Exhibit C
Form of Investor Rights Agreement
NEOPATH, INC.
Investor Rights Agreement
Dated
as of
February 8, 1999
CONTENTS
________
1. Certain Definitions 1
2. Shelf Registration 2
3. Expenses of Registration 2
4. Obligations of the Company 2
5. Information by Investors 3
6. Indemnification and Contribution 4
7. Delay of Registration 6
8. Assignment of Registration Rights 7
9. Termination of Registration Rights 7
10. Notices 7
11. Amendments and Waivers 8
12. Severability 8
13. Entire Agreement; Governing Law 8
14. Counterparts 8
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INVESTOR RIGHTS AGREEMENT
INVESTOR RIGHTS AGREEMENT, dated as of February 8, 1999,
by and among NEOPATH, INC., a Washington corporation (the
"Company"), and the parties listed on Schedule A hereto, as at
any time amended (the "Investors").
Recitals
A. Pursuant to a Common Stock Purchase Agreement, dated
as of February 8 1999 (the "Purchase Agreement"), the Company
has agreed to issue and sell shares of its common stock, par
value $.01 per share (the "Common Stock") (collectively, the
"Initial Investors").
B. The execution of this Agreement by the parties
hereto is a condition to the obligation of each Investor to
purchase the Common Stock.
C. The Company and the Investors desire to enter into
this Agreement to facilitate the purchase and sale of the
Common Stock.
Agreement
1. Certain Definitions
As used in this Agreement, the following terms not
otherwise defined in this Agreement shall have the following
respective meanings:
"Closing Date" shall mean the date of closing of the
issuance and sale of the Shares from the Company to the
Investors as provided in the Purchase Agreement.
"Commission" shall mean the United States Securities and
Exchange Commission.
"Shelf Period" shall mean the period commencing on the
date of effectiveness of the registration statement filed in
accordance with Section 2 hereof and ending on the date two
years from the Closing Date.
"The terms "register," "registered" and "registration"
refer to a registration effected by preparing and filing a
registration statement with the Commission in compliance with
the Securities Act of 1933, as amended (the "Securities Act"),
and the declaration or ordering of the effectiveness of such
registration statement.
"Registrable Securities" shall mean the Shares; provided,
however, that Shares shall cease to be treated as Registrable
Securities at such time as they (i) have been sold pursuant to
an effective registration statement under the Securities Act
or (ii) have otherwise been sold or transferred to or through
a broker, dealer or underwriter in a public distribution or a
public securities transaction.
"Registration Expenses" shall mean all expenses, except
as stated in the definition of Selling Expenses, incurred by
the Company in complying with this Agreement, including,
without limitation, all registration, qualification and filing
fees, printing expenses, escrow fees, fees and disbursements
of counsel for the Company and of one special counsel to the
Investors per registration statement, and blue sky fees and
expenses.
"Selling Expenses" shall mean all underwriting discounts,
selling commissions and stock transfer taxes applicable to the
sale of the Registrable Securities by the Investors.
"Shares" shall mean the shares of Common Stock to be
issued and sold by the Company to the Investors in accordance
with the Purchase Agreement.
2. Shelf Registration
On or before the date ten days after the Closing Date,
the Company shall file a registration statement with the
Commission with respect to the registration of all the
Registrable Securities held by the Investors and shall use its
best efforts to have such registration statement declared
effective within 90 days of the Closing Date or as soon as
practicable thereafter. After the effective date of such
registration statement, the Company shall use its best efforts
to maintain the registration effective for the period that
ends upon the earliest of (i) the expiration of the Shelf
Period, (ii) the time at which all Shares (excluding any
Shares that cease to be Registrable Securities) have been sold
or distributed pursuant to such registration statement or
(iii) the date after which all Shares (excluding any Shares
that cease to be Registrable Securities) may be sold in a
single transaction without registration in reliance on
Rule 144 under the Securities Act. Without intending in any
manner to diminish the obligations of the Company under
Section 4(b), if at any time during the Shelf Period the
Company notifies the Investors that there exists or may exist
material nonpublic information which must be disclosed in
order for the registration statement not to be false or
misleading, then the Company may require that no sales may be
made under the registration statement until such time as
disclosure is made or the Company determines that disclosure
is not necessary; provided, however, that the aggregate period
of time during which sales may not be made as a result of the
Company's exercise of the foregoing right shall not exceed
120 days during the Shelf Period. The Company shall use its
best efforts to cause any required disclosure to be made as
soon as practicable.
3. Expenses of Registration
All Registration Expenses shall be borne by the Company.
All Selling Expenses relating to Registrable Securities
registered on behalf of each Investor shall be borne by such
Investor on the basis of the number of shares of Common Stock
registered and sold.
4. Obligations of the Company
When required under Section 2 hereof to effect the
registration of any Registrable Securities, the Company shall,
as expeditiously as reasonably possible:
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(a) Prepare and file with the Commission a registration
statement with respect to such Registrable Securities and use
best efforts to cause such registration statement to become
and remain effective at the times and for the periods provided
in this Agreement.
(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 to the Investors 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 all securities covered by such
registration statement.
(d) Use reasonable efforts to register and qualify the
securities covered by such registration statement under such
state securities or blue sky laws as shall be reasonably
requested by the Investors, 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.
(e) 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(s) of such offering. Each Investor participating
in such registration shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Investor of Registrable Securities
covered by such registration statement, during the time when a
prospectus relating thereto covered by such registration
statement 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 in
the light of the circumstances then existing and, at the
request of any selling Investor, promptly furnish to all the
selling Investors 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 selling
Investors, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact
required to be stated therein necessary to make the statements
therein not misleading in the light of the circumstances under
which they were made.
5. Information by Investors
Each Investor shall furnish to the Company such
information regarding itself, the Registrable Securities it
holds and the distribution proposed by it as the Company may
reasonably request in writing and as shall be required in
connection with any registration, qualification or compliance
referred to in this Agreement.
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6. Indemnification and Contribution
(a) Indemnification by the Company. Upon the
registration of Registrable Securities, the Company shall
indemnify and hold harmless the Investors and each
underwriter, selling agent or other securities professional,
if any, that facilitates the disposition of such Shares, and
each of their respective officers and directors and each
person who controls the Investors, underwriter, selling agent
or other securities professional within the meaning of Section
15 of the Securities Act or Section 20 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), against
any losses, claims, damages or liabilities, joint or several,
to which the Investors or such other persons may become
subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in any
registration statement under which the Registrable Securities
are to be registered under the Securities Act, or any
prospectus contained therein or furnished by the Company to
the Investors or other such person, or any amendment or
supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading, and the Company hereby
agrees to reimburse the Investors or other person for any
legal or other expenses reasonably incurred by them in
connection with investigating or defending any such action or
claim as such expenses are incurred; provided, however, that
the Company shall not be liable to the Investors or other
person in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement or
prospectus, or amendment or supplement, in reliance upon and
in conformity with written information furnished to the
Company by the Investors or such other person expressly for
use therein.
(b) Indemnification by the Investors. Each Investor
agrees, as a consequence of the inclusion of the Investor in
such registration, and each underwriter, selling agent or
other securities professional, if any, which facilitates the
disposition of such Registrable Securities shall agree, as a
consequence of facilitating such disposition of Registrable
Securities, severally and not jointly, to (i) indemnify and
hold harmless the Company, its directors, officers who sign
any registration statement with respect to the Registrable
Securities and each person, if any, who controls the Company
within the meaning of either Section 15 of the Securities Act
or Section 20 of the Exchange Act, against any losses, claims,
damages or liabilities to which the Company or such other
persons may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or
are based upon an untrue statement or alleged untrue statement
of a material fact contained in such registration statement or
prospectus, or any amendment or supplement, or arise out of or
are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity
with written information furnished to the Company by the
Investor, underwriter, selling agent or other securities
professional expressly for use therein,
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and (ii) reimburse the Company for any legal or other expenses
reasonably incurred by the Company in connection with
investigating or defending any such action or claim as such
expenses are incurred.
(c) Notices of Claims, Etc. Promptly after receipt by
an indemnified party under subsection (a) or (b) above of
notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made
against an indemnifying party under this Section 6, notify
such indemnifying party in writing of the commencement
thereof; no indemnification provided for in subsection (a) or
(b) above with respect to such claim shall be available to any
party who shall fail to give notice as provided in this
subsection (c) if the party to whom notice was not given was
unaware of the proceeding to which such notice would have
related and was prejudiced by the failure to give such notice,
but the omission so to notify the indemnifying party shall not
relieve it from any liability which it may have to any
indemnified party otherwise than under this Section 6. In
case any such action shall be brought against any indemnified
party and it shall notify an indemnifying party of the
commencement thereof, such indemnifying party shall be
entitled to participate therein and, to the extent that it
shall wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel
to the indemnifying party), and, after notice from the
indemnifying party to such indemnified party of its election
so to assume the defense thereof, such indemnifying party
shall not be liable to such indemnified party under this
Section 6 for any legal expenses of other counsel or any other
expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof
other than reasonable costs of investigation, unless
representation of such indemnifying party and such indemnified
party by the same counsel would be inappropriate due to actual
or potential conflicting interests between such parties. No
indemnifying party shall, without the written consent of the
indemnified party, effect the settlement or compromise of, or
consent to the entry of any judgment with respect to, any
pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder
(whether or not the indemnified party is an actual or
potential party to such action or claim) unless such
settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does
not include a statement as to, or an admission of, fault,
culpability or a failure to act, by or on behalf of any
indemnified party.
(d) Contribution. If the indemnification provided for
in this Section 6 is unavailable to or insufficient to hold
harmless an indemnified party under subsection (a) or (b)
above in respect of any losses, claims, damages or liabilities
(or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of such losses,
claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative
fault of the indemnifying party and the indemnified party in
connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities (or actions in
respect thereof), as well as any other relevant equitable
considerations. The relative fault of such indemnifying party
and indemnified party shall be determined by reference to,
among other
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things, whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a
material fact relates to information supplied by such
indemnifying party or by such indemnified party, and the
parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 6(d) were
determined by pro rata allocation (even if the Investors or
any underwriters, selling agents or other securities
professionals or all of them were treated as one entity for
such purpose) or by any other method of allocation which does
not take account of the equitable considerations referred to
in this Section 6(d). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages
or liabilities (or actions in respect thereof) referred to
above shall be deemed to include any legal or other fees or
expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or
claim. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The obligations
of the Investors and any underwriters, selling agents or other
securities professionals in this Section 6(d) to contribute
shall be several in proportion to the number of shares of
Common Stock registered, underwritten, or sold as the case may
be, by them and not joint.
(e) Notwithstanding any other provision of this
Section 6, in no event will (i) any Investor be required to
undertake liability to any person under this Section 6 for any
amounts in excess of the dollar amount of the proceeds to be
received by the Investor from the sale of the Investor's
Registrable Securities (after deducting any fees, discounts
and commissions applicable thereto) pursuant to any
registration statement under which such Registrable Securities
are to be registered under the Securities Act and (ii) any
underwriter, selling agent or other securities professional be
required to undertake liability to any person hereunder for
any amounts in excess of the discount, commission or other
compensation payable to such underwriter, selling agent or
other securities professional with respect to the Registrable
Securities underwritten or sold by it.
(f) The obligations of the Company under this Section 6
shall be in addition to any liability which the Company may
otherwise have to the Investor, underwriter, selling agent or
other securities professional within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act, and
the obligations of the Investor or other such person under
this Section 6 shall be in addition to any liability which the
Investor or other person may otherwise have to the Company,
its directors, officers who sign any registration statement
with respect to the Registrable Securities and each person, if
any, who controls the Company within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange
Act. The remedies provided in this Section 6 are not
exclusive and shall not limit any rights or remedies which may
otherwise be available to an indemnified party at law or in
equity.
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7. Delay of Registration
No Investor shall have any right to obtain or seek an
injunction restraining or otherwise delaying any registration
as the result of any controversy that might arise with respect
to the interpretation or implementation of this Agreement.
8. Assignment of Registration Rights
The rights to cause the Company to register Registrable
Securities pursuant to this Agreement may be assigned by an
Investor to a transferee or assignee of such securities who
shall, upon such transfer or assignment, be deemed an
"Investor" under this Agreement; provided, however, that the
Company is, within a reasonable period of time after such
transfer, furnished with written notice of the name and
address of such transferee or assignee and the securities with
respect to which such registration rights are being assigned
and such transferee or assignee assumes the transferor's or
assignor's obligations under this Agreement; provided,
further, that such assignment shall be effective only if
immediately following such transfer the further disposition of
such securities by the transferee or assignee is restricted
under the Securities Act and that such transferee or assignee
is either (a) a partner or retired partner of any Investor
that is a partnership, (b) a member of the immediate family or
a trust for the benefit of any Investor that is an individual,
(c) an entity controlling, controlled by or under common
control with any Investor that is not an individual, or a
limited partner, general partner or other affiliate of an
Investor, (d) a constituent member of any Investor that is a
limited liability company or (e) a transferee of at least
500,000 shares of Common Stock (as adjusted for stock splits,
stock dividends, stock consolidations and the like).
9. Termination of Registration Rights
The registration rights granted pursuant to this
Agreement shall terminate as to all Investors on the second
anniversary of the Closing Date. In addition, such rights
shall terminate as to any Investor when all Registrable
Securities of such Investor have been sold or distributed or
when all Registrable Securities of such Investor may be sold
in a single transaction without registration in reliance on
Rule 144 under the Securities Act.
10. Notices
Unless otherwise provided, any notice desired or required
to be given hereunder shall be in writing given by personal
delivery or certified or registered mail, or confirmed
facsimile transmission, in any such case addressed or sent:
(a) if to the Company, with a copy to Xxxxxxx Coie, 0000 Xxxxx
Xxxxxx, 00xx Xxxxx, Xxxxxxx, XX 00000, Attn: Xxxxxxx X
Xxxxxxxxx, Facsimile: (000) 000-0000; (b) if to an Investor,
to the address or facsimile number listed on Exhibit A hereto;
or (c) to such other address or facsimile number as any party
shall have previously designated by such a notice. The
effective date of any notice or request shall be three days
from the date it is sent by the addresser with charges prepaid
so
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long as it is in fact received within five days, or when
successful transmission is confirmed if sent by facsimile, or
when personally delivered.
11. Amendments and Waivers
Any term of this Agreement may be amended and the
observance of any term may be waived (either generally or in a
particular instance and either retroactively or prospectively)
only with the written consent of the Company and the holders
of 75% of the Registrable Securities outstanding; provided any
adverse effect on any Investor affects all Investors equally.
12. Severability
If one or more provisions of this Agreement are held to
be unenforceable under applicable law, such provision shall be
excluded from this Agreement, and the balance of this
Agreement shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its
terms.
13. Entire Agreement; Governing Law
This Agreement constitutes the full and entire
understanding and agreement between the parties with respect
to the subject matter hereof and supersedes all prior
agreements with respect to the subject matter hereof. This
Agreement shall be governed by and construed under the laws of
the State of Washington as applied to agreements among
Washington residents entered into and to be performed entirely
within the State of Washington.
14. Counterparts
This Agreement may be executed and delivered (including
by facsimile transmission) in one or more counterparts, and by
the different parties hereto in separate counterparts, each of
which when executed and delivered shall be deemed to be an
original but all of which taken together shall constitute one
and the same agreement.
[remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
NEOPATH, INC.
By /s/ XXXX X. XXXXXX
__________________
Xxxx X. Xxxxxx
Chairman, President and
Chief Executive Officer
INVESTORS:
THE XXXXXXXX FUND, INC.
By /s/ XXXXXX XXXXX III
____________________
Its Health Care Analyst
CAPITAL RESEARCH AND MANAGEMENT
COMPANY ON BEHALF OF SMALLCAP WORLD
FUND, INC.
By /s/ XXXXXXX XXXXXX
__________________
Xxxxxxx X. Xxxxxx
Secretary
XXXXXXX CAPITAL GROUP, LLC, as
attorney-in-fact for each of the
Investors indicated on Exhibit A
hereto
By /s/ XXXXXX X. XXXXXXX
_____________________
Its Principal
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Exhibit A
Schedule of Investors
Name, Address and Facsimile Number Shares
__________________________________ ______
The Xxxxxxxx Fund, Inc. 1,821,000
00 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
FAX (000) 000-0000
Capital Research and 500,000
Management Company on behalf
of SmallCap World Fund, Inc.
000 Xxxxx Xxxx Xxxxxx
Xxx Xxxxxxx, XX 00000
FAX (000) 000-0000
Investors represented by
Xxxxxxx Capital Group, LLC
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
FAX (000) 000-0000
The Xxxxxxx Xxxxxx Foundation 7,000
Alza Corporation Retirement Plan 6,000
Xxxx Xxxxxx Foundation 6,000
The Xxxxxx Xxxxxxxx Family Trust 5,000
Xxxx X. & Xxxxxxxxx X. Xxxxxx 4,000
Xxxxxx X. Xxxxxx Employee
Investment Plan 60,000
The Xxxxx/Xxxxxxxx LLC 18,000
The Xxxxxx Investment
Partnership I, L.P. 4,000
Xxxxxxxx X. Legacy 6,000
NFIB Employee Pension Trust 12,000
NFIB Corporate Account 15,000
Norwalk Employees' Pension Plan 12,000
Public Employee Retirement
System of Idaho 120,000
Roanoke College 6,000
The A & JS Family LLC 11,000
City of Stamford Firemen's
Pension Fund 18,000
State of Oregon PERS/ZCG 240,000
Van Loben Sels Foundation 5,000
The A & SW Family LLC 12,000
Xxxxx Family LLC 6,000
Xxxxxxx Investment Partners LP 6,000
