EXHIBIT 4.7
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") is entered into as of
September 1, 2000 between Pharmos Corporation, a Nevada corporation with offices
at 00 Xxxx Xxxxxx Xxxxx, Xxxxx 000, Xxxxxx, Xxx Xxxxxx 00000 (the "Company") and
each of the entities listed under "Investors" on the signature page hereto (each
an "Investor" and collectively the "Investors"), each with offices at the
address listed under such Investor's name on Schedule I hereto.
W I T N E S S E T H:
WHEREAS, pursuant to that certain Common Stock Investment Agreement, dated
the date hereof, among the Company and the Investors (the "Purchase Agreement"),
the Company has agreed to sell and issue to the Investors, and the Investors
have agreed to purchase from the Company, inter alia, the number of shares (the
"Initial Shares") specified in the Purchase Agreement of the Company's common
stock, $.03 par value ("Common Stock"), and certain warrants, all as more fully
specified and subject to the terms and conditions set forth in the Purchase
Agreement;
WHEREAS, pursuant to the terms of, and in partial consideration for, the
Investors' agreement to enter into the Purchase Agreement, the Company has
agreed to issue the Initial Warrants and Adjustment Warrants described therein
(collectively, the "Warrants") exercisable for shares of Common Stock (the
"Warrant Shares" and "Adjustment Shares", respectively);
WHEREAS, pursuant to the Purchase Agreement one of the Investors has been
granted a warrant (the "Call Warrant") to purchase additional shares of Common
Stock (the "Optional Shares") and warrants (the "Optional Adjustment Warrants")
to purchase shares of Common Stock (the "Optional Adjustment Shares").
WHEREAS, pursuant to the terms of, and in partial consideration for, the
Investors' agreement to enter into the Purchase Agreement, the Company has
agreed to provide the Investors with certain registration rights with respect to
the Initial Shares, Warrant Shares, Adjustment Shares, Optional Shares and the
Optional Adjustment Shares, as well as certain other rights and remedies as set
forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in the Purchase Agreement and
this Agreement, the Company and the Investors agree as follows:
1. Certain Definitions. Capitalized terms used herein and not otherwise
defined shall have the meaning ascribed thereto in the Purchase Agreement and/or
the Warrants. As used in this Agreement, the following terms shall have the
following respective meanings:
"Closing" and "Closing Date" shall have the meanings ascribed to such terms
in the Purchase Agreement.
"Commission" or "SEC" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
"Effectiveness Deadline" has the meaning specified in Section 2(a).
"Fair Market Value" shall have the meaning ascribed to such term in the
Warrants.
"Holder" and "Holders" shall mean the Investor or the Investors,
respectively, and any transferee of the Warrants, Warrant Shares, Adjustment
Shares, Optional Warrants, Option Shares or Optional Warrant Shares which have
not been sold to the public to whom the registration rights conferred by this
Agreement have been transferred in compliance with this Agreement.
"Interfering Events" shall have the meaning set forth in Section 2(b).
"Monthly Delay Payment" shall have the meaning specified in Section
2(b)(i)(C).
"Premium Redemption Price" shall mean the following:
(a) as to the Initial Shares, the greater of (i) 120% of the Share
Purchase Price and (ii) the highest Common Stock closing price on the Principal
Market between and including date of the event triggering the right of
redemption and the trading day immediately prior to the actual redemption of the
Purchased Shares;
(b) as to the Warrant Shares, Adjustment Shares and Optional Warrant
Shares, 120% of the dollar amount which is the product of (i) the number of
shares to be redeemed, and (ii) the Fair Market Value for shares of Common Stock
in existence at the time (x) of the closing of a redemption of the Warrant
Shares, Adjustment Shares or Optional Warrant Shares or (y) of the event
triggering the right to redemption, whichever results in a greater Premium
Redemption Price.
(c) as to the Initial Warrants, Adjustment Warrants and Optional
Warrants, 120% of the dollar amount which is the product of (i) the number of
Warrant Shares, Adjustment Shares or Optional Warrant Shares to be issued to the
Holder upon exercise of thereof multiplied by (ii) the Fair Market Value for
Shares of Common Stock in existence at the time (x) of the closing of the
redemption or (y) of the event triggering the right to redemption, whichever
results in a greater Premium Redemption Price.
"Purchased Shares" means the Initial Shares, Warrant Shares and the
Adjustment Shares issued or issuable for the current or previous Adjustment
Periods.
"Put Notice" shall have the meaning set forth in Section 2(b)(i)(B).
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"Registrable Securities" shall mean: (i) the Initial Shares; (ii) the
Warrant Shares; (iii) the Adjustment Shares; (iv) the Optional Shares; (v) the
Optional Adjustment Shares; (vi) securities issued or issuable upon any stock
split, stock dividend, recapitalization or similar event with respect to the
foregoing; and (vii) any other security issued as a dividend or other
distribution with respect to, in exchange for or in replacement of the
securities referred to in the preceding clauses.
The terms "register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
"Registration Expenses" shall mean all expenses to be incurred by the
Company in connection with each Holder's registration rights under this
Agreement, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel for the Company, "Blue Sky"
fees and expenses, reasonable fees and disbursements of counsel to Holders
(using a single counsel selected by a majority in interest of the Holders) for a
"due diligence" examination of the Company and review of the Registration
Statement and related documents, and the expense of any special audits incident
to or required by any such registration (but excluding the compensation of
regular employees of the Company, which shall be paid in any event by the
Company).
"Registration Statement" shall have the meaning set forth in Section 2(a)
herein.
"Regulation D" shall mean Regulation D as promulgated pursuant to the
Securities Act, and as subsequently amended.
"Securities" means the Initial Shares, the Warrants, the Units, the
Optional Shares, the Optional Warrant Shares, the Warrant Shares and the
Adjustment Shares.
"Securities Act" or "Act" shall mean the Securities Act of 1933, as
amended.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities, all fees and
disbursements of counsel for Holders not included within "Registration Expenses"
and if the Holders engage a third party as an underwriter for the purpose of
distributing Registrable Securities on an underwritten basis, the fees and
expenses of such underwriting and any additional expenses of an accountant
incurred in order to obtain a "Comfort Letter."
"Trading Day" shall mean (x) if the Common Stock is listed on the New York
Stock Exchange or the American Stock Exchange, a day on which there is trading
on such stock exchange, or (y) if the Common Stock is not listed on either of
such stock exchanges but sale prices of the Common Stock are reported on an
automated quotation system, a day on which trading is reported on the principal
automated quotation system on which sales of the Common Stock are reported, or
(z) if the foregoing provisions are inapplicable, a day on which quotations are
reported by National Quotation Bureau Incorporated.
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2. Registration Requirements. The Company shall use its best efforts to
effect the registration of the Registrable Securities (including without
limitation the execution of an undertaking to file post-effective amendments,
appropriate qualification under applicable "Blue Sky" or other state securities
laws and appropriate compliance with applicable regulations issued under the
Securities Act) as would permit or facilitate the sale or distribution of all
the Registrable Securities in the manner (including manner of sale) reasonably
requested by the Holder and in all U.S. jurisdictions. Such best efforts by the
Company shall include the following:
(a) The Company shall, as expeditiously as reasonably possible after
the Closing Date:
(i) But in any event within 30 days thereafter, prepare and file
a registration statement with the Commission on Form S-3 under the
Securities Act (or in the event that the Company is ineligible to use
such form, such other form as the Company is eligible to use under the
Securities Act) covering the Registrable Securities (such registration
statement, including any amendments or supplements thereto and
prospectuses contained therein, is referred to herein as the
"Registration Statement"), which Registration Statement, to the extent
allowable under the Securities Act and the rules promulgated
thereunder (including Rule 416), shall state that such Registration
Statement also covers such number of additional shares of Common Stock
as may become issuable to prevent dilution resulting from stock
splits, stock dividends or similar events. The number of shares of
Common Stock initially included in such Registration Statement shall
be no less than 100% of the Initial Shares and 160% of the number of
shares of Common Stock underlying the Warrants. Thereafter, the
Company shall use its best efforts to cause such Registration
Statement to be declared effective as soon as practicable, and in any
event prior to the earlier of (i) 60 days following the Closing Date
or (ii) five days after SEC clearance to request acceleration (the
"Effectiveness Deadline"). The Company shall provide Holders and their
legal counsel reasonable opportunity to review any such Registration
Statement or amendment or supplement thereto prior to filing. Without
limiting the foregoing, the Company will promptly respond to all SEC
comments, inquiries and requests, and shall request acceleration of
effectiveness at the earliest possible date.
(ii) Prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus used in
connection with such Registration Statement, or prepare and file such
additional registration statements, as may be necessary to comply with
the provisions of the Act with respect to the disposition of all
securities covered by such Registration Statement in accordance with
the intended methods of disposition by the seller thereof as set forth
in the Registration Statement and notify the Holders of the filing and
effectiveness of such Registration Statement and any amendments or
supplements.
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(iii) After the registration, furnish to each Holder such numbers
of copies of a current prospectus conforming with the requirements of
the Act, copies of the Registration Statement, any amendment or
supplement thereto and any documents incorporated by reference therein
and such other documents as such Holder may reasonably require in
order to facilitate the disposition of Registrable Securities owned by
such Holder.
(iv) Use its best efforts to register and qualify the securities
covered by such Registration Statement under such other securities or
"Blue Sky" laws of all U.S. jurisdictions; provided that the Company
shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(v) Notify each Holder immediately of the happening of any event
(but not the substance or details of any such event unless
specifically requested by a Holder) as a result of which the
prospectus (including any supplements thereto or thereof and any
information incorporated or deemed to be incorporated by reference
therein) included in such Registration Statement, as then in effect,
includes an untrue statement of material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then
existing, and, pursuant to Section 2(f), use its best efforts to
promptly update and/or correct such prospectus.
(vi) Notify each Holder immediately of the issuance by the
Commission or any state securities commission or agency of any stop
order suspending the effectiveness of the Registration Statement or
the initiation of any proceedings for that purpose. The Company shall
use its best efforts to prevent the issuance of any stop order and, if
any stop order is issued, to obtain the lifting thereof at the
earliest possible time.
(vii) Permit a single firm of counsel, designated as Holders'
counsel by the Holders of a majority of the Registrable Securities
included in the Registration Statement, to review the Registration
Statement and all amendments and supplements thereto within a
reasonable period of time prior to each filing, and shall not file any
document in a form to which such counsel reasonably objects.
(viii) Use its best efforts to list the Registrable Securities
covered by such Registration Statement with all securities exchange(s)
and/or markets on which the Common Stock is then listed and prepare
and file any required filings with the National Association of
Securities Dealers, Inc. or any exchange or market where the Common
Stock is then traded.
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(ix) If applicable, take all steps necessary to enable Holders to
avail themselves of the prospectus delivery mechanism set forth in
Rule 153 (or successor thereto) under the Act.
(x) File additional Registration Statements if the number of
Registrable Securities at any time exceeds 85% of the number of shares
of Common Stock then registered in the existing Registration
Statement.
(b) Set forth below in this Section 2(b) are (I) events that may arise
that the Investors consider will interfere with the full enjoyment of their
rights under the Purchase Agreement and this Agreement (the "Interfering
Events"), and (II) certain remedies applicable in each of these events.
Paragraphs (i) through (v) of this Section 2(b) describe the
Interfering Events, provide a remedy to the Investors if an
Interfering Event occurs and provide that the Investors may require
that the Company redeem outstanding Securities at a specified price if
certain Interfering Events are not timely cured.
Paragraph (v) provides, inter alia, that if payments required as the
remedy in the case of certain of the Interfering Events are not paid
when due, the Company may be required by the Investors to redeem
outstanding Securities at a specified price.
The preceding paragraphs in this Section 2(b) are meant to serve only as an
introduction to this Section 2(b), are for convenience only, and are not to be
considered in applying, construing or interpreting this Section 2(b).
(i) Delay in Effectiveness of Registration Statement.
(A) In the event that the Registration Statement has not
been declared effective by the Effectiveness Deadline, then the
Company shall pay in cash or common stock, as provided in Section
2(b)(v), to each Holder a Monthly Delay Payment (as defined below) for
each 30 day period (or portion thereof) thereafter during which the
Registration Statement has not been declared effective, which Monthly
Delay Payments shall not in the aggregate exceed the maximum
percentage permitted by law.
(B) If the Registration Statement has not been declared
effective within 60 days of the Effectiveness Deadline, then each
Holder shall have the right but not the obligation to require the
Company to redeem the Warrants and/or Registrable Securities, in whole
or in part at the Premium Redemption Price. Each Holder shall exercise
such right by providing the Company with written notice thereof (the
"Put Notice"), which such Put Notice shall include the type and amount
of each security that the Holder seeks to redeem and a date at least
five (5) business days
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from the date thereof on which the Holder seeks the redemption to
occur (the "Redemption Date").
(C) As used in this Agreement, a "Monthly Delay Payment"
shall be a payment in immediately available funds equal to 2% of the
Share Purchase Price of the Purchased Shares held by a Holder for each
30 day period (or portion thereof) that the specified condition in
this Section 2(c) has not been fulfilled or the specified deficiency
has not been remedied, (prorated in each case as appropriate). Payment
of the Monthly Delay Payments and Premium Redemption Price shall be
due and payable from the Company to such Holder within five (5)
business days of demand therefor. Without limiting the foregoing, if
payment in immediately available funds of the Premium Redemption Price
is not made within such 5 business day period, the Holder may revoke
and withdraw in whole or in part its election to cause the Company to
make such mandatory purchase at any time prior to its receipt of such
cash, without prejudice to its ability to elect to receive that
particular or other Premium Redemption Price payments in the future.
(ii) No Listing; Premium Price Redemption for Delisting of Class
of Shares.
(A) In the event that the Company fails, refuses or is
unable to cause the Registrable Securities covered by the Registration
Statement to be listed with the applicable Approved Markets and each
other securities exchange and market on which the Common Stock is then
traded at all times during the period ("Listing Period") commencing
the earlier of the effective date of the Registration Statement or the
Effectiveness Deadline and continuing thereafter for so long as the
Warrants or Optional Warrants are outstanding, then the Company shall
pay in cash or Common Stock, as provided in Section 2(b)(v), to each
Holder a Monthly Delay Payment for each 30-day period (or portion
thereof) during the Listing Period from and after such failure,
refusal or inability to so list the Registrable Securities until the
Registrable Securities are so listed.
(B) In the event that shares of Common Stock of the Company
are delisted from the applicable Approved Markets at any time
following the Closing Date and remain delisted for 5 consecutive
business days, then at the option of each Holder and to the extent
such Holder so elects, the Company shall on 2 business days notice
either (1) pay in cash or Common Stock (as provided in Section
2(b)(v)) to such Holder a Monthly Delay Payment for each 30-day period
that the shares are delisted or (2) redeem the Securities held by such
Holder, in whole or in part, at a redemption price equal to the
Premium Redemption Price (as defined above); provided, however, that
such Holder may revoke such request at
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any time prior to receipt of payment of such Monthly Delay Payments or
Premium Redemption Price, as the case may be.
(iii) Blackout Periods. In the event any Holder is unable to sell
Registrable Securities under the Registration Statement for more than
(A) seven (7) consecutive days or (B) an aggregate of thirty (30) days
in any 12 month period ("Suspension Grace Period"), including without
limitation by reason of a suspension of trading of the Common Stock on
the Approved Market, any suspension or stop order with respect to the
Registration Statement or the fact that an event has occurred as a
result of which the prospectus (including any supplements thereto)
included in such Registration Statement then in effect includes an
untrue statement of material fact or omits to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing, or
the number of shares of Common Stock covered by the Registration
Statement is insufficient at such time to make such sales (a
"Blackout"), then the Company shall pay in cash to each Holder a
Monthly Delay Payment for each 30-day period (or portion thereof) from
and after the expiration of the Suspension Grace Period. In lieu of
receiving the Monthly Delay Payment as provided above, a Holder shall
have the right but not the obligation to elect to have the Company
redeem its Securities at the price equal to the Premium Redemption
Price.
(iv) Redemption for Exercise Deficiency. In the event that the
Company does not have a sufficient number of shares of Common Stock
available to satisfy the Company's obligations to any Holder upon
receipt of a notice of exercise of a Warrant or Optional Warrant from
an Investor, or is otherwise unable or unwilling for any reason to
issue Common Stock as required by, and in accordance with the
provisions of, the Warrants, the Optional Warrants or the Purchase
Agreement (each, an "Exercise Deficiency"), then:
(A) The Company shall provide to each Holder a Monthly Delay
Payment for each 30 day period or portion thereof (appropriately
prorated) following the Exercise Deficiency, on the terms set forth in
Section 2(b)(i)(B) above.
(B) At any time five (5) days after the commencement of the
running of the first 30-day period described above in clause (A) of
this paragraph (iv), at the request of any Holder, the Company
promptly shall purchase from such Holder, and on the terms set forth
in Section 2(b)(i)(B) above, the Securities in each case as a result
of the Exercise Deficiency at the Premium Redemption Price, on the
terms set forth in Section 2(b)(i)(B) above.
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(v) Premium Redemption Price for Defaults.
(A) The Company acknowledges that any failure, refusal or
inability by the Company to perform the obligations described in the
foregoing paragraphs (i) through (iv) will cause the Holders to suffer
damages in an amount that will be difficult to ascertain, including
without limitation damages resulting from the loss of liquidity in the
Registrable Securities and the additional investment risk in holding
the Registrable Securities. Accordingly, the parties agree, after
consulting with counsel, that it is appropriate to include in this
Agreement the foregoing provisions for Monthly Delay Payments and
mandatory redemptions in order to compensate the Holders for such
damages. The parties acknowledge and agree that the Monthly Delay
Payments and mandatory redemptions set forth above represent the
parties' good faith effort to quantify such damages and, as such,
agree that the form and amount of such payments and mandatory
redemptions are reasonable and will not constitute a penalty.
(B) In the event that the Company fails to pay any Monthly
Delay Payment within 5 business days of demand therefor, each Holder
shall have the right to sell to the Company any or all of its
Securities at the Premium Redemption Price on the terms set forth in
Section 2(b)(i)(B) above.
(vi) Cumulative Remedies. Each Monthly Delay Payment triggered by
an Interfering Event provided for in the foregoing paragraphs (i)
through (v) shall be in addition to each other Monthly Delay Payment
triggered by another Interfering Event; provided, however, that in no
event shall the Company be obligated to pay to any Holder Monthly
Delay Payments in an aggregate amount greater than one Monthly Delay
Payment for any 30-day period (or portion thereof). The Monthly Delay
Payments and mandatory redemptions provided for above are in addition
to and not in lieu or limitation of any other rights the Holders may
have at law, in equity or under the terms of the Transaction Documents
including without limitation the right to specific performance. Each
Holder shall be entitled to specific performance of any and all
obligations of the Company in connection with the registration rights
of the Holders hereunder.
(vii) Certain Acknowledgments. The Company acknowledges that any
failure, refusal or inability by the Company described in the
foregoing paragraphs (i) through (v) will cause the Holders to suffer
damages in an amount that will be difficult to ascertain, including
without limitation damages resulting from the loss of liquidity in the
Registrable Securities and the additional investment risk in holding
the Registrable Securities. Accordingly, the parties agree that it is
appropriate to include in this Agreement the foregoing provisions for
Monthly Delay Payments and mandatory redemptions in order to
compensate the Holders for such
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damages. The parties acknowledge and agree that the Monthly Delay
Payments and mandatory redemptions set forth above represent the
parties' good faith effort to quantify such damages and, as such,
agree that the form and amount of such Monthly Delay Payments and
mandatory redemptions are reasonable and will not constitute a
penalty. The parties agree that the provisions of this clause (vii)
consist of certain acknowledgments and agreements concerning the
remedies of the Holders set forth in clauses (i) through (v) and
paragraph (vi) of this paragraph; nothing in this clause (vii) imposes
any additional default payments and mandatory redemptions for
violations under this Agreement.
(c) If the Holder(s) intend to distribute the Registrable Securities
by means of an underwriting, the Holder(s) shall so advise the Company. Any such
underwriting may only be administered by investment bankers reasonably
satisfactory to the Company.
(d) The Company shall enter into such customary agreements for
secondary offerings (including a customary underwriting agreement with the
underwriter or underwriters, if any) and take all such other reasonable actions
reasonably requested by the Holders in connection therewith in order to expedite
or facilitate the disposition of such Registrable Securities. In the event that
the offering in which the Registrable Securities are to be sold is deemed to be
an underwritten offering or an Investor selling Registrable Securities is deemed
to be an underwriter, the Company shall:
(i) make such representations and warranties to the Holders and
the underwriter or underwriters, if any, in form, substance and scope
as are customarily made by issuers to underwriters in secondary
offerings;
(ii) cause to be delivered to the sellers of Registrable
Securities and the underwriter or underwriters, if any, opinions of
independent counsel to the Company, on and dated as of the effective
day (or in the case of an underwritten offering, dated the date of
delivery of any Registrable Securities sold pursuant thereto) of the
Registration Statement, and within ninety (90) days following the end
of each fiscal year thereafter, which counsel and opinions (in form,
scope and substance) shall be reasonably satisfactory to the Holders
and the underwriter(s), if any, and their counsel and covering,
without limitation, such matters as the due authorization and issuance
of the securities being registered and compliance with securities laws
by the Company in connection with the authorization, issuance and
registration thereof and other matters that are customarily given to
underwriters in underwritten offerings, addressed to the Holders and
each underwriter, if any.
(iii) cause to be delivered, immediately prior to the
effectiveness of the Registration Statement (and, in the case of an
underwritten offering, at the time of delivery of any Registrable
Securities sold pursuant thereto), and at the beginning of each fiscal
year following a
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year during which the Company's independent certified public
accountants shall have reviewed any of the Company's books or records,
a "comfort" letter from the Company's independent certified public
accountants addressed to the Holders and each underwriter, if any,
stating that such accountants are independent public accountants
within the meaning of the Securities Act and the applicable published
rules and regulations thereunder, and otherwise in customary form and
covering such financial and accounting matters as are customarily
covered by letters of the independent certified public accountants
delivered in connection with secondary offerings; such accountants
shall have undertaken in each such letter to update the same during
each such fiscal year in which such books or records are being
reviewed so that each such letter shall remain current, correct and
complete throughout such fiscal year; and each such letter and update
thereof, if any, shall be reasonably satisfactory to the Holders.
(iv) if an underwriting agreement is entered into, the same shall
include customary indemnification and contribution provisions to and
from the underwriters and procedures for secondary underwritten
offerings;
(v) deliver such documents and certificates as may be reasonably
requested by the Holders of the Registrable Securities being sold or
the managing underwriter or underwriters, if any, to evidence
compliance with clause (i) above and with any customary conditions
contained in the underwriting agreement, if any; and
(vi) deliver to the Holders on the effective day (or in the case
of an underwritten offering, dated the date of delivery of any
Registrable Securities sold pursuant thereto) of the Registration
Statement, and at the beginning of each fiscal quarter thereafter, a
certificate in form and substance as shall be reasonably satisfactory
to the Holders, executed by an executive officer of the Company and to
the effect that all the representations and warranties of the Company
contained in the Purchase Agreement are still true and correct except
as disclosed in such certificate; the Company shall, as to each such
certificate delivered at the beginning of each fiscal quarter, update
or cause to be updated each such certificate during such quarter so
that it shall remain current, complete and correct throughout such
quarter; and such updates received by the Holders during such quarter,
if any, shall have been reasonably satisfactory to the Holders.
(e) The Company shall make available for inspection by the Holders,
upon reasonable written notice and during regular business hours,
representative(s) of all the Holders together, any underwriter participating in
any disposition pursuant to a Registration Statement, and any attorney or
accountant retained by any Holder or underwriter, all financial and other
records customary for purposes of the Holders' due diligence examination of the
Company and review of any Registration Statement, all SEC Documents (as defined
in the Purchase Agreement) filed subsequent to the Closing,
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pertinent corporate documents and properties of the Company, and cause the
Company's officers, directors and employees to supply all information reasonably
requested by any such representative, underwriter, attorney or accountant in
connection with such Registration Statement, provided that such parties agree to
keep such information confidential.
(f) The Company shall file a Registration Statement with respect to
any newly authorized and/or reserved shares with respect to its obligation to
reserve or register Registrable Securities, within thirty (30) days of any
corporate authorizing or reserving same and shall file a Registration Statement
with respect to additional Registrable Securities within thirty (30) days of the
occurrence of an event referred to in Section 2(a)(x), and shall use its best
efforts, in either case, to cause such Registration Statement to become
effective within seventy-five (75) days of such corporate action or occurrence,
as the case may be. If the Holders become entitled, pursuant to an event
described in clause (iii) of the definition of Registrable Securities, to
receive any securities in respect of Registrable Securities that were already
included in a Registration Statement, subsequent to the date such Registration
Statement is declared effective, and the Company is unable under the securities
laws to add such securities to the then effective Registration Statement, the
Company shall promptly file, in accordance with the procedures set forth herein,
an additional Registration Statement with respect to such newly Registrable
Securities. The Company shall use its best efforts to (i) cause any such
additional Registration Statement, when filed, to become effective under the
Securities Act, and (ii) keep such additional Registration Statement effective
during the period described in Section 5 below. All of the registration rights
and remedies under this Agreement shall apply to the registration of such newly
reserved shares and such new Registrable Securities, including without
limitation the provisions providing for Monthly Delay Payments contained herein.
3. Expenses of Registration. All Registration Expenses incurred in
connection with any registration, qualification or compliance with registration
pursuant to this Agreement shall be borne by the Company, and all Selling
Expenses of a Holder shall be borne by such Holder.
4. Registration on Form S-3; Other Forms. The Company shall use its best
efforts to qualify for registration on Form S-3 or any comparable or successor
form or forms, or in the event that the Company is ineligible to use such form,
such form as the Company is eligible to use under the Securities Act.
5. Registration Period. In the case of the registration effected by the
Company pursuant to this Agreement, the Company will use its best efforts to
keep such registration effective until the later to occur of (i) sales are
permitted of all Registrable Securities without registration under Rule 144(k)
or (ii) such time as there are no longer any Warrants or Optional Warrants
outstanding or issuable.
6. Indemnification.
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(a) The Company Indemnity. The Company will indemnify each Holder,
each of its officers, directors and partners, and each person controlling each
Holder, within the meaning of Section 15 of the Securities Act and the rules and
regulations thereunder with respect to which registration, qualification or
compliance has been effected pursuant to this Agreement, and each underwriter,
if any, and each person who controls, within the meaning of Section 15 of the
Securities Act and the rules and regulations thereunder, any underwriter,
against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus, offering circular or
other document (including any related registration statement, notification or
the like) incident to any such registration, qualification or compliance, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or any violation by the Company of the Securities Act or any state
securities law or in either case, any rule or regulation thereunder applicable
to the Company and relating to action or inaction required of the Company in
connection with any such registration, qualification or compliance, and will
reimburse each Holder, each of its officers, directors and partners, and each
person controlling such Holder, each such underwriter and each person who
controls any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating and defending any such claim, loss,
damage, liability or action, provided that the Company will not be liable in any
such case to a Holder to the extent that any such claim, loss, damage, liability
or expense arises out of or is based on any untrue statement or omission based
upon written information furnished to the Company by such Holder or the
underwriter (if any) therefor and stated to be specifically for use therein. The
indemnity agreement contained in this Section 6(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent will
not be unreasonably withheld).
(b) Holder Indemnity. Each Holder will, severally and not jointly, if
Registrable Securities held by it are included in the securities as to which
such registration, qualification or compliance is being effected, indemnify the
Company, each of its directors, officers, partners, and each underwriter, if
any, of the Company's securities covered by such a registration statement, each
person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act and the rules and regulations thereunder, each
other Holder (if any), and each of their officers, directors and partners, and
each person controlling such other Holder(s), against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement, prospectus, offering circular or
other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statement
therein not misleading, and will reimburse the Company and such other Holder(s)
and their directors, officers and partners, underwriters or control persons for
any legal or any other expenses reasonably incurred in connection with
investigating and defending any such claim, loss, damage, liability or action,
in each case to the extent, but only to the extent, that such untrue statement
(or alleged untrue statement) or omission (or alleged omission) is made in such
registration statement,
13
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by such Holder and
stated to be specifically for use therein, and provided that the maximum amount
for which such Holder shall be liable under this indemnity shall not exceed the
net proceeds received by such Holder from the sale of the Registrable
Securities. The indemnity agreement contained in this Section 6(b) shall not
apply to amounts paid in settlement of any such claims, losses, damages or
liabilities if such settlement is effected without the consent of such Holder
(which consent shall not be unreasonably withheld).
(c) Procedure. Each party entitled to indemnification under this
Section 6 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim in any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not be unreasonably withheld), and the Indemnified Party
may participate in such defense at such party's expense, and provided further
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this Article
except to the extent that the Indemnifying Party is materially and adversely
affected by such failure to provide notice. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation. Each Indemnified Party shall furnish
such information regarding itself or the claim in question as an Indemnifying
Party may reasonably request in writing and as shall be reasonably required in
connection with the defense of such claim and litigation resulting therefrom.
7. Contribution. If the indemnification provided for in Section 6 herein is
unavailable to the Indemnified Parties in respect of any losses, claims, damages
or liabilities referred to herein (other than by reason of the exceptions
provided therein), then each such Indemnifying Party, in lieu of indemnifying
each of such Indemnified Parties, shall contribute to the amount paid or payable
by each such Indemnified Party as a result of such losses, claims, damages or
liabilities as between the Company on the one hand and any Holder on the other,
in such proportion as is appropriate to reflect the relative fault of the
Company and of such Holder in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative fault of the Company on the one
hand and of any Holder on the other shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Company or by such Holder.
In no event shall the obligation of any Indemnifying Party to contribute
under this Section 7 exceed the amount that such Indemnifying Party would have
been obligated to
14
pay by way of indemnification if the indemnification provided for under Section
6(a) or 6(b) hereof had been available under the circumstances.
The Company and the Holders agree that it would not be just and equitable
if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Holders or the underwriters were treated as one entity
for such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately preceding
paragraphs. The amount paid or payable by an Indemnified Party as a result of
the losses, claims, damages and liabilities referred to in the immediately
preceding paragraphs shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such Indemnified
Party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this section, no Holder or underwriter shall
be required to contribute any amount in excess of the amount by which (i) in the
case of any Holder, the net proceeds received by such Holder from the sale of
Registrable Securities or (ii) in the case of an underwriter, the total price at
which the Registrable Securities purchased by it and distributed to the public
were offered to the public exceeds, in any such case, the amount of any damages
that such Holder or underwriter 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.
8. Survival. The indemnity and contribution agreements contained in
Sections 6 and 7 and the representations and warranties of the Company referred
to in Section 2(d)(i) shall remain operative and in full force and effect
regardless of (i) any termination of this Agreement or the Purchase Agreement or
any underwriting agreement, (ii) any investigation made by or on behalf of any
Indemnified Party or by or on behalf of the Company, and (iii) the consummation
of the sale or successive resales of the Registrable Securities.
9. Information by Holders. Each Holder shall reasonably promptly furnish to
the Company such information regarding such Holder and the distribution and/or
sale proposed by such Holder as the Company may reasonably request in writing
and as shall be reasonably required in connection with any registration,
qualification or compliance referred to in this Agreement. The intended method
or methods of disposition and/or sale (Plan of Distribution) of such securities
as so provided by such Investor shall be included without alteration in the
Registration Statement covering the Registrable Securities and shall not be
changed without written consent of such Holder, except that such Holder may not
require an intended method of disposition which violates applicable securities
law.
10. NASDAQ Limit on Stock Issuances. Section 3.14 of the Purchase Agreement
shall govern limits imposed by NASDAQ rules on the issuance of Common Stock.
15
11. Replacement Certificates. The certificate(s) representing the
Registrable Securities held by the Investor (or then Holder) may be exchanged by
the Investor (or such Holder) at any time and from time to time for certificates
with different denominations representing an equal aggregate number of
Registrable Securities, as reasonably requested by the Investor (or such Holder)
upon surrendering the same. No service charge will be made for such registration
or transfer or exchange.
12. Transfer or Assignment. Except as otherwise provided herein, this
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The rights granted to the Investors by
the Company under this Agreement to cause the Company to register Registrable
Securities may be transferred or assigned (in whole or in part) to a transferee
or assignee of Registrable Securities, Warrants or Optional Warrants, and all
other rights granted to the Investors by the Company hereunder may be
transferred or assigned to any transferee or assignee of any Registrable
Securities, Warrants or Optional Warrants; provided in each case that the
Company must be given written notice by the such Investor at the time of or
within a reasonable time after said transfer or assignment, stating the name and
address of said transferee or assignee and identifying the securities with
respect to which such registration rights are being transferred or assigned;
provided that the transferee or assignee of such rights agrees in writing to be
bound by the provisions of this Agreement.
13. Miscellaneous.
(a) Remedies. The Company and the Investors acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Agreement and to enforce specifically the terms and provisions hereof, this
being in addition to any other remedy to which any of them may be entitled by
law or equity.
(b) Jurisdiction. THE COMPANY AND EACH OF THE INVESTORS (I) HEREBY
IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT
COURT, THE NEW YORK STATE COURTS AND OTHER COURTS OF THE UNITED STATES SITTING
IN NEW YORK COUNTY, NEW YORK FOR THE PURPOSES OF ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT AND (II) HEREBY WAIVES, AND AGREES
NOT TO ASSERT IN ANY SUCH SUIT ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT
PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURT, THAT THE SUIT, ACTION OR
PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE OF THE SUIT,
ACTION OR PROCEEDING IS IMPROPER. THE COMPANY AND EACH OF THE INVESTORS CONSENTS
TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY
THEREOF TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS
AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT
SERVICE OF PROCESS AND NOTICE
16
THEREOF. NOTHING IN THIS PARAGRAPH SHALL AFFECT OR LIMIT ANY RIGHT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
(c) Notices. Any notice or other communication required or permitted
to be given hereunder shall be in writing by facsimile, mail or personal
delivery and shall be effective upon actual receipt of such notice. The
addresses for such communications shall be:
to the Company:
Pharmos Corporation
00 Xxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxxxx, Xxx Xxxxxx 00000
Phone: (000) 000-0000
Attn: Xxxxxx X. Xxxx,
Chief Financial Officer
with copies to:
Xxxxxxxxxx Xxxxxxxxx & Xxxxxx LLP
00 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx X. Xxxxxxxxx, Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
to the Investors:
To each Investor at the address and/or fax number set
forth on Schedule I of this Agreement
with copies to:
Kleinberg, Kaplan, Xxxxx & Xxxxx, P.C.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
and Xxxxxxxxxxx X. Xxxxx, Esq.
Any party hereto may from time to time change its address for notices by
giving at least 10 days' written notice of such changed address to the other
parties hereto.
(d) Indemnity. Each party shall indemnify each other party against any
loss, cost or damages (including reasonable attorney's fees) incurred as a
result of
17
such parties' breach of any representation, warranty, covenant or agreement in
this Agreement.
(e) Waivers. No waiver by any party of any default with respect to any
provision, condition or requirement of this Agreement shall be deemed to be a
continuing waiver in the future or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of any party to exercise any
right hereunder in any manner impair the exercise of any such right accruing to
it thereafter. The representations and warranties and the agreements and
covenants of the Company and each Investor contained herein shall survive the
Closing.
(f) Execution. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement, it
being understood that all parties need not sign the same counterpart.
(g) Publicity. The Company agrees that it will not disclose, and will
not include in any public announcement, the name of any Investor without its
express written approval, unless and until such disclosure is required by law or
applicable regulation, and then only to the extent of such requirement. The
Company agrees to deliver a copy of any public announcement regarding the
matters covered by this Agreement or any agreement or document executed herewith
to each Investor and any public announcement including the name of an Investor
to such Investor, prior to the publication of such announcements.
(h) No Piggyback on Registration. Neither the Company nor any of its
security holders (other than Ladenburg Xxxxxxxx & Co. Inc. and SmallCaps OnLine
LLC other than the Holders in such capacity pursuant hereto) may include
securities of the Company in the Registration Statement other than the
Registrable Securities, and the Company shall not after the date hereof enter
into any agreement providing any such right to any of its security holders.
(i) Entire Agreement. This Agreement, together with the Purchase
Agreement, the Warrants and the agreements and documents contemplated hereby and
thereby, contains the entire understanding and agreement of the parties, and may
not be modified or terminated except by a written agreement signed by both
parties.
(j) Governing Law. THIS AGREEMENT AND THE VALIDITY AND PERFORMANCE OF
THE TERMS HEREOF SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED
AND TO BE PERFORMED ENTIRELY IN SUCH STATE.
(k) Severability. The parties acknowledge and agree that the Investors
are not agents, affiliates or partners of each other, that all representations,
warranties, covenants and agreements of the Investors hereunder are several and
not joint, that no Investor shall have any responsibility or liability for the
representations, warrants,
18
agreements, acts or omissions of any other Investor, and that any rights granted
to "Investors" hereunder shall be enforceable by each Investor hereunder.
(l) Jury Trial. EACH PARTY HERETO WAIVES THE RIGHT TO A TRIAL BY JURY.
(m) Titles. The titles used in this Agreement are used for convenience
only and are not to be considered in construing or interpreting this Agreement.
(n) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and the Holders of at least a majority of the then issued or issuable
Registrable Securities; provided, however, that, for the purposes of this
sentence, Registrable Securities that are owned, directly or indirectly, by the
Company, or an affiliate of the Company are not deemed outstanding.
Signature page follows
19
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
PHARMOS CORPORATION
By:
---------------------------------
Name:
Title:
INVESTORS:
MILLENNIUM PARTNERS, LP (as an Investor
in the Call Warrant only)
By:
---------------------------------
Name:
Title:
LATERMAN & CO. L.P.
By:
---------------------------------
Name:
Title:
STRONG RIVER INVESTMENTS, INC.
By:
---------------------------------
Name:
Title:
Signature page to Registration Rights Agreement
SCHEDULE I
Investor
--------
Millennium Partners, L.P.c/o
Millennium Management, LLC
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attn: Xxx Xxxxxxxx
Strong River Investments, Inc.
x/x Xxxxx, Xxxxxxxx-Xxxx &
Xxxxxx (BVI) Ltd.
Xxxxxxxxxx Plaza, 2nd Floor
Wickhams Cay 1, Road Town
Tortola, British Virgin Islands
With copies to:
Xxxxxxx Capital Corp.
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attn: Mor Xxxx
Xxxxxxxx & Co., L.P.5
Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxxxxxx Xxxxxxxx
