================
------------------------------------------------------------------------------------------------------------
Sprout Capital V: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147,483
Sprout Technology Fund, L.P.: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,041
DLJ Venture Capital Fund II, L.P.: . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,860
LTOS: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159,383
Investech: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106,256
------------------------------------------------------------------------------------------------------------
Preferred Stock:
------------------------------------------------------------------------------------------------------------
Sprout Capital V: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 353,942
Sprout Technology Fund, L.P.: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,297
DLJ Venture Capital Fund II, L.P.: . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,261
LTOS: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 382,500
Investech: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255,000
------------------------------------------------------------------------------------------------------------
Warrants, dated March 31, 1988, to purchase:
------------------------------------------------------------------------------------------------------------
Sprout Capital V: 1,221 shares of Common Stock
2,929 shares of Preferred Stock
Investech, L.P.: 813 shares of Common Stock
1,952 shares of Preferred Stock
------------------------------------------------------------------------------------------------------------
Warrants, dated November 14, 1989, to purchase:
------------------------------------------------------------------------------------------------------------
Sprout Capital V: 7,376 shares of Common Stock
17,704 shares of Preferred Stock
DLJ Capital Fund II, L.P.: 444 shares of Common Stock
1,064 shares of Preferred Stock
LTOS: 7,820 shares of Common Stock
18,768 shares of Preferred Stock
Investech, L.P.: 5,214 shares of Common Stock
12,514 shares of Preferred Stock
============================================================================================================
(1) Plus up to 250,000 shares of Common Stock to be issued on account of
accrued dividends in connection with the transactions provided for in the
Purchase Agreement.
20
EXECUTION A
SCHEDULE II
TO REGISTRATION RIGHTS AGREEMENT
===========================================================================================================
Aggregate Warrants
Principal To
Amount Of Purchase
Notes To Of Shares
Note Be Of Common
Warrant Investors Denominations Purchased Stock
-----------------------------------------------------------------------------------------------------------
TRUST FOR DEFINED BENEFIT PLAN OF ICI
AMERICAN HOLDINGS INC.
The Notes and Warrants shall be 220,000
registered in the name of: $1,100,000 $1,100,000 Shares
Fuelship & Company
-----------------------------------------------------------------------------------------------------------
STATE EMPLOYEES' RETIREMENT FUND OF
THE STATE OF DELAWARE
The Notes and Warrants shall be 580,000
registered in the name of: $2,900,000 $2,900,000 Shares
NAP & Company
===========================================================================================================
