EXHIBIT 10.48
ORPHAN MEDICAL, INC.
STOCK PURCHASE AGREEMENT
Agreement, made and entered into as of the 23rd day of July, 1998,
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 shall authorize, issue and
sell an aggregate of 7,500 shares of senior convertible preferred stock, par
value $0.01 per share, which shall be issued pursuant to and shall be entitled
to such other 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 Initial Closing Date (as
defined in Section 3), 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 senior
convertible preferred stock to be sold pursuant to this agreement, including any
shares issued pursuant to the option described in Section 2.2 hereof, and all
shares of senior convertible preferred stock issued in exchange or substitution
therefor.
2. Sale and Purchase of Preferred Shares.
2.1 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 Initial Closing Date, the number of Preferred Shares set
forth opposite its name on Schedule 1 at a purchase price of One Thousand
Dollars ($1,000) per share.
2.2 The Investors that purchased Preferred Shares on the
Initial Closing Date have an option to purchase, and, to the extent exercised,
the Company shall be obliged to sell to the Investors, up to an additional 4,500
Preferred Shares, subject to the limitations and procedures set forth in this
Section 2.2. Such Preferred Shares shall be sold on the same terms and
conditions as the securities being sold on the Initial Closing Date.
Notwithstanding the foregoing, if the Conversion Price (as defined in the
Certificate of Designation attached hereto as Exhibit A) is less than the last
sale price of the Company's Common Stock on the last trading day prior to the
Initial Closing Date, then the number of Preferred Shares issued on the
Supplemental Closing Date (as defined in Section 3) shall be reduced as
necessary so that the maximum number of shares of common stock, $.01 par value
per share, of the Company (the "Common Stock") issuable upon (a) conversion of
all the Preferred Shares sold by the Company pursuant to this agreement
(including Preferred Shares issued on both the Initial Closing Date and the
Supplemental Closing Date), and (b) conversion of the maximum number of
Preferred Shares that could be issued by the Company as dividends on the
Preferred Shares (in each case assuming the Preferred Shares are converted at
the Conversion Price determined as of the Supplemental Closing Date) (the
"Conversion Shares") shall be no greater than 1,250,000 (the "Maximum Conversion
Shares"). The Company shall deliver to the Investors on the date which is 90
days following the Initial Closing Date (or as soon as practicable thereafter
but in no event later than five business days following the ninetieth day after
the Initial Closing Date) written notice of the maximum aggregate number of
Preferred Shares the Investors may purchase on the Supplemental Closing Date (as
defined in Section 3), a calculation of the Maximum Conversion Shares, and a
calculation of the Conversion Price. No later than three business days after the
delivery of the Company's written notice, each Investor shall deliver to the
Company written notice of the number of Preferred Shares, if any, it shall
purchase on the Supplemental Closing Date (the "Option Notice").
3. Closing. The closing of the transactions contemplated by the first
paragraph of 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 July __, 1998 (the "Initial Closing Date") or
at such other place or different time or day as may be mutually acceptable to
the Investors and the Company. The supplemental closing shall take place at such
time and place as may be selected jointly by the Company and the Investors,
which in any event shall be on or before the fifth business day after delivery
of the Option Notice by the Investors to the Company (the "Supplemental Closing
Date").
At each closing, the Company will deliver to each Investor a
certificate, dated such closing date, representing the Preferred Shares
purchased by such Investor on such closing date, 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 being purchased by such
Investor, which payment shall be made by wire transfer of immediately available
funds.
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 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 B:
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 the Preferred
Shares and the 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 (a "Subsidiary"). If any entity is
listed on Exhibit B and the Company owns a controlling interest in such entity,
the representations and warranties set forth in this Article 4 are 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 C are (a) a balance sheet, as at December 31, 1997 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, 1998 for the Company, together with the related statement
of income and changes in financial position 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, 1997, and June 30, 1998, 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 due 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. None of the Company's tax returns has been audited by
governmental authorities. The Company does not have any tax liabilities except
those incurred in the ordinary course of business since March 31, 1998.
4.7 Changes, Dividends, etc. Except for the transactions
contemplated by this agreement, since March 31, 1998, the Company has not: (i)
incurred any debts, obligations or liabilities, absolute, accrued or contingent
and whether due or to become due, 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) 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 to
Chronimed, Inc. pursuant to the Termination Agreement dated June 27, 1997
between the Company and Chronimed, Inc. and shares issued upon exercise of
warrants or options that were outstanding as of March 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 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; 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
March 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 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. None of the Company's Subsidiaries is required
to file any forms, reports or other documents with the SEC pursuant to Section
12 or 15 of the Exchange Act.
4.9 Title to Properties and Encumbrances. Except as otherwise
set forth in Exhibit C and the SEC Documents and except for properties and
assets disposed of in the ordinary course of business since March 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 March 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 C, (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 are in good operating 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 and 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 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 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 or the 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 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 and the 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");
(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. 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 described in the SEC Documents and
for security interests in favor of Chronimed, Inc. and 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 (0) 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.
(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 (0) 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. At the date hereof, the authorized capital
stock of the Company consists of 25,000,000 shares, $.01 par value per share, of
which 6,249,718 are issued and outstanding. Prior to the transactions
contemplated by this agreement, the Company has not issued any preferred shares.
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 B,
the SEC Documents 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 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 for the
Chronimed, Inc. Termination Agreement and the warrants that, as of June 30,
1998, entitled holders to purchase an aggregate of 213,255 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 "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
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.
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 B. 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 has 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 action necessary to the authorization,
creation, issuance and delivery of the Preferred Shares and the Conversion
Shares has been taken by the Company, or will be taken by the Company on or
prior to the applicable closing date.
4.18 Brokers or Finders. Except the arrangement fee described
in Section 6.10, 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.
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 March 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.
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.
5. Representations of the Investors. Each Investor represents for
itself that:
5.1 Investment Intent. The Preferred Shares 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
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 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. Except for a fee to be paid to an
affiliate of UBS Capital II LLC, 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 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 which each Investor has agreed to purchase on
the applicable closing date is subject to the fulfillment prior to or on such
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 applicable closing date with the same effect as though made on and as
of such 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
applicable closing date.
6.3 Certificate of Officers. The Company shall have delivered
to the Investors a certificate, dated the applicable 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.
6.4 Opinion of Intellectual Property. The Company shall have
delivered to each Investor an opinion, satisfactory to each of the Investors, of
Schwegman, Lundberg, Woessmer & Xxxxx, P.A., intellectual property counsel for
the Company, dated the applicable closing date substantially in the form
attached hereto as Exhibit D hereto.
6.5 Board of Directors. Upon the Closing, the Company's Board
of Directors shall consist of seven directors, one of whom shall be Xxxxxxx
Xxxxxx.
6.6 Legal Opinion. The Investors shall have received an
originally executed opinion of Xxxxxx & Xxxxxxx LLP, counsel for the Company,
dated as of the Initial Closing Date or Supplemental Closing Date, as
applicable, in the form attached as Exhibit E with changes made to reflect the
matters related to the applicable closing date.
6.7 Necessary Consents. On or before the applicable 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; provided, however, that the Company shall not attempt to obtain
shareholder approval of such transactions based on the Company's belief that the
Nasdaq Marketplace Rules do not require shareholder approval.
6.8 No Material Adverse Effect. Since March 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.
6.9 Certificate of Designation. On or prior to the Initial
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.
6.10 Payment of Fees and Expenses. The Company shall have paid
(i) on or before the Initial Closing Date and Supplemental Closing Date, as
applicable, 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
$75,000 and (ii) on or before the Initial Closing Date and the Supplemental
Closing Date, an arrangement fee to the Investor equal to four percent (4%) of
the stated value of the Preferred Shares purchased by the Investor on the
Initial Closing Date and Supplemental Closing Date, respectively.
6.11 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 on the Initial
Closing Date or the Supplemental Closing date, as applicable.
6.12 Proceedings and Documents. All corporate and other
proceedings and actions taken in connection with the transactions contemplated
hereby and all certificates, 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. Affirmative Covenants of the Company.
7.1. Limitation on Issuance of Additional Equity Securities.
The Company hereby covenants and agrees that, except for Permitted Issuances (as
defined in Section 11(b)), for so long as any Preferred Shares remain
outstanding, the Company shall not issue shares of Common Stock or
options, warrants or other rights to purchase shares of Common Stock or
securities convertible into shares of Common Stock at a price less than the
Conversion Price, unless:
(a) such issuance would not result in a reduction of the Conversion
Price; or
(b) the Company receives written confirmation from Nasdaq that no
shareholder approval is required to effectuate the anti-dilution provisions set
forth in Section 8(c) of the Certificate of Designation if such provisions would
be triggered as a result of such issuance; or
(c) shareholder approval for such issuance is obtained.
7.2 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 7.2(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 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 7.2(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 7.2(a)
and Section 7.2(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.
7.3 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 material adverse effect on the
business, operations, financial condition, prospects or results of operation of
the Company.
8. Conversion of Preferred Shares.
8.1 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 part 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.
8.2 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 8.1 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 reserved a sufficient number of its common shares for
the purpose of issuance upon the exercise of such conversion privilege.
8.3 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.
9. 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.
10. Registration Rights. The Company acknowledges and agrees that the
Investors shall have the registration rights set forth on Exhibit F.
11. Right of First Refusal.
(a) In the event (and on each occasion) that, after the date hereof,
the Company shall propose to issue equity securities, any rights, warrants or
options to purchase equity securities or any securities convertible into equity
securities ("New Securities"), other than a Permitted Issuance (as defined
below), the Company shall give the Investors written notice (an "Offer Notice")
of the Company's proposal,
describing the material terms upon which the Company has proposed to issue the
New Securities. The Investors shall have fifteen (15) business days from the
date on which the Company shall give the written Offer Notice to agree to
purchase such New Securities, in whole or in part, upon the terms specified in
the Offer Notice, and in compliance with paragraph (c) of this Section 11, by
giving written notice to the Company and stating therein the quantity of New
Securities to be purchased by such Investors. If, in connection with such a
proposed issuance of New Securities, an Investor shall for any reason fail or
refuse to give such written notice to the Company within such period of fifteen
(15) business days, such Investor shall, for all purposes of this Section 11, be
deemed to have refused (in that particular instance only) to purchase any of
such New Securities and to have waived (in that particular instance only) all
rights of such Investor under this Section 11 to purchase any of such New
Securities. If an Investor gives written notice of its intent to purchase such
New Securities an Investor shall close upon such purchase within twenty (20)
days after the date of the delivery of the Investor's notice to the Company
electing to purchase New Securities.
(b) "Permitted Issuance" shall mean (i) the issuance or sale of (A)
Common Stock upon the exercise of any options to acquire Common Stock that are
outstanding on the First Issuance Date (as defined in Section 7 of the
Certificate of Designation) (as such number of shares is proportionately
adjusted for subsequent stock splits, combinations of shares and stock dividends
affecting the Common Stock), in each case pursuant to the terms thereof as in
effect on the First Issuance Date, (B) shares of Common Stock that may be issued
after the First Issuance Date to Chronimed, Inc. pursuant to the terms of the
Termination Agreement between the Company and Chronimed, Inc., and (C) stock
options and shares of Common Stock issuable upon exercise of such options
granted to employees and directors of the Company and its Subsidiaries pursuant
to the terms of stock option plans approved by the Company's Board of Directors
if such options are excersisable at the market price on the date of grant;
provided that the aggregate number of shares of Common Stock issued, or
issuable, pursuant to this clause (i) shall not exceed two million shares, (ii)
the issuance of Common Stock upon the exercise of the Warrants, (iii) the
issuance of Common Stock upon the conversion or exchange of the Preferred Stock
and (iv) the issuance of securities pursuant to any public offering of the
Company's securities registered under the Securities Act.
(c) In the event that the Investor shall fail or refuse to exercise in
full its preemptive rights within said fifteen (15) day period, the Company
shall have sixty (60) days thereafter (the "Sale Period") to sell the quantity
of New Securities which the Investors did not agree to purchase pursuant to
paragraph (c) of this Section 11, upon the terms specified in the Company's
Offer Notice to the Investors. In the event the Company has not sold the New
Securities within the Sale Period, the Company will not thereafter issue or sell
any New Securities without first offering such securities to the Investors in
the manner provided by the foregoing provisions of this Section 11.
(d) The Company will not, at any time after the effective date of this
agreement, enter into any agreement or contract (whether written or oral) which
is inconsistent in any respect with the right of first refusal granted by the
Company to the Investors pursuant to this Section 11.
12. Restriction on Transfer of Shares.
12.1 Restrictions. The Preferred Shares and 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.
12.2 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, as amended, and all applicable state securities laws or (ii) such
registration."
Upon the conversion of any Preferred Shares, unless the Company receives an
opinion of counsel satisfactory to the Company to the effect that a transfer of
the Conversion Shares may be made without registration or further restriction on
transfer, or unless such 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.
12.3 Removal of Legend. Any legend endorsed on a certificate
evidencing a security pursuant to Section 12.2 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 12.2.
13. Miscellaneous.
13.1 No Waivers; Cumulative Remedies. No failure or delay on
the part of the Investors, or any other holder of any Purchased 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.
13.2 Amendments; Waiver and Consents. This agreement may be
amended or modified, and the obligations of the Company and the rights of the
holders of Purchased Shares 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.
13.3 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 13.2.
13.4 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 $75,000, 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.
13.5 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 Purchased 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, or
(b) if to the Company at 00000 Xxxxxxxxx Xxxxx, Xxxxxxxxxx,
Xxxxxxxxx 00000. Attention: President; or at such other address as the Company
may specify by written notice to the Investors.
13.6 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 under Section 2.2 to their affiliates. The Investors may not
assign their rights, interests and obligations set forth in Section 2.2 to any
non-affiliate without the consent of the Company, which may not be unreasonably
withheld.
(c) The Investors may freely assign their rights, interests
and obligations attached to the Preferred Shares and the Conversion Shares, as
applicable, upon transfer of such Shares in accordance with Section 5.1.
(d) 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.
13.7 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.
13.8 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.
13.9 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.
13.10 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.
13.11 Definition of Purchased Shares. For purposes of this
agreement the term "Purchased Shares" shall refer to and include (a) the
Preferred Shares, (b) the Conversion Shares, and (c) any shares of capital stock
of the Company issued with respect to, or in exchange for, any of the foregoing
in any corporate recapitalization or corporate restructuring.
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
Its
------------------------
UBS CAPITAL II LLC
By
By
Schedule 1
Investor Preferred Shares
UBS Capital II LLC 7,500
EXHIBIT F
REGISTRATION RIGHTS PROVISIONS
Capitalized terms used herein have the meanings set forth in Section 8.
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 Registrable Shares and Warrant Shares requested to be registered by
the holders of such securities; and second, pro rata on the basis of the number
of Warrants Shares and Registrable Shares 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 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 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 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 Registration
Statement 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 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 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
(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 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, [DISCUSS] (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.
(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 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 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 F, 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.
"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.
"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 issuable
or issued upon conversion of the Shares or issued as dividends on the Shares and
(ii) any shares of Common Stock issued or issuable with respect to the shares of
Common Stock referred to in clause (i) above upon any stock split, stock
dividend, 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 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.
"Shares" means the outstanding shares of Senior Convertible
Preferred Stock, par value $.01 per share, of the Company and any securities
(other than Common Stock) into which such shares may hereafter be changed
"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 July __, 1998, 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.
"Warrant Shares" means shares of Common Stock issuable or
issued upon exercise of the warrant dated May 19, 1995 issued to X.X. Xxxxxxxx &
Company.
Unless otherwise stated other capitalized terms contained
herein have the meanings set forth in the Securities 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 F shall be given in accordance with Section 14.4 of the Stock Purchase
Agreement.
(d) Stock Purchase Agreement. This Exhibit F is deemed a part
of the Stock Purchase Agreement.
