Exhibit 10.6
ENCORE MEDICAL CORPORATION
INVESTORS' RIGHTS AGREEMENT
This Investors' Rights Agreement (this "Agreement") is made and entered
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into as of the 8/th/ day of February, 2002 by and among (i) Encore Medical
Corporation, a Delaware corporation (the "Company") and (ii) CapitalSource
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Holdings LLC (the "Investors").
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Recitals
WHEREAS, an affiliate of the Investors is party to the Note and Equity
Purchase Agreement dated as of February 8, 2002, between the Company and the
Investors (the "Sub-debt Agreement"), and certain of the Company's and the
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Investors' obligations under the Sub-debt Agreement are conditioned upon the
execution and delivery by the Investors and the Company of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. RESTRICTIONS ON TRANSFERABILITY OF SECURITIES; REGISTRATION RIGHTS.
1.1 Certain Definitions. Capitalized terms used herein and not otherwise
defined have the meanings given them in the Sub-debt Agreement. As used in this
Agreement, the following terms shall have the meanings set forth below:
(a) "Commission" shall mean the Securities and Exchange Commission or
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any other federal agency at the time administering the Securities Act.
(b) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
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amended, or any similar successor federal statute and the rules and
regulations thereunder, all as the same shall be in effect from time to
time.
(c) "Holder" shall mean any Investor who holds Registrable Securities
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and any holder of Registrable Securities to whom the registration rights
conferred by this Agreement have been transferred in compliance with
Section 1.2 and Section 1.12 hereof.
(d) "Initiating Holders" shall mean any Holder or Holders who in the
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aggregate hold more than fifty percent (50%) of the outstanding Registrable
Securities.
(e) "Material Adverse Effect" shall mean a material adverse effect
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upon the business, assets, financial condition, income or prospects of the
Company.
(f) "Other Stockholders" shall mean persons other than Holders who, by
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virtue of agreements with the Company, are entitled to include their
securities in certain registrations hereunder.
(g) "Registrable Securities" shall mean (i) shares of Common Stock
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issued or issuable pursuant to the exercise of the Warrant, and (ii) any
Common Stock issued as a dividend or other distribution with respect to or
in exchange for or in replacement of the shares referenced in clause (i)
above, provided, however, that Registrable Securities shall not include any
shares of Common Stock which have previously been registered or which have
been sold to the public either pursuant to a registration statement or Rule
144, or which have been sold in a private transaction in which the
transferor's rights under this Agreement are not assigned.
(h) The terms "register," "registered" and "registration" shall refer
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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.
(i) "Registration Expenses" shall mean all expenses incurred in
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effecting any registration pursuant to this Agreement, including, without
limitation, all registration, qualification, and filing fees, printing
expenses, escrow fees, fees and disbursements of counsel for the Company,
blue sky fees and expenses, and expenses of any regular or special audits
incident to or required by any such registration, but shall not include
Selling Expenses, fees and disbursements of counsel for the Holders and the
compensation of regular employees of the Company, which shall be paid in
any event by the Company.
(j) "Restricted Securities" shall mean any Registrable Securities
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required to bear the legend set forth in Section 1.2(b) hereof.
(k) "Rule 144" shall mean Rule 144 as promulgated by the Commission
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under the Securities Act, as such Rule may be amended from time to time, or
any similar successor rule that may be promulgated by the Commission.
(l) "Rule 145" shall mean Rule 145 as promulgated by the Commission
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under the Securities Act, as such Rule may be amended from time to time, or
any similar successor rule that may be promulgated by the Commission.
(m) "Securities Act" shall mean the Securities Act of 1933, as
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amended, or any similar successor federal statute and the rules and
regulations thereunder, all as the same shall be in effect from time to
time.
(n) "Selling Expense" shall mean all underwriting discounts, selling
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commissions and stock transfer taxes applicable to the sale of Registrable
Securities and fees and disbursements of counsel for any Holder (other than
the fees and disbursements of counsel included in Registration Expenses).
(o) "Transfer" means the sale, assignment, lease, transfer,
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mortgaging, encumbering or other disposition, whether voluntary or
involuntary, and whether or not consideration is received therefor.
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(p) "Warrant" shall mean the warrant issued pursuant to the Sub-debt
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Agreement to purchase shares of the Company's Common Stock par value $.001 per
share.
1.2 Restrictions on Transfer.
(a) Each Holder agrees not to make any disposition of all or any
portion of the Registrable Securities unless and until:
(i) There is then in effect a registration statement under
the Securities Act covering such proposed disposition and such
disposition is made in accordance with such registration statement; or
(ii) (A) Such Holder shall have notified the Company of the
proposed disposition and shall have furnished the Company with a
detailed statement of the circumstances surrounding the proposed
disposition, and (B) if reasonably requested by the Company, such
Holder shall have furnished the Company with an opinion of counsel,
reasonably satisfactory to the Company, that such disposition will not
require registration of such shares under the Securities Act. It is
agreed that the Company will not require opinions of counsel for
transactions made pursuant to Rule 144 except in unusual
circumstances.
(iii) Notwithstanding the provisions of paragraphs (i) and
(ii) above, no such registration statement or opinion of counsel shall
be necessary for a transfer by a Holder which is (A) a partnership to
its partners or retired partners in accordance with partnership
interests, (B) a corporation to its shareholders in accordance with
their interest in the corporation, (C) a limited liability company to
its members or former members in accordance with their interest in the
limited liability company, or (D) to the Holder's family member or
trust for the benefit of an individual Holder or for the benefit of a
Holder's family member, provided the transferee will be subject to the
terms of this Section 1.2 to the same extent as if such transferee
were an original Holder hereunder (each of the transfers described in
this Section 1.2(iii)(A) through (D), a "Permitted Transfer").
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Prior to any transfer to a transferee other than a purchaser who
acquired such shares of Common Stock in a public offering or pursuant
to Rule 144, the transferee shall have agreed in writing for the
benefit of the Company to be bound by this Section 1.2, provided and
to the extent such Section is then applicable.
(b) Each certificate representing Registrable Securities shall (unless
otherwise permitted by the provisions of this Agreement) be stamped or otherwise
imprinted with a legend substantially similar to the following (in addition to
any legend required under applicable state securities laws):
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT Of 1933, AS AMENDED, AND MAY NOT BE SOLD OR
TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
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REGISTERED UNDER SUCH ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL OR OTHER EVIDENCE, SATISFACTORY TO THE COMPANY AND ITS COUNSEL,
THAT SUCH REGISTRATION IS NOT REQUIRED.
(c) The Company shall be obligated to reissue promptly unlegended
certificates at the request of any Holder thereof if the Holder shall have
obtained an opinion of counsel at such Holder's expense (which counsel may
be counsel to the Company) reasonably acceptable to the Company to the
effect that the securities proposed to be disposed of may lawfully be so
disposed of without registration, qualification or legend.
(d) Any legend endorsed on an instrument pursuant to applicable state
securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal.
1.3 Requested Registration.
(a) Request for Registration. If the Company shall receive from
Initiating Holders at any time or times not earlier than the date on which
the Warrant may be exercised in accordance with its terms, a written
request that the Company effect any registration with respect to all or a
part of the Registrable Securities, the Company will:
(i) promptly, and in any event no later than ten (10) days of
the receipt of such written request; 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, filing post-effective
amendments, appropriate qualifications under applicable blue sky or
other state securities laws, and appropriate compliance with the
Securities Act) to permit or facilitate the sale and distribution of
all or such portion of such Registrable Securities as are 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 received by the Company within twenty
(20) days after such written notice from the Company is mailed or
delivered.
The Company shall not be obligated to effect, or to take any action to
effect, any such registration pursuant to this Section 1.3:
(A) In any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in
effecting such registration, qualification, or compliance, unless the
Company is already subject to service in such jurisdiction and except
as may be required by the Securities Act;
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(B) After the Company has initiated two (2) such registrations
pursuant to this Section 1.3(a) (counting for these purposes only
registrations which have been declared or ordered effective and
pursuant to which at least 80% of the Registrable Securities requested
to be included in such registration have been sold and registrations
which have been withdrawn by the Holders as to which the Holders have
not elected to bear the Registration Expenses pursuant to Section 1.5
hereof and would, absent such election, have been required to bear
such expenses);
(C) During the period starting with the date thirty (30) days
prior to the Company's good faith estimate of the date of filing of,
and ending on a date one hundred eighty (180) days after the effective
date of, a Company-initiated registration in which Registrable
Securities were sold or could have been sold; provided that the
Company is actively employing in good faith all reasonable efforts to
cause such registration statement to become effective; or
(D) If the Initiating Holders propose to dispose of shares of
Registrable Securities which may be immediately registered on Form S-3
pursuant to a request made under Section 1.6 hereof.
(b) Subject to the foregoing clauses (A) through (D), the Company
shall file a registration statement covering the Registrable Securities so
requested to be registered as soon as practicable, and in any event no
later than forty-five (45) days, after receipt of the request or requests
of the Initiating Holders; provided, however, that if (i) in the good faith
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judgment of the Board of Directors of the Company, such registration would
be seriously detrimental to the Company and the Board of Directors of the
Company concludes, as a result, that it is essential to defer the filing of
such registration statement at such time, and (ii) the Company shall
furnish to the Initiating Holders a certificate signed by the Chief
Executive Officer of the Company stating that in the good faith judgment of
the Board of Directors of the Company, it would be seriously detrimental to
the Company for such registration statement to be filed in the near future
and that it is, therefore, essential to defer the filing of such
registration statement, then the Company shall have the right to defer such
filing (except as provided in clause (C) above) for a period of not more
than one hundred thirty-five (135) days after receipt of the request of the
Initiating Holders, and, provided further, that the Company shall not defer
its obligation in this manner more than once in any twelve-month period.
The registration statement filed pursuant to the request of the Initiating
Holders may, subject to the provisions of Sections 1.3(d) and 1.14 hereof,
include other securities of the Company, with respect to which registration
rights have been granted, and may include securities of the Company being sold
for the account of the Company.
(c) Participation. A Holder may elect to include in any registration
and underwriting, if applicable, all or a part of the Registrable
Securities he holds.
(d) Procedures. If (i) the Company shall request inclusion in any
registration pursuant to this Section 1.3 of securities being sold for its
own account, or if other
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persons shall request inclusion in any registration pursuant to this Section 1.3
and (ii) the Initiating Holders request that pursuant to this Section 1.3,
Registrable Securities be registered pursuant to an underwriting, the Initiating
Holders shall, on behalf of all Holders, offer to include such securities in the
underwriting and may condition such offer on their acceptance of the further
applicable provisions of this Article 1 (including Section 1.13). The Company
shall (together with all Holders and other persons proposing to distribute their
securities through such underwriting) enter into an underwriting agreement in
customary form with the representative of the underwriter or underwriters
selected for such underwriting by a majority in interest of the Initiating
Holders, which underwriters are reasonably acceptable to the Company.
Notwithstanding any other provision of this Section 1.3, if the representative
of the underwriters advises the Initiating Holders in writing that marketing
factors require a limitation on the number of shares to be underwritten, then
the number of such shares to be included in the underwritten public offering
shall be reduced, and shares shall be excluded from such underwritten public
offering in a number deemed necessary by such underwriters, first by excluding
shares held by the Company, directors, officers, employees and founders and any
other stockholders of the Company, and then, to the extent necessary, by
excluding Registrable Securities in accordance with the allocation provisions
contained in Section 1.13.
(e) If a person who has requested inclusion in such registration as
provided above does not agree to the terms of any such underwriting, such person
shall be excluded therefrom by written notice from the Company, the underwriter
or the Initiating Holders. Any Registrable Securities or other securities so
excluded or withdrawn from such underwriting shall also be withdrawn from such
registration. If shares are so withdrawn from the registration and if the number
of shares to be included in such registration was previously reduced as a result
of marketing factors pursuant to this Section 1.3(d), then the Company shall
offer to all Holders who have retained rights to include securities in the
registration the right to include additional securities in the registration in
an aggregate amount equal to the number of shares so withdrawn, with such shares
to be allocated among such Holders requesting additional inclusion in accordance
with Section 1.13.
1.4 Company Registration.
(a) If the Company shall determine to register any of its securities either
for its own account or the account of a security holder or holders exercising
their respective demand registration rights (other than pursuant to Section 1.3
or 1.6 hereof), other than a registration relating solely to employee benefit
plans on Form X-0, Xxxx X-0 or any successor Forms or a registration relating to
a corporate reorganization or other transaction on Form S-4 or any successor to
Form S-4, or a registration on any registration form that does not permit
secondary sales, the Company will:
(i) promptly give to each Holder written notice thereof; and
(ii) use its best efforts to include in such registration (and any
related qualification under blue sky laws or other compliance), except as
set forth in
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Section 1.4(b) below, and in any underwriting involved therewith, all
the Registrable Securities specified in a written request or requests,
made by any Holder and received by the Company within ten (10) days
after the written notice from the Company described in clause (i)
above is mailed or delivered by the Company. Such written request may
specify all or a part of a Holder's Registrable Securities.
(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 Section 1.4(a)(i). In such event, the right of any Holder to
registration pursuant to this Section 1.4 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 of
securities of the Company with registration rights to participate therein
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the representative of the
underwriter or underwriters selected by the Company.
Notwithstanding any other provision of this Section 1.4, if the
representative of the underwriters advises the Company in writing that marketing
factors require a limitation on the number of shares to be underwritten, the
representative may (subject to the limitations set forth below) exclude all
Registrable Securities from, or limit the number of Registrable Securities to be
included in, the registration and underwriting. The Company shall so advise all
holders of securities requesting registration, and the number of shares of
securities that are entitled to be included in the registration and underwriting
shall be allocated first to the Company for securities being sold for its own
account and thereafter as set forth in Section 1.13.
If any person does not agree to the terms of any such underwriting, he
shall be excluded therefrom by written notice from the Company or the
underwriter. Any Registrable Securities or other securities so excluded from
such underwriting shall be withdrawn from such registration. If shares are so
withdrawn from the registration and if the number of shares of Registrable
Securities to be included in such registration was previously reduced as a
result of marketing factors, the Company shall then offer to all persons who
have retained the right to include securities in the registration the right to
include additional securities in the registration in an aggregate amount equal
to the number of shares so withdrawn, with such shares to be allocated among the
persons requesting additional inclusion in accordance with Section 1.13 hereof.
1.5 Expenses of Registration. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Sections 1.3, 1.4 and 1.6 hereof and reasonable fees of one counsel for the
selling stockholders in the case of registrations pursuant to Section 1.3 and
1.6 shall be borne by the Company; provided, however, that if the Holders bear
the Registration Expenses for any registration proceeding begun pursuant to
Section 1.3 and subsequently withdrawn by the Holders registering shares
therein, such registration proceeding shall not be counted as a requested
registration pursuant to Section 1.3 hereof. Furthermore, in the event that a
withdrawal by the Holders is based upon material adverse information relating to
the Company that is different from the information known or available (upon
request from the
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Company or otherwise) to the Holders requesting registration at the time of
their request for registration under Section 1.3, such registration shall not be
treated as a counted registration for purposes of Section 1.3 hereof, even
though the Holders do not bear the Registration Expenses for such registration.
All Selling Expenses relating to securities so registered shall be borne by the
holders of such securities pro rata on the basis of the number of shares of
securities so registered on their behalf, as shall any other expenses in
connection with the registration required to be borne by the Holders of such
securities.
1.6 Registration on Form S-3.
(a) If the Company qualifies for the use of Form S-3, in addition to
the rights contained in the foregoing provisions of this Article 1, the
Holders of Registrable Securities shall have the right to request
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 methods of disposition of such shares by such Holder or
Holders), provided, however, that any such request must be made by Holders
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who in the aggregate hold more than ten percent (10%) of the outstanding
Registrable Securities, provided, further, that the Company shall not be
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obligated to effect any such registration (i) if the Holders, together with
the holders of any other securities of the Company entitled to inclusion in
such registration, propose to sell Registrable Securities and such other
securities (if any) on Form S-3 at an aggregate price to the public of less
than $1,000,000, (ii) in the circumstances described in clauses (A) and (C)
of Section 1.3(a), (iii) if the Company shall furnish the certification
described in Section 1.3(b) (but subject to the limitations set forth
therein) or (iv) if, in a given twelve month period, the Company has
effected one such registration in such period.
(b) If a request complying with the requirements of Section 1.6(a)
hereof is delivered to the Company, the provisions of Sections 1.3(a)(i)
and (ii) and Section 1.3(b) hereof shall apply to such registration. If the
registration is for an underwritten offering, the rights of any Holder to
registration pursuant to this Section 1.6 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting (unless mutually agreed
by a majority in interest of the Initiating Holders and such Holder with
respect to such participation and inclusion) to the extent provided herein
and the provisions of Section 1.3(d) hereof shall apply to such
registration. A Holder may elect to include in such underwriting all or a
part of the Registrable Securities he holds.
1.7 Registration Procedures. In the case of each registration effected by
the Company pursuant to Section 1, the Company will keep each Holder advised in
writing as to the initiation of each registration and as to the completion
thereof. At its expense, the Company will use its best efforts to:
(a) Keep such registration effective for a period of one hundred
twenty (120) days or until the Holder or Holders have completed the
distribution described in the registration statement relating thereto,
whichever first occurs; provided, however, that (i) such 120-day period
shall be extended for a period of time equal to the period the Holder
refrains from selling any securities included in such registration at the
request of an
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underwriter of Common Stock (or other securities) of the Company; and (ii) in
the case of any registration of Registrable Securities on Form S-3 which are
intended to be offered on a continuous or delayed basis, such 120-day period
shall be extended, if necessary, to keep the registration statement effective
until all such Registrable Securities are sold, however in no event longer than
one year from the effective date of the registration statement and provided that
Rule 145, or any successor rule under the Securities Act, permits an offering on
a continuous or delayed basis, and provided further that applicable rules under
the Securities Act governing the obligation to file a post-effective amendment
permit, in lieu of filing a post-effective amendment, that (I) includes any
prospectus required by Section 10(a)(3) of the Securities Act, or (II) reflects
facts or events representing a material or fundamental change in the information
set forth in the registration statement, the incorporation by reference of
information required to be included in (I) and (II) above to be contained in
periodic reports filed pursuant to Section 13 or 15(d) of the Exchange Act in
the registration statement;
(b) Prepare and file with the Commission such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement;
(c) Furnish such number of prospectuses and other documents incident
thereto, including any amendment of or supplement to the prospectus, as a Holder
from time to time may reasonably request;
(d) Notify each seller 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 of 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 or incomplete in the light of the
circumstances then existing, and at the request of any such seller, prepare and
furnish to such seller a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such shares, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading or
incomplete in the light of the circumstances then existing;
(e) Cause all such Registrable Securities registered pursuant hereunder to
be listed on each securities exchange on which similar securities issued by the
Company are then listed;
(f) 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
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;
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(g) Use its best efforts to furnish, at the request of any underwriter on
the date that such Registrable Securities are delivered to the underwriters for
sale in connection with a registration pursuant to this Section 1, (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,
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.;
(h) Provide a transfer agent and registrar for all Registrable Securities
registered pursuant to such registration statement and a CUSIP number for all
such Registrable Securities, in each case not later than the effective date of
such registration; and
(i) In connection with any underwritten offering pursuant to a registration
statement filed pursuant to Section 1.3 hereof, the Company will enter into an
underwriting agreement in form reasonably necessary to effect the offer and sale
of Common Stock, provided such underwriting agreement contains reasonable and
customary provisions.
1.8 Indemnification.
(a) The Company will indemnify each Holder, each of its officers, directors
and partners, legal counsel, and accountants and each person controlling such
Holder within the meaning of Section 15 of the Securities Act, with respect to
which registration, qualification, or compliance has been effected pursuant to
this Article 1, and each underwriter, if any, and each person who controls
within the meaning of Section 15 of the Securities Act any underwriter, against
all expenses, claims, losses, damages, and liabilities (or actions, proceedings,
or settlements 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 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 such Holder, each of its officers, directors, partners, legal
counsel, and accountants 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 or settling any such claim, loss, damage, liability, or action,
provided that the Company will not be liable in any such case to the extent that
any such claim, loss, damage, liability, or expense rises out of or is based on
any untrue statement or omission based upon written information furnished to the
Company by such Holder or underwriter and stated to be specifically for use
therein. It is agreed that the indemnity agreement contained in this
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Section 1.8(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 shall not be unreasonably withheld).
(b) Each Holder will, if Registrable Securities held by such Holder 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, legal counsel, and accountants 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, each other such Holder and Other Stockholder,
and each of their officers, directors, and partners, and each person controlling
such Holder or Other Stockholder, 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 statements therein not
misleading, and will reimburse the Company and such Holders, Other Stockholders,
directors, officers, partners, legal counsel, and accountants, persons,
underwriters, or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or 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, prospectus, offering
circular, or other document in reliance upon and in conformity with written
information furnished to the Company by such Holder (with respect to such
Holder) and stated to be specifically for use therein provided, however, that
the obligations of such Holder hereunder shall not apply to amounts paid in
settlement of any such claims, losses, damages, or liabilities (or actions in
respect thereof) if such settlement is effected without the consent of such
Holder (which consent shall not be unreasonably withheld); and provided that in
no event shall any indemnity under this Section 1.8 exceed the gross proceeds
from the offering received by such Holder.
(c) Each party entitled to indemnification under this Section 1.8 (the
"Indemnified Party") shall give notice to the party required to provide
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indemnification (the "Indemnifying Party") promptly after such Indemnified Party
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has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of such claim or 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 Section 1.8, to the extent such
failure is not prejudicial. Notwithstanding the foregoing, any Indemnified Party
shall have the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of the Indemnified Party unless (i) the Indemnified
Party shall have been advised by counsel that representation of the
11
Indemnified Party by counsel provided by the Indemnifying Party would be
inappropriate due to actual or potential conflicting interests between the
Indemnifying Party and the Indemnified Party, including situations in which
there are one or more legal defenses available to the Indemnified Party
that are different from or additional to those available to the
Indemnifying Party, (ii) the Indemnifying Party shall have authorized in
writing the employment of counsel for the Indemnified Party at the expense
of the Indemnifying Party, or (iii) the Indemnifying Party shall have
failed to assume the defense or retain counsel reasonably satisfactory to
the Indemnified Party. 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 that
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 defense of such claim and litigation
resulting therefrom.
(d) If the indemnification provided for in this Section 1.8 is held by
a court of competent jurisdiction to be unavailable to an Indemnified Party
with respect to any loss, liability, claim, damage, or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party hereunder, shall contribute to the amount paid or payable
by such Indemnified Party as a result of such loss, liability, claim,
damage, or expense in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party on the one hand and of the
Indemnified Party on the other in connection with the statements or
omissions that resulted in such loss, liability, claim, damage, or expense
as well as any other relevant equitable considerations. The relative fault
of the Indemnifying Party and of the Indemnified Party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact
relates to information supplied by the Indemnifying Party or by the
Indemnified Party and the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such statement or
omission. In no event shall any contribution by a Holder under this Section
1.8(d) exceed the net proceeds from the offering received by such Holder.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in any underwriting agreement
entered into in connection with the underwritten public offering of
Registrable Securities are in conflict with the foregoing provisions, the
provisions in the underwriting agreement shall control.
(f) This Section 1.8 shall survive the completion of any offering of
Registrable Securities in a registration statement under this Section 1,
and otherwise.
1.9 Information by Holder. Each Holder of Registrable Securities shall
furnish to the Company such information regarding such Holder and the
distribution 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 Section 1.
12
1.10 Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission that may permit the sale of the
Restricted Securities to the public without registration, the Company agrees to
use its best efforts to:
(a) Make and keep public information regarding the Company available
as those terms are understood and defined in Rule 144 under the Securities
Act, at all times from and after the date hereof;
(b) File with the Commission 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 Restricted Securities, furnish to the
Holder forthwith upon written request a written statement by the Company as
to its compliance with the reporting requirements of Rule 144, and of the
Securities Act and the Exchange Act, a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents so
filed as a Holder may reasonably request in availing itself of any rule or
regulation of the Commission allowing a Holder to sell any such securities
without registration.
1.11 Transfer or Assignment of Registration Rights. The rights to cause the
Company to register securities granted to a Holder by the Company under this
Article 1 may be transferred or assigned by a Holder to a Permitted Transferee,
an Affiliate and a purchaser of Registrable Securities or Warrants exercisable
for Registrable Securities, provided that the Company is given written notice at
the time of or within a reasonable time after said transfer or assignment,
stating the name and address of the transferee or assignee and identifying the
securities with respect to which such registration rights are being transferred
or assigned, and, provided further, that the transferee or assignee of such
rights assumes in writing the obligations of such Holder under this Section 1.
1.12 "Market Stand-Off" Agreement. If requested by an underwriter of Common
Stock (or other securities) of the Company, a Holder shall not sell or otherwise
transfer or dispose of any Common Stock (or other securities) of the Company
held by such Holder (other than those included in the registration) during the
one hundred eighty (180) day period following the effective date of a
registration statement of the Company filed under the Securities Act; provided,
--------
however, that this Section 1.12 shall not apply unless all officers and
-------
directors of the Company and other holders of Common Stock (including shares
issuable upon exercise or conversion of any options, warrants or other rights
and securities convertible into or exchangeable therefor) holding not less than
the number of shares of Common Stock held by such Holder and its Affiliates
(including shares issuable upon exercise or conversion of any options, warrants
or other rights and securities convertible into or exchangeable therefor) enter
into similar agreements.
The obligations described in this Section 1.12 shall not apply to a
registration relating solely to employee benefit plans on Form S-1 or Form S-8
or similar forms that may be promulgated in the future, or a registration
relating solely to a transaction on Form S-4 or similar forms that may be
promulgated in the future. The Company may impose stop-transfer
13
instructions with respect to the shares of Common Stock (or other securities)
subject to the foregoing restriction until the end of such one hundred eighty
(180) day period.
1.13 Allocation of Registration Opportunities. In any circumstance in which
all of the Registrable Securities and other shares of Common Stock of the
Company (including shares of Common Stock issued or issuable upon conversion of
shares of any currently unissued series of Preferred Stock of the Company) with
registration rights (the "Other Shares") requested to be included in a
------------
registration on behalf of the Holders or other selling stockholders cannot be so
included as a result of limitations of the aggregate number of shares of
Registrable Securities and Other Shares that may be so included, the number of
shares of Registrable Securities and Other Shares that may be so included shall
be allocated among the Holders and other selling stockholders requesting
inclusion of shares pro rata on the basis of the number of shares of Registrable
Securities and Other Shares that would be held by such Holders and other selling
stockholders, assuming conversion; provided, however, that such allocation shall
-------- -------
not operate to reduce the aggregate number of Registrable Securities and Other
Shares to be included in such registration, if any Holder or other selling
stockholder does not request inclusion of the maximum number of shares of
Registrable Securities and Other Shares allocated to him pursuant to the
above-described procedure, in which case the remaining portion of his allocation
shall be reallocated among those requesting Holders and other selling
stockholders whose allocations did not satisfy their requests pro rata on the
basis of the number of shares of Registrable Securities and Other Shares which
would be held by such Holders and other selling stockholders, assuming
conversion, and this procedure shall be repeated until all of the shares of
Registrable Securities and Other Shares which may be included in the
registration on behalf of the Holders and other selling stockholders have been
so allocated. The Company shall not limit the number of Registrable Securities
to be included in a registration pursuant to this Agreement in order to include
shares held by stockholders with no registration rights or to include shares of
stock issued to employees, officers, directors, or consultants pursuant to the
Company's stock option or similar compensation plan, or in the case of
registrations under Sections 1.3 or 1.6 hereof, in order to include in such
registration securities registered for the Company's own account.
1.14 Delay of Registration. No Holder shall have any right to take any
action to restrain, enjoin, or otherwise delay any registration as the result of
any controversy that might arise with respect to the interpretation or
implementation of this Article 1.
1.15 Termination of Registration Rights.
(a) Except as set forth in subparagraph (b) below, the right of any
Holder to request registration or inclusion in any registration pursuant to
Section 1.3, 1.4 or 1.6 shall terminate if all shares of Registrable
Securities held or entitled to be held upon conversion by such Holder may
immediately be sold under Rule 144 during any 90-day period.
(b) The provisions of subparagraph (a) above shall not apply to any
Holder who owns more than one percent (1%) of the Company's outstanding
stock until such time as such Holder owns less than one percent (1%) of the
outstanding stock of the Company.
14
2. COVENANTS OF THE COMPANY.
The Company hereby covenants and agrees as follows:
2.1 Basic Financial Information. The Company will furnish the following
reports to each Investor who, together with its Affiliates, owns at least twenty
percent (20%) of the original aggregate amount of shares of Common Stock (or
Warrants exercisable for such shares) issued or issuable upon exercise of the
Warrants (each a "Significant Holder"):
------------------
(a) As soon as practicable, and in any event, within ninety (90) days
after the end of each fiscal year of the Company, a consolidated balance
sheet of the Company and its subsidiaries, if any, as at the end of such
fiscal year, and consolidated statements of income and cash flows of the
Company and its subsidiaries, if any, for such year, prepared in accordance
with generally accepted accounting principles consistently applied and
certified by independent public accountants of recognized national standing
selected by the Company.
(b) As soon as practicable, and in any event, within forty-five (45)
days after the end of the first, second, and third quarterly accounting
periods in each fiscal year of the Company, a consolidated balance sheet of
the Company and its subsidiaries, if any, as of the end of each such
period, and consolidated statements of income and cash flows of the Company
and its subsidiaries, if any, for such period and for the current fiscal
year to date, prepared in accordance with generally accepted accounting
principles consistently applied and setting forth in comparative form the
figures for the corresponding periods of the previous fiscal year, subject
to changes resulting from normal year-end audit adjustments, except that
such financial statements need not contain the notes required by generally
accepted accounting principles.
2.2 Additional Information and Rights.
(a) The Company will deliver the reports and information described
below in this Section 2.2 to each Significant Holder:
(i) As soon as practical after the end of each month and in any
event within thirty (30) days thereafter, a consolidated balance sheet
of the Company and its subsidiaries, if any, as at the end of such
month and consolidated statements of income and cash flows of the
Company and its subsidiaries, for each month and for the current
fiscal year of the Company to date, all subject to normal year-end
audit adjustments, prepared in accordance with generally accepted
accounting principles consistently applied, together with a comparison
of such statements to the corresponding periods of the prior fiscal
year, subject to changes resulting from normal year-end audit
adjustments, except that such financial statements need not contain
the notes required by generally accepted accounting principles.
(ii) Annually (and in any event no later than ten (10) days after
adoption by the Board of Directors of the Company) the budget of the
Company, in the form approved by its Board of Directors, which
operating plan shall include at
15
least a projection of income and a projected cash flow statement for
each fiscal quarter in such fiscal year and a projected balance sheet
as of the end of each fiscal quarter in such fiscal year (the
"Budget").
------
(iii) With reasonable promptness, all press releases issued by
the Company or any subsidiary, any filings made with the Commission by
the Company or any subsidiary, and such other data and information as
from time to time may be reasonably requested by any Significant
Holder or such other data as the Company may from time to time furnish
to any of the holders of its securities.
(b) The provisions of Section 2.1 and this Section 2.2 shall not be
in limitation of any rights which any Investor or Significant Holder may
have with respect to the books and records of the Company and its
subsidiaries, or to inspect their properties or discuss their affairs,
finances and accounts, under the laws of the jurisdictions in which they
are incorporated.
(c) Anything in Article 2 to the contrary notwithstanding, no
Investor by reason of this Agreement shall have access to any trade secrets
or classified information of the Company. Each Investor hereby agrees to
hold in confidence and trust and not to misuse or disclose any confidential
information provided pursuant to this Section 2.2. The Company shall not be
required to comply with this Section 2.2 in respect of any Investor whom
the Company reasonably determines to be, directly or indirectly, a
competitor or an officer, employee or director or greater than fifteen
percent (15%) stockholder of a competitor.
(d) In lieu of the financial information required pursuant to Section
2.1, copies of the Company's annual reports on Form 10-K and its quarterly
reports on Form 1O-Q, respectively, may be provided to the Significant
Holders.
2.3 Form S-3 Eligibility. The Company shall use its best efforts to
maintain its qualification for registration on Form S-3 or any comparable or
successor form or forms.
2.4 Maintaining Records; Access to Properties and Inspections. The Company
will keep, and will cause its Subsidiaries to keep, financial records in
accordance with generally accepted practices and, upon reasonable prior notice,
at all reasonable times and as often as a Significant Holder may reasonably
request, permit any authorized representative designated by any Significant
Holder to visit and inspect the financial records and the properties of the
Company and its Subsidiaries at reasonable times during normal business hours
and as often as reasonably requested and to make extracts from and copies of
such financial records, and permit any representatives designated by a
Significant Holder to discuss the affairs, finances and condition of the Company
and its Subsidiaries with the officers thereof and independent accountants
therefor.
2.5 Board Materials and Rights.
(a) The Company shall provide to each Significant Holder written
notice of each regular meeting of the Company's board of directors at least 30
days in advance of such
16
meeting and prior written notice of each special meeting of the Company's board
of directors on the date on which the members of the board of directors are
notified of such meeting. In addition, the Company will send each Significant
Holder copies of all reports and materials provided to the members of the board
of directors at meetings or otherwise.
(b) From and after such time as the Notes and all expenses and other
amounts payable under the Purchase Documents have been paid in full, the Company
shall permit one authorized representative of the Investors (and their
successors) to attend and participate (without the right to vote) in all
meetings of its board of directors and any committee thereof, whether in person,
by telephone or otherwise, and shall provide such representative with such
notice and other information with respect to such meetings as are delivered to
the directors of the Company. The Company shall pay such representative's
reasonable travel expenses (including, without limitation, the cost of airfare,
meals and lodging) in connection with the attendance of such meetings.
2.6 Reservation of Shares. So long as any Warrants are outstanding, the
Company shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of issuance upon the
exercise of the Warrants, such number of shares of Common Stock issuable upon
the exercise of all outstanding Warrants. All shares of Common Stock which are
so issuable shall be, when issued, duly and validly issued, fully paid and
nonassessable and free from all taxes, Liens and charges. The Company shall take
all such action as may be reasonably necessary to assure that all such shares of
Common Stock may be so issued without violation of any applicable law or
governmental regulation or any requirements of any domestic securities exchange
upon which shares of Common Stock may be listed (except for official notice of
issuance which shall be immediately transmitted by the Company upon issuance).
2.7 Replacement of Warrants. So long as any Warrants are outstanding, the
Company shall perform all acts required under the Warrants, including the
re-issuance or replacement of Warrants to any of the Investors upon transfer,
exchange, loss or destruction thereof (upon provision of reasonable
indemnification).
2.8 Amendment of Charter Documents. The Company shall not, nor shall it
allow any of its Subsidiaries, to amend any provision of, or add any provision
to, their respective Charter Documents or Bylaws, without the consent of the
Investors, provided that such documents may be amended without the consent of
the Investors only in a manner that affects all members of a class in the same
fashion.
2.9 Further Assurances. The Company will execute, and will cause its
Subsidiaries to execute, any and all further documents, agreements and
instruments, and take all further action that may be required under applicable
law, or that any Investor may reasonably request, in order to effectuate the
transactions contemplated hereby. The Company shall deliver or cause to be
delivered to the Investors all such instruments and documents (including legal
opinions) as any Investor may reasonably request to evidence compliance with
this Section.
2.10 Termination. The provisions of this Section 2 (other than Sections 2.6
and 2.7)
17
shall terminate at such time as the Investors own less than twenty-five percent
(25%) of the original aggregate amount of shares of Common Stock (or Warrants
exercisable for such shares) issued or issuable upon exercise of the Warrants.
In addition, the provisions of Section 2.5 shall terminate at such time as the
number of shares of Common Stock issued or issuable in respect of any Warrant
held by the Investors is less than five percent (5%) of the fully diluted shares
of Common Stock then outstanding.
3. PRE-EMPTIVE RIGHTS.
3.1 Right of First Refusal. The Company hereby grants to each Investor who
owns any shares of Common Stock issued or issuable upon exercise of the Warrant
the right of first refusal to purchase a pro rata share of New Securities (as
defined in this Section 3.1) which the Company may, from time to time, propose
to sell and issue. An Investor's pro rata share, for purposes of this right of
first refusal, is (i) the ratio of the number of shares of Common Stock issued
or issuable upon exercise of the Warrants held by such Investor to the total
number of shares of Common Stock issued or issuable upon exercise of the Warrant
(ii) multiplied by the Warrant Percentage. For purposes of this Agreement, the
"Warrant Percentage" is defined as the ratio of the total number of shares of
------------------
Common Stock issued or issuable upon conversion of the Warrant to the extent
such Warrant or such shares of Common Stock are then outstanding divided by the
total outstanding Common Stock, on an as-converted, fully-diluted basis
calculated using the Treasury Stock Method. Each Investor shall have a right of
over-allotment such that if any Investor fails to exercise its right hereunder
to purchase its pro rata share of New Securities, the other Investors may
purchase the non-purchasing Investor's portion on a pro rata basis within ten
(10) days from the date such non-purchasing Investor fails to exercise its right
hereunder to purchase its pro rata share of New Securities. This right of first
refusal shall be subject to the following provisions:
(a) "New Securities" shall mean any capital stock (including Common
--------------
Stock and/or Preferred Stock) of the Company whether now authorized or not, and
rights, options or warrants to purchase such capital stock, and securities of
any type whatsoever that are, or may become, convertible into capital stock;
provided, that, the term "New Securities" does not include (i) securities issued
-------- ----
pursuant to the Warrant; (ii) securities issued pursuant to the acquisition of
another business entity or business segment of any such entity by the Company by
merger, purchase of substantially all the assets or other reorganization whereby
the Company will own more than fifty percent (50%) of the voting power of such
business entity or business segment of any such entity; (iii) any borrowings,
direct or indirect, from financial institutions or other persons by the Company,
whether or not presently authorized, including any type of loan or payment
evidenced by any type of debt instrument; (iv) securities issued to employees,
consultants, officers, directors or agents of the Company pursuant to any stock
option, stock purchase or stock bonus plan, agreement or arrangement approved by
the Board of Directors at any time; (v) securities issued to vendors or
customers or to other persons in similar commercial situations with the Company
if such issuance is approved by the Board of Directors; (vi) securities issued
in connection with obtaining lease financing, whether issued to a lessor,
guarantor or other person; (vii) securities issued in a public offering pursuant
to a registration under the Securities Act; (viii) securities issued in
connection with any stock split, stock dividend or recapitalization of the
Company; (ix) securities issued in connection with corporate
18
partnering transactions on terms approved by the Board of Directors; and (x) any
right, option or warrant to acquire any security convertible into the securities
excluded from the definition of New Securities pursuant to subsections (i)
through (ix) above.
(b) In the event the Company proposes to undertake an issuance of New
Securities, it shall give each Investor written notice of its intention,
describing the type of New Securities, and their price and the general terms
upon which the Company proposes to issue the same. Each Investor shall have
twenty (20) days after any such notice is mailed or delivered to agree to
purchase such Investor's pro rata share of such New Securities for the price and
upon the terms specified in the notice by giving written notice to the Company
and stating therein the quantity of New Securities to be purchased.
(c) In the event the Investors fail to exercise fully the right of
first refusal within such 20-day period and after the expiration of the 10-day
period for the exercise of the over-allotment provisions of this Section 3.1,
the Company shall have ninety (90) days thereafter to sell or enter into an
agreement (pursuant to which the sale of New Securities covered thereby shall be
closed, if at all, within ninety (90) days from the date of said agreement) to
sell the New Securities respecting which the Investors' right of first refusal
option set forth in this Section 3.1 was not exercised, at a price and upon
terms no more favorable to the purchasers thereof than specified in the
Company's notice to Investors pursuant to Section 3.1(b). In the event the
Company has not sold within such ninety (90) day period or sold and issued New
Securities in accordance with the foregoing within 90 days from the date of such
agreement, the Company shall not thereafter issue or sell any New Securities,
without first again offering such securities to the Investors in the manner
provided in Section 3.1(b) above.
(d) The right of first refusal granted under this Agreement shall
expire on February 8, 2003.
(e) The right of first refusal set forth in this Section 3.1 may not
be assigned or transferred, except that (i) such right is assignable by each
Investor to any Affiliate of such Investor, (ii) such right is assignable
between and among any of the Investors and (iii) such right is assignable to
each purchaser of Warrants or shares of Common Stock issued upon exercise of any
Warrants (other than a purchaser who acquired such shares of Common Stock in a
public offering or pursuant to Rule 144 or to a purchaser to whom an Investor's
rights under this Agreement are expressly not assigned).
4. MISCELLANEOUS.
4.1 Governing Law. This Agreement shall be governed in all respects by the
laws of the State of Delaware, without regard to its conflicts of laws
principles.
4.2 Successors and Assigns. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
This Agreement and the rights and obligations of an Investor hereunder shall
inure to the benefit of each purchaser of Warrants or shares of Common Stock
issued upon exercise of any Warrants (other than a purchaser who acquired such
shares of Common Stock in a public offering or pursuant to Rule 144 or to a
19
purchaser to whom an Investor's rights under this Agreement are expressly not
assigned), who shall be deemed an Investor under this Agreement.
4.3 Entire Agreement; Amendment; Waiver. This Agreement (including the
Exhibits hereto) constitutes the full and entire understanding and agreement
between the parties with regard to the subjects hereof. Neither this Agreement
nor any term hereof may be amended, waived, discharged or terminated, except by
a written instrument signed by the Company and the Investors holding a majority
of the shares of Common Stock (or Warrants exercisable for such shares) issued
or issuable upon exercise of the Warrants and any such amendment, waiver,
discharge or termination shall be binding on all the Investors.
4.4 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by United States
first-class mail, postage prepaid, sent by facsimile or electronic transmission
or delivered personally by hand or nationally recognized courier addressed (a)
if to an Investor, as indicated on the list of Investors attached hereto as
Exhibit A, or at such other address, e-mail address or facsimile number as such
holder or permitted assignee shall have furnished to the Company in writing, or
(b) if to the Company, at such address, e-mail address or facsimile number as
the Company shall have furnished to each Investor in writing. All such notices
and other written communications shall be effective on the date of mailing,
confirmed facsimile transfer or electronic transmission or delivery.
4.5 Delays or Omissions. No delay or omission to exercise any right, power
or remedy accruing to any Investor, upon any breach or default of the Company
under this Agreement shall impair any such right, power or remedy of such
Investor nor shall it be construed to be a waiver of any such breach or default,
or an acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default therefore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any
Investor of any breach or default under this Agreement or any waiver on the part
of any Investor of any provisions or conditions of this Agreement must be made
in writing and shall be effective only to the extent specifically set forth in
such writing. All remedies, either under this Agreement or by law or otherwise
afforded to any Investor, shall be cumulative and not alternative.
4.6 Rights; Separability. Unless otherwise expressly provided herein, an
Investor's rights hereunder are several rights, not rights jointly held with any
of the other Investors. In case any provision of the 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.
4.7 Information Confidential. Each Investor acknowledges that the
information received pursuant hereto may be confidential and for its use only,
and it will not use such confidential information in violation of the Exchange
Act or reproduce, disclose or disseminate such information to any other person
(other than its or its Affiliate's or subsidiaries' employees or agents having a
need to know the contents of such information, and its or its Affiliate's or
subsidiaries' attorneys), except in connection with the exercise of rights under
this Agreement and the other Purchase Documents, unless the Company has made
such information available to
20
the public generally or such Investor is required to disclose such information
by a governmental body.
4.8 Titles and Subtitles; Counterparts. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing or interpreting this Agreement. This
Agreement may be executed in any number of counterparts, each of which shall be
deemed to be an original, and all of which together shall constitute one and the
same document. Each party to this Agreement agrees that it will be bound by its
own facsimile signature and that it accepts the facsimile signature of each
other party.
(signatures on next page)
21
IN WITNESS WHEREOF, the parties hereto have executed this Investors' Rights
Agreement effective as of the day and year first above written.
COMPANY:
ENCORE MEDICAL CORPORATION
By: /s/ Xxxxx Xxxxxxxxx
-----------------------------------
Name:_________________________________
Title:________________________________
INVESTORS:
CAPITALSOURCE HOLDINGS LLC
By: /s/ Xxxxxx X. Xxxxxxx
----------------------------------
Name: Xxxxxx X. Xxxxxxx
--------------------------------
Title: Sr. Vice President
-------------------------------
22
EXHIBIT A
INVESTOR NOTICE PROVISIONS
--------------------------
CapitalSource Holdings LLC
0000 Xxxxxxx Xxxxxx, 00/xx/ Xxxxx
Xxxxx Xxxxx, XX 00000
Attention: Corporate Finance Group, Portfolio Manager
Telephone: (000) 000-0000
FAX: (000) 000-0000
E-Mail: xxxxxxx@xxxxxxxxxxxxx.xxx
23
