1
EXHIBIT 4.2
FIRST AMENDED INVESTORS' RIGHTS AGREEMENT
This First Amended Investors' Rights Agreement is made and
entered into as of April 12, 1996 by and among HESKA CORPORATION (the
"Company") (formerly Paravax, lnc.), the holders of capital stock or warrants
to purchase capital stock of the Company identified on Schedule A and Schedule
B attached hereto (the "Investors") and CIBA-GEIGY LIMITED (the "Purchaser").
The Investors and the Purchaser are sometimes collectively referred to as the
"Shareholders".
RECITALS:
A. The Company will issue and sell to the Purchaser an
aggregate of 3,000,000 shares of Series F Preferred Stock pursuant to a Series
F Preferred Stock Purchase Agreement of even date herewith (the "Series F
Agreement").
B. The Purchaser has required that certain registration
rights be granted to them with respect to the securities of the Company to be
acquired.
C. The Investors hold shares of Series A, Series B, Series
C, Series D and Series E Preferred Stock of the Company, or warrants to
purchase Series C and Series D Preferred Stock of the Company entitled to
certain registration rights and rights regarding receipt of information
pursuant to the terms of an Investors' Rights Agreement dated as of March 31,
1995 (the "Original Agreement"). The Investors hereby agree that all such
rights under the Original Agreement are hereby amended and superseded by the
rights provided under this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and of the
mutual promises and covenants contained herein, the parties agree as follows:
1. Integration and Transaction with Diamond.
1.1 Integration. Effective upon the execution of this
Agreement by the Investors holding a majority of the Registrable Securities, as
such term was defined in the Original Agreement, and the closing of the sale
and issuance of Series F Preferred Stock pursuant to the Series F Agreement,
and subject only to the conditions set forth therein, all rights and covenants
contained in the Original Agreement shall be amended and replaced in their
entirety by the rights and covenants in this Agreement. The rights and
covenants of this Agreement set forth the sole and entire agreement among the
Company, the
2
Investors and the Purchasers on the subject matter hereof and supersede any
prior agreements.
1.2 Transaction With Diamond. The parties agree that
shareholders of Diamond Animal Health, Inc. ("Diamond") who become holders of
Series E Preferred Stock of the Company pursuant to a planned acquisition of
the shares of Diamond may become parties to this Agreement by executing a
counterpart signature page, and all such shareholders shall be Shareholders and
their shares of Series E Preferred Stock shall be Registrable Securities for
all purposes of this Agreement.
2. Restrictions on Transfer Registration Rights.
2.1 Definitions. As used herein:
(a) The terms "register", "registered" and
"registration" refer to a registration effected by preparing and filing a
registration statement in compliance with the Securities Act of 1 933, as
amended (the "Securities Act"), and the declaration or ordering of the
effectiveness of such registration statement.
(b) For the purposes hereof, the term "Registrable
Securities" means shares of (i) any and all Common Stock of the Company issued
or issuable upon conversion of shares of the Series A, Series B, Series C,
Series D, Series E or Series F Preferred Stock of the Company, which have not
been previously resold to the public in a registered public offering, including
shares of Common Stock issuable upon conversion of Series C and Series D
Preferred Stock issuable upon exercise of warrants as listed in Schedule A
hereto (the "Warrants") issued to Dominion Ventures, Inc., (ii) stock issued
with respect to or in any exchange for or in replacement of stock included in
subparagraph (i) above which have not been previously resold to the public in a
registered public offering, and (iii) stock issued in respect of the stock
referred to in (i) and (ii) above as a result of a stock split, stock dividend
or the like, which have not been previously resold to the public in a
registered public offering.
(c) The terms "Holder" or "Holders" mean any person
or persons to whom Registrable Securities were originally issued and who
execute this Agreement or qualifying transferees under Section 5 hereof who
hold Registrable Securities.
(d) The term "Initiating Holders" means any Holder
or Holders of in the aggregate at least 35% of the Registrable Securities which
have not been previously resold to the public in a registered public offering.
-2-
3
2.2 Requested Registration.
(a) Request for Registration. In case the Company
shall receive from the Initiating Holders a written request that the Company
effect any registration with respect to Registrable Securities the reasonably
expected aggregate offering price of which equals or exceeds $5,000,000
including underwriting discounts and commissions, the Company will:
(i) within ten (10) days after its receipt
thereof give written notice of the proposed registration to all other Holders;
and
(ii)as soon as practicable, use its best
efforts to effect such registration (including, without limitation, preparation
of a registration statement and prospectus complying as to form with the
requirements of the Securities Act, the execution of an undertaking to file
post-effective amendments, appropriate qualifications under the applicable blue
sky or other state securities laws and appropriate compliance with exemptive
regulations issued under the Securities Act and any other governmental
requirements or regulations) as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as is specified in such request, together with
all or such portion of the Registrable Securities of any Holder or Holders
joining in such request as are specified in a written request given within 20
days after receipt of such written notice from the Company;
provided, that the Company shall not be obligated to take any action to effect
such registration pursuant to this Section 2.2:
(A) Prior to the earlier of (1) June
30, 1 998, or (2) one hundred and eighty (180) days following the effective
date of the Company's first registered offering to the general public of its
securities for its own account; or
(B) In any particular jurisdiction in
which the Company would be required to execute a general consent to service of
process in effecting such registration unless the Company is already subject to
service in such jurisdiction and except as may be required by the Securities
Act; or
(C) After the Company has effected
two such registrations pursuant to this subsection 2.2(a) and such
registrations have been declared or ordered effective.
-3-
4
Subject to the foregoing clauses (A) through (C), the Company shall file a
registration statement covering the Registrable Securities so requested to be
registered as soon as practical, but in any event within ninety (90) days after
receipt of the request or requests of the Initiating Holders; provided,
however, that if the Company shall furnish to such Holders a certificate signed
by the President or Chief Executive Officer of the Company stating that in the
good faith judgment of the Board of Directors it would be seriously detrimental
to the Company for such registration statement to be filed at the date filing
would be required and it is therefore essential to defer the filing of such
registration statement, the Company shall be entitled to delay the filing of
such registration statement not more than once in any twelve month period for
an additional period of up to ninety (90) days.
(b) Underwriting. If the Initiating Holders intend
to distribute the Registrable Securities covered by their request by means of
an underwriting, they shall so advise the Company as a part of their request
made pursuant to Section 2.2 and the Company shall include such information in
the written notice referred to in subsection 2.2(a)(i). The right of any Holder
to registration pursuant to Section 2.2 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. The Company shall (together with all Holders proposing to
distribute their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by a majority in interest of the Initiating
Holders, provided, however, that the managing underwriter shall be approved by
the Company, which approval shall not be unreasonably withheld.
Notwithstanding any other provision of this Section 2.2, if the underwriter
advises the Initiating Holders in writing that marketing factors require a
limitation of the number of shares to be underwritten, the lnitiating Holders
shall so advise all Holders of Registrable Securities who have elected to
participate in such offering, and the number of shares of Registrable
Securities that may be included in the registration and underwriting shall be
allocated among all such Holders thereof in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities held by such
Holders. If any Holder of Registrable Securities disapproves of the terms of
the underwriting, he may elect to withdraw therefrom by written notice to the
Company, the underwriter and the Initiating Holders. Any Registrable
Securities which are excluded from the underwriting by reason of the
underwriter's marketing limitation or withdrawn from such underwriting shall be
withdrawn from such registration. If the underwriter has not limited the
number of Registrable Securities to be underwritten, the Company,
-4-
5
employees of the Company and other holders of the Company's Common Stock may
include securities for its (or their) own account in such registration if the
underwriter so agrees and if the number of Registrable Securities which would
otherwise have been included in such registration and underwriting will not
thereby be limited by the underwriter.
2.3 Company Registration.
(a) Right to Include. If at any time or from time
to time, the Company proposes to register any of its securities, for its own
account or the account of any of its shareholders other than the Holders,
(other than a registration relating solely to employee stock option or purchase
plans, or a registration relating solely to an SEC Rule 145 transaction, or a
registration on any other form, other than Form 0-0, X-0 or S-3, or any
successor to such form which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of Registrable Securities) the Company will:
(i) promptly give to each Holder written
notice thereof; and
(ii)include in such registration (and any
related qualification under blue sky laws or other compliance with applicable
laws), and in any underwriting involved therein, all the Registrable Securities
specified in a written request or requests, made within 20 days after receipt
of such written notice from the Company, by any Holder or Holders to be
included in any such registration, except as set forth in subsection 2.3(b)
below.
(b) Underwriting. If the registration of which the
Company gives notice is for a registered public offering involving an
underwriting, the Company shall so advise the Holders as a part of the written
notice given pursuant to subsection 2.3(a)(i). In such event the right of any
Holder to registration pursuant to Section 2.3 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting
shall (together with the Company and the other holders distributing their
securities through such underwriting) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by the Company. Notwithstanding any other provision of this
Section 2.3, if the underwriter determines that marketing factors require a
limitation of the number of shares to be underwritten, the underwriter may
limit the number of Registrable Securities to be included in the registration
and underwriting (i) completely, in the case of the Company's initial public
offering, or (ii) to not less than 15% of the shares to be included in any
other registration. In the event of a cutback by the underwriters of the
number of Registrable Securities to be included in the registration and
underwriting, the Company shall advise all Holders of Registrable Securities
which would otherwise be registered and underwritten pursuant hereto, and the
number of shares of Registrable Securities that may be included in the
registration and underwriting shall be allocated among all of such Holders in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities held by such Holders. If any Holder disapproves of the terms of any
such underwriting, he may elect to withdraw therefrom by written notice to the
Company and the underwriter. Any Registrable Securities excluded or withdrawn
from such underwriting shall be withdrawn from such registration. The Company
may not include, pursuant to contractual incidental registration rights or
otherwise, shares of Common Stock held by employees or consultants of the
Company or others in a registration statement pursuant to Section 2.3 if, and
to the extent that, the amount of Registrable
-5-
6
Securities held by other than employees or consultants that is otherwise
includable in such registration statement would thereby be diminished.
2.4 Form S-3. After its initial public offering, the
Company shall use its best efforts to qualify for registration on Form S-3 or
any comparable or successor form. After the Company has qualified for the use
of Form S-3, the Holders of the Registrable Securities shall have the right to
request an unlimited number of registrations on Form S-3 (such requests shall
be in writing and shall state the number of shares of Registrable Securities to
be disposed of and the intended method of disposition of Shares by such
Holders), subject only to the following:
(a) The Company shall not be required to effect a
registration pursuant to this Section 2.4 within 120 days of the effective date
of any registration referred to in Sections 2.2 or 2.3 above.
(b) The Company shall not be required to effect a
registration pursuant to this Section 2.4 unless the Holder or Holders
requesting registration propose to dispose of shares of Registrable Securities
having an aggregate disposition price (before deduction of underwriting
discounts and expenses of sale) of at least $750,000.
-6-
7
(c) The Company shall not be required to effect
more than two registrations pursuant to this Section 2.4 in any consecutive 1 2
month period.
The Company shall promptly give written notice to all Holders
of Registrable Securities of the receipt of a request for registration pursuant
to this Section 2.4 and shall provide a reasonable opportunity for other
Holders to participate in the registration, provided that if the registration
is for an underwritten offering, the terms of subsection 2.2(b) shall apply to
all participants in such offering. Subject to the foregoing, the Company will
use its best efforts to effect promptly the registration of all shares of
Registrable Securities on Form S-3 to the extent requested by the Holder or
Holders thereof for purposes of disposition; provided, however, that if the
Company shall furnish to such Holders a certificate signed by the President or
Chief Executive Officer of the Company stating that in the good faith judgement
of the Board of Directors it would be seriously detrimental to the Company for
such registration statement to be filed at the date filing would be required
and it is therefore essential to defer the filing of such registration
statement, the Company shall be entitled to delay the filing of such
registration statement for an additional period of up to ninety (90) days. Any
registration pursuant to this Section 2.4 shall not be counted as a
registration pursuant to Section 2.2.
2.5 Expenses of Registration. All expenses incurred in
connection with any registration, qualification or compliance pursuant to this
Section 2, including without limitation, all registration, filing and
qualification fees, printing expenses, fees and disbursements of counsel for
the Company and one counsel for the selling Holders and expenses of any special
audits incidental to or required by such registration, shall be borne by the
Company except as follows:
(a) The Company shall not be required to pay for
expenses of any registration proceeding begun pursuant to Section 2.2 or 2.4,
the request for which has been subsequently withdrawn by the Initiating Holders
or Holders requesting registration, in which such case, such expenses shall be
borne by the Holders requesting such withdrawal; provided, however, that in
lieu of paying such expenses a majority in interest of the Initiating Holders
may elect to forfeit their right to request one registration pursuant to
Section 2.2; provided further, however, that if at the time of such withdrawal
the Holders have learned of a material adverse change in the business,
condition or prospects of the Company from that known to the Holders at the
time of their request and have withdrawn the request with reasonable promptness
following disclosure by the Company of such change, then the Holders shall not
be
-7-
8
required to pay any such expenses and shall retain their rights to such
registration pursuant to Section 2.2.
(b) With respect to any registration proceeding
pursuant to Section 2.4, the Company shall only be required to pay for expenses
of (i) two registrations requested by Charter Ventures and Charter Ventures II,
L.P., (ii) two registrations requested by Volendam lnvesteringen N.V., and
(iii) two registrations requested by the Purchaser, provided in each case that
such registrations have been declared or ordered effective.
(c) The Company shall not be required to pay fees
of legal counsel of a Holder except for a single counsel acting on behalf of
all selling Holders.
(d) The Company shall not be required to pay
underwriters' fees, discounts or commissions relating to the Registrable
Securities.
2.6 Registration Procedures. In the case of each
registration, qualification or compliance effected by the Company pursuant to
this Agreement, the Company will keep each Holder participating therein advised
in writing as to the initiation of each registration, qualification and
compliance and as to the completion thereof. At its expense the Company will:
(a) Keep such registration, qualification or
compliance pursuant to Sections 2.2, 2.3 or 2.4 effective for a period of 120
days or until the Holder or Holders have completed the distribution described
in the registration statement relating thereto, whichever first occurs;
(b) Furnish to the Holders such numbers of copies
of a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by them;
(c) Notify each Holder of Registrable Securities
covered by such registration statement at any time when a prospectus relating
thereto is required to be delivered under the Securities Act or the happening
of any event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing;
-8-
9
(d) Use its best efforts to register and qualify
the securities covered by such registration statement under such other
securities or Blue Sky laws of such United States jurisdictions as shall be
reasonably requested by the Holders; 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, unless the Company is already subject to service in such
jurisdiction and except as may be required by the Securities Act;
(e) Cause all such Registrable Securities
registered under this Section 2 to be listed on each securities exchange on
which similar securities issued by the Company are then listed;
(f) In the event of any underwritten public
offering, enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the managing underwriter of such
offering, and each Holder participating in such underwriting shall also enter
into and perform its obligations under such an agreement;
(g) Provide a transfer agent and registrar for all
Registrable Securities registered hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration; and
(h) Furnish, at the request of any Holder
requesting registration of Registrable Securities pursuant to this Section 2,
on the date that such Registrable Securities are delivered to the underwriters
for sale in connection with such registration, if such securities are being
sold through underwriters or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities, and (ii) a letter dated such date, from
the independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants
to underwriters in an underwritten public offering, addressed to the
underwriters, if any, and to the Holders requesting registration of Registrable
Securities.
-9-
10
2.7 Indemnification.
(a) The Company will indemnify and hold harmless each
Holder of Registrable Securities, each of its officers, directors and partners,
and each person controlling such Holder, with respect to which such
registration, qualification or compliance has been effected pursuant to this
Agreement, and each underwriter, if any, and each person who controls any
underwriter of the Registrable Securities held by or issuable to such Holder,
against all claims, losses, expenses, damages and liabilities (or actions in
respect thereto) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any preliminary or final
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 or
alleged violation by the Company relating to action or inaction required of the
Company in connection with the requirements of the Securities Act or the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any rule
or regulation promulgated under the Securities Act or any state securities law
applicable to the Company and will reimburse each such 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
reasonable legal and any other expenses incurred in connection with
investigating, defending or settling any such claim, loss, damage, liability or
action; provided, however, that the Company will not be liable in any such case
to the extent that any such claim, loss, damage or liability arises out of or
is based on any untrue statement or omission based upon written information
furnished to the Company in an instrument duly executed by such Holder or
underwriter specifically for use therein, and provided further that the
agreement of the Company to indemnify any under writer and any person who
controls such underwriter contained herein with respect to any such preliminary
prospectus shall not inure to the benefit of any underwriter, from whom the
person asserting any such claim, loss, damage, liability or action purchased
the stock which is the subject thereof, if at or prior to the written
confirmation of the sale of such stock, a copy of the prospectus (or the
prospectus as amended or supplemented) was not sent or delivered to such
person, excluding the documents incorporated therein by reference, and the
untrue statement or omission of a material fact contained in such preliminary
prospectus was corrected in the prospectus (or the prospectus as amended or
supplemented).
-10-
11
(b) Each Holder will, if Registrable Securities
held by or issuable to such Holder are included in the securities as to which
such registration, qualification or compliance is being effected, indemnify and
hold harmless the Company, each of its directors and officers, each
underwriter, if any, of the Company's securities covered by such a registration
statement, each person who controls the Company within the meaning of the
Securities Act, and each other such Holder, each of its officers, directors and
partners and each person controlling such Holder, against all claims, losses,
expenses, 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 preliminary or final 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, and will reimburse the Company, such Holders, such directors,
officers, partners, persons or underwriters for any reasonable legal or any
other expenses incurred in connection with investigating, defending or settling
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, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company in an
instrument duly executed by such Holder specifically for use therein, and
provided further that the agreement of the Holder to indemnify any underwriter
and any person who controls such underwriter (or to indemnify the Company and
each person who controls the Company if the Company is selling directly and not
through an underwriter) contained herein with respect to any such preliminary
prospectus shall not inure to the benefit of any underwriter, from whom the
person asserting any such claim, loss, damage, liability or action purchased
the stock which is the subject thereof (or the Company if such stock was
purchased directly from the Company), if at or prior to the written
confirmation of the sale of such stock, a copy of the prospectus (or the
prospectus as amended or supplemented) was not sent or delivered to such
person, excluding the documents incorporated therein by reference, and the
untrue statement or omission of a material fact contained in such preliminary
prospectus was corrected in the prospectus (or the prospectus as amended or
supplemented). Notwithstanding the foregoing, in no event shall the
indemnification provided by any Holder hereunder exceed the net proceeds
received by such Holder for the sale of such Holder's securities pursuant to
such registration.
-11-
12
(c) Each party entitled to indemnification under
this Section 2.7 (the "Indemnified Party") shall give notice to the party
required to provide indemnification (the "lndemnifying Party") promptly after
such Indemnified Party has actual knowledge of any claim as to which indemnity
may be sought. The Indemnified Party shall promptly permit the Indemnifying
Party to assume the defense of any such claim or any litigation resulting
therefrom, provided that counsel for the Indemnifying Party, who shall conduct
the defense of such claim or litigation, shall be approved by the Indemnified
Party (whose approval shall not be unreasonably be withheld). The Indemnified
Party may participate in such defense and hire counsel at such party's own
expense; provided, however, that the Indemnified Party shall have the right to
retain its own counsel with the fees and expenses to be paid by the
Indemnifying Party if the Indemnifying Party refuses to assume the defense
thereof or if representation of such Indemnified Party by the counsel retained
by the Indemnifying Party would be inappropriate due to actual or potential
differing interests between such Indemnified Party and any other party
represented by such counsel in such proceeding. The failure of any Indemnified
Party to give notice as provided herein shall not relieve the Indemnifying
Party of its obligations hereunder, except to the extent that such failure is
materially prejudicial to an Indemnifying Party's ability to defend such
action. No Indemnifying Party, in the defense of any such claim or litigation,
shall, except with the consent of the Indemnified Party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. No Indemnified Party shall be entitled to indemnification
hereunder if such Indemnified Party consents to entry of any judgment or enters
into any settlement without the consent of the Indemnifying Party. Any
Indemnified Party shall cooperate with the Indemnifying Party in the defense of
any claim or litigation brought against such Indemnified Party.
2.8 Lock-Up Provision. Upon receipt of a written request
by the Company or by its underwriters, the Holders shall not sell, sell short,
grant an option to buy, or otherwise dispose of shares of the Company's Common
Stock or other securities (except for any such shares included in the
registration) for a period of one hundred and eighty (180) days following the
effective date of the initial registration of the Company's securities;
provided, however, that such Holder shall have no obligation to enter into the
agreement described in this Section 2.8 unless all executive officers and
directors enter into similar agreements. The Company may impose stop-transfer
instructions with respect to the shares (or securities) subject to the
foregoing restriction until the end of said 180-day period.
-12-
13
2.9 Information by Holder. The Holder or Holders of
Registrable Securities included in any registration shall promptly furnish to
the Company such information regarding such Holder or Holders and the
distribution proposed by such Holder or Holders as the Company may reasonably
request in writing and as shall be required in connection with any
registration, qualification or compliance referred to herein.
2.10 Rule 144 Reporting. With a view to making available
to Holders of Registrable Securities the benefits of certain rules and
regulations of the Securities and Exchange Commission (the "SEC") which may
permit the sale of the Registrable Securities to the public without
registration, at all times after the effective date of the first registration
filed by the Company for an offering of its securities to the general public
the Company agrees to:
(a) Make and keep public information available, as
those terms are understood and defined in SEC Rule 144 under the Securities
Act;
(b) File with the SEC in a timely manner all
reports and other documents required of the Company under the Securities Act
and the Exchange Act; and
(c) So long as a Holder owns any Registrable
Securities, to furnish to such Holder forthwith upon such Holder's request a
written statement by the Company as to its compliance with the reporting
requirements of said Rule 144 (at any time after 90 days after the effective
date of the first registration statement filed by the Company for an offering
of its securities to the public), and of the Securities Act and the Exchange
Act (at any time after it has become subject to such reporting requirements), a
copy of the most recent annual or quarterly report of the Company, and such
other reports and documents so filed by the Company as such Holder may
reasonably request in availing itself of any
rule or regulation of the SEC allowing such Holder to sell any such securities
without registration.
2.11 Limitations on Subsequent Registration Rights. From
and after the date of this Agreement, the Company shall not, without the prior
written consent of the Holders of a majority of the outstanding Registrable
Securities, enter into any agreement with any holder or prospective holder of
any securities of the Company which would allow such holder or prospective
holder (a) to include such securities in any registration filed under Section
2.2, 2.3 or 2.4 hereof, unless under the terms of such agreement, such holder
or prospective holder may include such securities in any such registration only
to the extent that the inclusion of its securities will not reduce the amount
of the
-13-
14
Registrable Securities of the Holders which is included or (b) to make a demand
registration which could result in such registration statement being declared
effective prior to the earlier of either of the dates set forth in subsection
2.2(a)(ii)(A) or within 120 days of the effective date of any registration
effected pursuant to Section 2.2 hereof.
2.12 Termination. The rights of a Holder under this
Agreement (other than rights under Section 2.7) shall terminate on the earlier
to occur of (a) the date on which a Holder can sell all of its Registrable
Securities without registration pursuant to Rule 144 within a three (3) month
period, unless at the time the Holder's Registrable Securities represent more
than one percent (1 %) of the outstanding capital stock of the Company, or (b)
the eighth anniversary of the closing of the Company's first registered public
offering of its securities.
3. Covenants of the Company.
3.1 Financial Information. So long as a Shareholder
continues to hold at least 200,000 shares of Preferred Stock (including shares
of Common Stock issued upon conversion of Preferred Stock) (collectively, the
"Securities") with respect to subsections (a) and (b) below, and 500,000 shares
of the Securities with respect to subsections (c) and (d) below, the Company
will furnish the following information to the Shareholder:
(a) Annual Financials. As soon as practicable
after the end of each fiscal year, and in any event within 90 days thereafter,
the Company will provide the Shareholder with consolidated balance sheets of
the Company and its subsidiaries, if any, as at the end of such fiscal year,
and consolidated income statements and consolidated statements of cash flows of
the Company and its subsidiaries, if any, for such year, prepared in accordance
with generally accepted accounting principles, all in reasonable detail,
certified by independent public auditors of recognized national standing
selected by the Company.
(b) Quarterly Financials. As soon as practicable
after the end of each fiscal quarter (except the fourth fiscal quarter), and in
any event within 45 days thereafter, the Company will provide the Shareholders
with consolidated balance sheets of the Company and its subsidiaries, if any,
as at the end of such fiscal quarter, and consolidated income statements of the
Company and its subsidiaries, if any, for such quarter, prepared in accordance
with generally accepted accounting principles (except for required footnotes
and for minor year-end adjustments), all in reasonable detail, certified by the
chief financial officer of the Company.
-14-
15
(c) Monthly Financials. As soon as practicable
after the end of each month (except the last month of the fiscal year), and in
any event within 20 days thereafter, the Company will provide the Shareholders
with consolidated balance sheets and income statements of the Company and its
subsidiaries, if any, as of the end of such month, prepared in accordance with
generally accepted accounting principles (except for required footnotes and for
minor year end adjustments).
(d) Budget. As soon as practicable after its
adoption or approval by the Company's Board of Directors, but not later than
the commencement of such fiscal year, the Company will provide the Shareholders
with a consolidated annual plan for each fiscal year which shall include
monthly capital and operating expense budgets, cash flow statements, projected
balance sheets and profit and loss projections for each such month and for the
end of the year, itemized in such detail as the Board of Directors may
reasonably determine.
(e) Termination of Covenant. The Company's
obligation to deliver the information required under subsections (c) and (d)
above shall terminate upon the date on which the Company is required to file a
report with the SEC pursuant to Section 13(a) or 1 5(d) of the Exchange Act by
reason of (i) the Company's having registered any of its securities pursuant to
Section 12 of the Exchange Act or (ii) a registration statement filed by the
Company under the Securities Act having become effective.
3.2 Confidentiality of Information. All information
obtained by a Shareholder pursuant to Section 3.1 shall be deemed proprietary
and confidential to the Company and will not be disclosed by a Shareholder to
any person or entity without the prior written consent of the Company;
provided, however, that such consent shall not be unreasonably withheld. This
restriction shall not apply to information which becomes known to the public
without fault of the recipient or which is disclosed pursuant to a governmental
regulation or order, provided that prior to disclosure the disclosing party
notifies the Company of such proposed disclosure in order to permit the Company
to seek confidential treatment of such information.
4. Right to Maintain.
4.1 "New Securities". For purposes of this Section 4,
the term "New Securities" shall mean shares of Common Stock, Preferred Stock or
any other class of capital stock of the Company, whether or not now authorized,
securities of any type that are convertible into shares of such capital stock,
and
-15-
16
options, warrants or rights to acquire shares of such capital stock.
Notwithstanding the foregoing, the term "New Securities" will not include (a)
securities issuable upon conversion of the Series A, Series B, Series C, Series
D, Series E or Series F Preferred Stock; (b) up to an additional 1,020,000
shares of Series E Preferred Stock and Common Stock (or related options) in the
aggregate issuable to the shareholders or optionholders of Diamond; (c)
securities issuable upon exercise of the Warrants; (d) securities offered to
the public in a bona fide underwritten public offering pursuant to a
registration statement filed under the Securities Act; (e) securities issued
pursuant to the acquisition of another corporation by the Company by merger,
purchase of substantially all of the assets, or other reorganization whereby
the Company owns not less than fifty-one percent (51%) of the voting power of
such corporation; (f) up to an aggregate of 2,674,073 shares of Common Stock
first issued after the date of this Agreement or related options outstanding on
or first issued after the date of this Agreement to officers, directors,
employees or consultants of the Company, pursuant to any stock grant, stock
option plan or stock purchase plan or other stock incentive agreement or
arrangement approved by the vote or written consent of not less than sixty-six
and two-thirds percent (66 2/3%) of the directors then in office; (g)
securities issued in connection with equipment lease or working capital debt
financings, so long as the number of securities so issued does not exceed one
percent (1 %) of the then outstanding capital stock of the Company; (h)
securities issued upon exercise or conversion of options, warrants and other
convertible securities outstanding on the date hereof; and (i) shares of Common
Stock or Preferred Stock issued in connection with any stock split, stock
dividend or recapitalization by the Company.
4.2 Grant of Rights. Subject to the terms specified in
this Section 4, so long as a Shareholder holds not less than 500,000 shares of
Securities, the Company hereby grants to the Shareholders the right of first
refusal to purchase a portion of any issue of New Securities which the Company
hereafter may from time to time propose to issue and sell as shall maintain the
Shareholders' pro rata percentage ownership of the Company's capital stock.
The "pro rata" percentage ownership of a Shareholder is calculated by dividing
(i) the number of shares of Common Stock held by the Shareholder plus the total
number of shares of Common Stock issuable upon the conversion of all Preferred
Stock then held by the Shareholder by (ii) the total number of shares of Common
Stock then outstanding, including shares issuable upon conversion of any
Preferred Stock.
-16-
17
4.3 Procedure.
(a) In the event the Company proposes to
undertake an issuance of New Securities, it shall give the Shareholders written
notice of its intention, describing the type of New Securities, the price and
material terms upon which the Company proposes to issue the same. A
Shareholder shall have 20 calendar days from the date of receipt of any such
notice to agree to purchase up to its pro rata share of such New Securities for
the price and upon the terms specified in the Company's notice by giving
written notice to the Company to such effect and stating therein the quantity
of New Securities to be purchased.
(b) If less than all of the New Securities are
subscribed for after the expiration of the 20 calendar day period referred to
in Section 4.3(a), the Company shall have 90 days thereafter to sell or enter
into an agreement to sell any New Securities not purchased by Shareholders
exercising their rights at a price and upon terms no more favorable to the
purchaser than the terms specified in the Company's notice to the Shareholders,
after which 90 day period the Company shall not thereafter sell such New
Securities without first offering a portion to the Shareholders in accordance
with this Section 4.
4.4 Termination of Rights. The rights granted under this
Section 4 shall expire upon the closing of a firm commitment underwritten
public offering pursuant to an effective registration statement under the
Securities Act covering the offer and sale of Common Stock for the account of
the Company to the public at an aggregate offering price of not less than
$10,000,000 and at a public offering price per share (prior to underwriter
commissions and expenses) that is not less than $8.00 (as adjusted for stock
splits, stock combinations and the like).
5. Assignment of Rights.
The rights granted pursuant to this Agreement may be assigned
by a Shareholder or its transferee upon sale or transfer (other than a sale to
the public) of at least 200,000 shares of Preferred Stock (including shares of
Common Stock issued upon conversion thereof) (as adjusted for stock dividends,
stock splits, recapitalizations and the like) held by a Shareholder, provided
that certain rights under Sections 3 and 4 will continue to require ownership
of a greater number of shares. The rights under Sections 3 and 4 may not be
assigned to a transferee which the Company reasonably believes is a competitor
or intends to become a competitor of the Company. The Company shall be given
prompt notice of such transfer and any such transferee shall agree to become
subject to the obligations of the Shareholders under this
-17-
18
Agreement. Notwithstanding the foregoing, Ciba-Geigy Limited may assign all of
its rights and obligations hereunder in connection with the merger of
Ciba-Geigy Limited and Sandoz Limited, and the formation of a new entity,
Novartis.
6. Miscellaneous.
6.1 Amendment or Waiver. Any term of this Agreement may
be amended and the observance of any such term may be waived (either generally
or in a particular instance and either retroactively or prospectively) with the
written consent of the Company and Shareholders holding at least a majority of
the outstanding Registrable Securities. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon all of the parties hereto
and their successors and assigns, even if such Shareholder did not consent in
writing to such amendment or waiver.
6.2 Governing Law. This Agreement shall be governed in
all respects by the laws of the State of California as such laws are applied to
agreements between California residents entered into and to be performed
entirely within California.
6.3 Entire Agreement. This Agreement constitutes the
full and entire understanding and agreement between the parties with respect to
the subject hereof and it supersedes, merges, and renders void any and all
prior understandings and/or agreements, written or oral, with respect to such
subject matter.
6.4 Notices. All notices and other communications
required or permitted hereunder shall be in writing and shall be personally
delivered, mailed by certified or registered mail, postage prepaid, or
delivered by overnight delivery or express courier, addressed to the Holders at
their addresses shown on the records of the Company or, to the Company, at its
principal executive office, or at such other address as the Company or any
Holder shall hereafter furnish in writing. All notices that are mailed shall
be deemed delivered five (5) days after deposit in the United States mail.
6.5 Severability. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
6.6 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall constitute one and the same instrument.
-18-
19
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date and year first above written.
HESKA CORPORATION
By: /s/ XXXX X. XXXXXXXXX
--------------------------------------
Xxxx X. Xxxxxxxxx
Title: President
-----------------------------------
INVESTORS AND PURCHASER:
CIBA-GEIGY LIMITED
By: /s/ X.X. XXXXXXX /s/ XX. X. XXXXXXXXX
---------------------------------------
X.X. Xxxxxxx
President Animal Xx. X. Xxxxxxxxx
Title: Health Division Division Counsel
-----------------------------------
-19-
20
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
HESKA CORPORATION
By:
----------------------------------
Title:
-------------------------------
INVESTORS AND PURCHASER:
CHARTER VENTURES
By: /s/ A. XXXX XXXXX
----------------------------------
Title: General Position
-------------------------------
-19-
21
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
HESKA CORPORATION
By:
----------------------------------
Title:
-------------------------------
INVESTORS AND PURCHASER:
CHARTER VENTURES II, L.P.
By: /s/ A. XXXX XXXXX
----------------------------------
Title: General Partner
-------------------------------
-19-
22
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
HESKA CORPORATION
By:
----------------------------------
Title:
-------------------------------
INVESTORS AND PURCHASER:
VOLENDAM INVESTERINGEN N.V.
/s/ ANNEKE SOEDHOE /s/ GERMAIN SPROEK
By: MeesPierson Trust (Curacao) N.V.
----------------------------------
Title: Managing Director
-------------------------------
-19-
23
SCHEDULE A
List of Warrants
Series C Preferred Stock Warrants:
Date of No. Shares Subject
-------- ------------------
Name Grant Expiration Date Exercise Price to Warrant
---- ----- --------------- -------------- ----------
Dominion Ventures 11/22/89 11/22/1998 $2.50 6,400
-----
Total: 6,400
Series D Preferred Stock Warrants:
Date of Subject to
-------- -----------
Name Grant Expiration Date Exercise Price Warrant
---- ----- --------------- -------------- -------
Dominion Ventures 06/07/93 06/07/2002 $3.25 6,225
Dominion Ventures 12/30/93 12/30/2002 $3.25 267
Dominion Ventures 11/20/94 11/20/2003 $3.25 18,500
-------
Total: 24,992
Total of all warrants: 31,392
=======
-20-
24
SCHEDULE B
LIST OF INVESTORS
Number of
Name Series Shares
---- ------ ------
Charter Ventures A 300,000
B 250,000
C 1,340,000
D 800,000
E 695,510
Charter Ventures II, L.P. E 155,652
Volendam Investerigen N.V. E 3,076,923
-21-
