EXHIBIT 10(f)
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INVESTOR RIGHTS AGREEMENT
DATED JULY 1, 1999
AMONG
HANGER ORTHOPEDIC GROUP, INC.
AND
CERTAIN OF ITS INVESTORS
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TABLE OF CONTENTS
PAGE
SECTION 1 DEFINITIONS..................................................... 1
SECTION 2 RIGHTS TO SUBSCRIBE FOR SECURITIES.............................. 2
SECTION 3 BOARD OF DIRECTORS.............................................. 3
SECTION 4 INFORMATION RIGHTS; COVENANTS................................... 4
SECTION 5 SHELF REGISTRATION.............................................. 6
SECTION 6 DEMAND REGISTRATION............................................. 7
SECTION 7 PIGGYBACK REGISTRATION.......................................... 9
SECTION 8 SHORT FORM REGISTRATIONS........................................ 9
SECTION 9 EXPENSES........................................................ 10
SECTION 10 PREPARATION AND FILING.......................................... 10
SECTION 11 INDEMNIFICATION................................................. 13
SECTION 12 UNDERWRITING AGREEMENT.......................................... 15
SECTION 13 INFORMATION BY INVESTOR......................................... 15
SECTION 14 EXCHANGE ACT COMPLIANCE......................................... 16
SECTION 15 NO CONFLICT OF RIGHTS........................................... 16
SECTION 16 MISCELLANEOUS................................................... 16
INVESTOR RIGHTS AGREEMENT dated
as of July 1, 1999, among HANGER
ORTHOPEDIC GROUP, INC., a Delaware
corporation (the "COMPANY"), and the
investors of the Company listed on
SCHEDULE I (together with their
successors, assigns and transferees,
the "INVESTORS").
Each Investor currently holds shares of the Company's 7% Redeemable
Preferred Stock. The parties hereto deem it to be in their best interests to
set forth their rights and obligations in connection with public offerings,
sales of shares of Common Stock and certain other duties of the Company to the
Investors. Accordingly, the parties agree as follows:
SECTION 1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings (capitalized terms used in this Agreement and not defined herein
shall have the meanings given to them in the Certificate of Designations):
"BOARD" means the Board of Directors of the Company.
"CERTIFICATE OF DESIGNATIONS" has the meaning given to it in the
Securities Purchase Agreement.
"CLOSING" has the meaning given to it in the Securities Purchase
Agreement.
"COMMISSION" has the meaning given to it in the Securities
Purchase Agreement.
"COMMON STOCK PERCENTAGE" means, with respect to any Investor, the
fraction, expressed as a percentage, the numerator of which is the total
number of Common Stock Equivalents held by such Investor and the denominator
of which is the total number of outstanding shares of Common Stock.
"INVESTORS" has the meaning given to it in the preamble to this
Agreement.
"NOTICE OF ACCEPTANCE" has the meaning given to it in Section
2(b).
"NYSE" means the New York Stock Exchange.
"OFFER" has the meaning given to it in Section 2(a).
"OFFER PERIOD" has the meaning given to it in Section 2(a).
"OFFERED SECURITIES" means (A) shares of Common Stock, (B) any
other equity security of the Company, (C) any debt security of the Company
which by its terms is convertible into or exchangeable for any equity security
of the Company or has an equity kicker or other participation rights, (D) any
security of the Company that is a combination of debt and equity or (E) any
option, warrant or other right to subscribe for, purchase or otherwise acquire
any equity security or any such debt security of the Company; PROVIDED that
Offered Securities shall not include (i) any Security that is issued in a
public offering that is registered under the Securities Act, (ii) any options
to acquire shares of Common Stock granted to employees, directors or
consultants of the Company or any Security issued upon exercise of any such
options or (iii) any Security issued as consideration in any acquisition of a
business..
"OTHER SHARES" means at any time those shares of Common Stock
which do not constitute Primary Shares or Restricted Shares.
"PRIMARY SHARES" means at any time the authorized but unissued
shares of Common Stock or shares of Common Stock held by the Company in its
treasury.
"REFUSED SECURITIES" has the meaning given to it in Section 2(d).
"RESTRICTED SHARES" means at any time, with respect to any
Investor, the shares of Common Stock held by such Investor.
"RULE 144" means Rule 144 promulgated under the Securities Act or
any successor rule thereto or any complementary rule thereto.
"RULE 144A" means Rule 144A promulgated under the Securities Act
or any successor rule thereto or any complementary rule thereto.
"SELLING INVESTOR" has the meaning given to it in Section 10(b).
"SELLING INVESTORS' COUNSEL" has the meaning given to it in
Section 10(b).
SECTION 2. RIGHTS TO SUBSCRIBE FOR SECURITIES.
(a) The Company shall not issue, sell or exchange, or agree to issue,
sell or exchange, any Offered Securities unless the Company shall have first
offered to sell to each Investor up to such Investor's Common Stock Percentage
of such Offered Securities, at a price and on such other terms as shall have
been specified by the Company in writing delivered to the Investors (the
"OFFER"), which Offer by its terms shall remain open for a period of 15
business days from the date it is delivered by the Company (the "OFFER
PERIOD"). The rights of the Investors to subscribe for Offered Securities
pursuant to this Section are assignable to any other Investor or any Affiliate
of any Investors.
(b) Notice of any Investors 's intention to accept, in whole or in part,
an Offer shall be evidenced by a writing signed by such Investor and delivered
to the Company prior to the end of the Offer Period, setting forth such
portion of the Offered Securities as such Investor elects to purchase (the
"NOTICE OF ACCEPTANCE"); PROVIDED, HOWEVER, that if such Investor exercises
its rights under this Section 2, such Investor must purchase a ratable portion
of each class of the Offered Securities (if more than one class is offered).
Within 20 days after receipt by the Company of such Notices of Acceptance, the
Company shall sell and each Investor shall purchase the Offered Securities in
respect of which such Investor's Notice of Acceptance was delivered, upon the
terms and conditions of the Offer.
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(c) In the event the Company materially amends the terms of the Offer at
any time, the Offer Period shall be extended for a period of not less than 10
business days (or 48 hours if the amendment relates solely to the price of the
Offer or the number of shares to be sold in the Offer, in each case based
solely on the closing price of the shares of Common Stock as quoted by the
NYSE).
(d) In the event that Notices of Acceptance are not given by the
Investors in respect of all the Offered Securities, the Company shall have 90
days from the expiration of the Offer Period to sell all or any part of such
Offered Securities as to which Notices of Acceptance have not been given (the
"REFUSED SECURITIES") to any other Person(s), but only upon terms and
conditions in all respects, including, without limitation, unit price and
interest rates, which are no more favorable, in the aggregate, to such other
Person(s) or less favorable, in the aggregate, to the Company than those set
forth in the Offer.
(e) In each case, any Offered Securities not purchased by the Investors
or any other Person(s) in accordance with Sections 2(b) and 2(d) may not be
sold or otherwise disposed of until they are again offered to the Investors
under the procedures specified in this Section 2.
SECTION 3. BOARD OF DIRECTORS.
(a) The Investors shall have the right to designate persons who shall be
observers, and shall be entitled to be present, at each meeting of the Board
(the "BOARD OBSERVERS"). The number of Board Observers that the Investors
shall be entitled to designate shall equal the greater of (i) one and (ii)
such number as would represent as a percentage of the number of directors
constituting the entire Board, the aggregate Common Stock Percentage of all
Investors.
(b) The Investors may designate the Board Observers at a meeting (by a
vote of a majority of the Investors present provided that a quorum exists) or
by delivering a notice to the Corporation signed by the Requisite Senior
Holders. At any meeting held for the purpose of designating the Board
Observers, the presence, in person or by proxy, of the holders of a majority
of the number of shares of Senior Preferred Stock at the time outstanding
shall be required to constitute a quorum of such class to designate the Board
Observers.
(c) Upon delivery of a written request by any Investor, the President,
any Vice President, the Secretary or any Assistant Secretary of the
Corporation shall call a special meeting of the Investors. Such meeting shall
be held at the earliest practicable date at the principal executive office of
this Corporation or at such other location as the Investors submitting a
written request shall designate.
(d) The Board Observers will have the right to attend each meeting of
the Board and at least one of such observers shall be entitled to attend each
meeting of each committee of the Board. Any such attendance may be
teleconference. No meeting of the Board or any committee thereof may be
conducted by teleconference if all participants therein cannot hear all other
participants. The Company shall provide the Board Observers with (i) copies of
all actions taken by written consent of the Board and/or any committee thereof
promptly after the execution thereof, (ii) simultaneously with any
distribution to directors of the Company or any members of any committee of
the Board, copies of all materials that are distributed to such directors or
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members (including requests for actions by written consent) and (iii) written
notice at least one week prior to any meeting of the Board or any committee of
the Board that such Board Observer is entitled to attend.
(e) The Company shall reimburse each observer designated by the
Investors for all out-of-pocket expenses incurred in connection with or
relating to any meeting of the Board or any committee thereof.
SECTION 4. INFORMATION RIGHTS; COVENANTS.
(a) ACCESS TO RECORDS. The Company shall, and shall cause each
Subsidiary to, afford to the Investors, the Affiliates of the Investors and
each of their respective officers, employees, advisors, counsel and other
authorized representatives (collectively with the Affiliates of the Investors,
the "REPRESENTATIVES"), during normal business hours, reasonable access, upon
reasonable advance notice, to all of the books, records and properties of the
Company and such Subsidiary and all officers and employees of the Company and
such Subsidiary.
(b) FINANCIAL REPORTS. The Company shall furnish each Investor with the
following:
(i) MONTHLY REPORTS. As soon as available, but not later than 30
days after the end of each fiscal month, a consolidated balance sheet of
the Company as of the end of such period and consolidated statements of
income of the Company for such period and for the period commencing at
the end of the previous fiscal year and ending with the end of such
period, setting forth in each case in comparative form the corresponding
figures for the corresponding period of the preceding fiscal year, and
including comparisons to the budget or business plan and an analysis of
the variances from the budget or plan, all prepared in accordance with
generally accepted accounting principles consistently applied (except
for the absence of footnotes and year-end adjustments).
(ii) QUARTERLY REPORTS. As soon as available, but not later than
45 days after the end of each quarterly accounting period, (A) a
consolidated balance sheet of the Company as of the end of such period
and consolidated statements of income, cash flows and changes in
stockholders' equity for such quarterly accounting period and for the
period commencing at the end of the previous fiscal year and ending with
the end of such period, setting forth in each case in comparative form
the corresponding figures for the corresponding period of the preceding
fiscal year, and including comparisons to the budget or business plan
and an analysis of the variances from the budget or plan, all prepared
in accordance with generally accepted accounting principals consistently
applies and (B) a report by management of the Company of the operating
and financial highlights of the Company and its Subsidiaries for such
period, which shall include (x) a comparison between operating and
financial results and budget and (y) an analysis of the operations of
the Company and its Subsidiaries for such period.
(iii) ANNUAL AUDIT. As soon as available, but not later than 90
days after the end of each fiscal year of the Company, audited
consolidated financial statements of the Company, which shall include
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statements of income, cash flows and changes in Investors' equity for
such fiscal year and a balance sheet as of the last day thereof, each
prepared in accordance with generally accepted accounting principles,
consistently applied, and accompanied by the report of a "Big 5" firm of
independent certified public accountants selected by the Board (the
"ACCOUNTANTS"). The Company and its Subsidiaries shall maintain a system
of accounting sufficient to enable its Accountants to render the report
referred to in this Section 4.
(iv) BUDGETS. As soon as available, but not more than 90 days
after the commencement of each new fiscal year, a business plan and
projected financial statements for such new fiscal year.
(v) MISCELLANEOUS. Promptly upon becoming available, the Company
shall provide to each Investor:
(A) copies of all financial statements, reports, press
releases, notices, proxy statements and other documents sent by
the Company or its Subsidiaries to its Investors generally or
released to the public and copies of all regular and periodic
reports, if any, filed by the Company or its Subsidiaries with the
Commission, any securities exchange or the NASD;
(B) notification in writing of any litigation or
governmental proceeding in which it or any of its Subsidiaries is
involved and which might, if determined adversely, materially and
adversely effect the Company or any of its Subsidiaries;
(C) notification in writing of the existence of any default
under any material agreement or instrument to which the Company or
any of its Subsidiaries is a party or by which any of their assets
are bound;
(D) copies of the minutes and actions by written consent of
the board of directors of the Company;
(E) upon request, copies of all reports prepared for or
delivered to the management of the Company or its Subsidiaries by
its accountants; and
(F) upon request, any other routinely collected financial or
other information available to management of the Company or its
subsidiaries (including, without limitation, routinely collected
statistical data).
(c) COMPLIANCE WITH INDENTURE. So long as any shares of Senior
Preferred Stock are outstanding, the Company will comply and perform all
obligations under SECTION 5.04, SECTION 5.05, SECTION 5.06, the first
sentence of SECTION 5.07, the first sentence of SECTION 5.09, SECTION
5.10 AND SECTION 6.10 of the Credit Agreement.
(d) NO CONFLICTING AGREEMENTS. Neither the Company nor shall the
Company permit any of its Subsidiaries to enter into any agreement
containing any provision which would (i) be violated or breached by the
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exercise or performance by Company or its Subsidiary of any of their
respective rights or obligations under any Related Document, (ii) impair
in any material respect the ability of the Company or any Subsidiary to
comply with the terms of the Documents or (iii) prohibit a wholly- owned
Subsidiary from paying dividends or making other distributions..
SECTION 5. SHELF REGISTRATION.
(a) Prior to the Actual Conversion Date for any conversion at the option
of the Company, the Company shall file with the Commission a Registration
Statement for an offering to be made on a continuous basis pursuant to Rule
415 covering all of the Restricted Shares (the "INITIAL SHELF REGISTRATION").
The Company shall use its best efforts to file with the Commission the Initial
Shelf Registration at least 60 days prior to the Actual Conversion Date for
any conversion at the option of the Company. The Initial Shelf Registration
shall be on Form S-1 or another appropriate form permitting registration of
such Restricted Shares for resale by the Investors in the manner or manners
designated by them (including, without limitation, one underwritten offering).
The Issuers shall not permit any securities other than the Restricted Shares
to be included in the Initial Shelf Registration or any Subsequent Shelf
Registration (as defined below).
The Company shall, subject to applicable Law or applicable
interpretations of the staff of the Commission, use its best efforts to cause
the Initial Shelf Registration to be declared effective under the Securities
Act on or prior to the Actual Conversion Date for any conversion at the option
of the Company and to keep the Initial Shelf Registration continuously
effective under the Securities Act until the date which is two years from such
Actual Conversion Date or such shorter period ending when (i) all Restricted
Shares covered by the Initial Shelf Registration have been sold in the manner
set forth and as contemplate in the Initial Shelf Registration or cease to be
outstanding or (ii) a Subsequent Shelf Registration covering all of the
Restricted Shares covered by and not sold under the Initial Shelf Registration
or an earlier Subsequent Shelf Registration has been declared effective under
the Securities Act (the "EFFECTIVENESS PERIOD"), PROVIDED, HOWEVER, that the
Effectiveness Period in respect of the Initial Shelf Registration shall be
extended to the extent required to permit dealers to comply with the
applicable prospectus delivery requirements of Rule 174 under the Securities
Act and as otherwise provided herein.
No Investor may include any of its Restricted Shares in any Shelf
Registration Statement pursuant to this Agreement unless and until such
Investor furnishes to the Company in writing, within 15 business days after
receipt of a request therefor, such information concerning such Investor
required to be included in any Shelf Registration Statement or Prospectus or
preliminary prospectus included therein. Each holder of Restricted Shares as
to which any Shelf Registration Statement is being effected agrees to furnish
promptly to the Company all information required to be disclosed in order to
make information previously furnished to the Company by such Investor not
materially misleading.
(b) SUBSEQUENT SHELF REGISTRATION. If the Initial Shelf Registration or
any Subsequent Shelf Registration ceases to be effective for any reason at any
time during the Effectiveness Period (other than because of the sale of all of
the securities registered thereunder), the Company shall use its best efforts
to obtain the prompt withdrawal of any order suspending the effectiveness
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thereof, and in any event shall within 45 days of such cessation of
effectiveness use their best efforts to amend the Initial Shelf Registration
in a manner to obtain the withdrawal of the order suspending the effectiveness
thereof, or file an additional "shelf" Registration Statement pursuant to Rule
415 covering all of the Restricted Shares covered by and not sold under the
Initial Shelf Registration or an earlier Subsequent Shelf Registration (each,
a "SUBSEQUENT SHELF REGISTRATION"). If a Subsequent Shelf Registration is
filed, the Company shall use its best efforts to cause the Subsequent Shelf
Registration to be declared effective under the Securities Act as soon as
practicable after such filing and to keep such subsequent Shelf Registration
continuously effective for a period equal to the number of days in the
Effectiveness Period less the aggregate number of days during which the
Initial Shelf Registration or any Subsequent Shelf Registration was previously
continuously effective. As used herein the term "SHELF REGISTRATION" means the
Initial Shelf Registration and any Subsequent Shelf Registration.
(c) SUPPLEMENTS AND AMENDMENTS. The Company shall promptly supplement
and amend any Shelf Registration if required by the rules, regulations or
instructions applicable to the registration form used for such Shelf
Registration, if required by the Securities Act, or if reasonably requested by
the Investors or by any underwriter of such Restricted Shares.
(d) SUSPENSION OF SHELF REGISTRATION STATEMENT. The Company's obligation
to keep the Shelf Registration Statement effective and usable for offers and
sales of the Registrable Securities may be suspended by the Company in good
faith for valid business reasons, including, without limitation, a pending
acquisition or divestiture of assets. Any such period during which the Company
fails to keep the Shelf Registration Statement effective and usable for offers
and sales of Restricted Securities is referred to as a "Suspension Period." A
Suspension Period shall commence on and include the date that the Company
gives notice that the Shelf Registration Statement is no longer effective or
the prospectus included therein is not longer usable for offers and sales of
the Restricted Securities and shall end on the date when each Investor covered
by such registration statement either receives the copies of the supplemented
or amended prospectus or is advised in writing by the Company that the use of
the prospectus may be resumed; PROVIDED that the aggregate of all Suspension
Periods shall not exceed 90 days in any period of 365 consecutive days.
SECTION 6. DEMAND REGISTRATION.
(a) If at any time after the third anniversary of the date hereof the
Company shall be requested by the Requisite Senior Holders to effect a
registration under the Securities Act of Restricted Shares in accordance with
this Section, then the Company shall promptly give written notice of such
proposed registration to all holders of Restricted Shares and shall offer to
include in such proposed registration any Restricted Shares requested to be
included in such proposed registration by such holders who respond in writing
to the Company's notice within 15 days after delivery of such notice (which
response shall specify the number of Restricted Shares proposed to be included
in such registration and the intended method of distribution, which may be
pursuant to a shelf registration). The Company shall promptly use its best
efforts to effect such registration on an appropriate form, including Form
S-2, if available, under the Securities Act of the Restricted Shares which the
Company has been so requested to register; PROVIDED, HOWEVER, that the Company
shall not be obligated to effect any registration under the Securities Act
except in accordance with the following provisions:
(i) the Company shall not be obligated to file more than one
registration statement in total pursuant to this Section, subject to
paragraph (c) below;
(ii) the Company shall not be obligated to file any registration
statement during any period in which (A) any other registration
statement (other than on Form S-4 or Form S-8 promulgated under the
Securities Act or any successor forms thereto) pursuant to which Primary
Shares are to be or were sold has been filed and not withdrawn or has
been declared effective within the prior 60 days or (B) the Company has
determined in good faith that the filing of a registration statement
would require the disclosure of material information that the Company
has a bona fide business purpose for preserving as confidential, such
filing to be delayed until the date which is 90 days after such request
for registration pursuant to this Section 6(a); PROVIDED that the
Company may only so delay the filing or effectiveness of a registration
statement pursuant to this Section 6(a)(ii)(B) on one occasion during
any twelve month period;
(iii) with respect to the registration pursuant to this Section,
the Company may include in such registration any Primary Shares or Other
Shares; PROVIDED, HOWEVER, that if the managing underwriter advises the
Company in writing that the inclusion of all Restricted Shares, Primary
Shares and Other Shares proposed to be included in such registration
would interfere with the successful marketing (including pricing) of all
such securities, then the number of Restricted Shares, Primary Shares
and Other Shares proposed to be included in such registration shall be
included in the following order:
(A) FIRST, the Restricted Shares held by all Investors, PRO
RATA based upon the number of Restricted Shares owned by each such
Investor at the time of such registration;
(B) SECOND, the Primary Shares; and
(C) THIRD, the Other Shares.
(b) the Investors requesting a registration pursuant to this Section
may, in the notice delivered pursuant to paragraph (a) above, elect that such
registration cover an underwritten offering. Upon such election, such
Investors shall select one or more nationally recognized firms of investment
banks to act as the managing underwriters and shall select any additional
investment banks to be used in connection with such offering, provided that
such investment banks must be reasonably satisfactory to the Company. The
Company shall, together with all Investors proposing to sell Restricted Shares
in such offering, enter into a customary underwriting agreement with such
underwriters.
(c) A requested registration under this Section may be rescinded by
written notice to the Company by the Investors holding a majority of the
Restricted Shares to be included in such registration under the following
circumstances:
(A) If such registration statement is rescinded prior to the
filing date, such rescinded registration shall not count as a
registration statement initiated pursuant to this Section for
purposes of paragraph (a) above;
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(B) If such registration statement is rescinded after the
filing date but prior to its effective date, such rescinded
registration shall not count as a registration statement initiated
pursuant to this Section for purposes of paragraph (a) above if
the participating Investors (x) have reimbursed the Company for
all out-of-pocket fees and expenses incurred by the Company in
connection with such rescinded registration or (y) (1) reasonably
believed that the registration statement contained an untrue
statement of material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
made therein not misleading, (2) notified the Company of such fact
and requested that the Company correct such alleged misstatement
or omission and (3) the Company has refused to correct such
alleged misstatement or omission; and
(C) A registration shall not count as a registration
statement initiated pursuant to this Section for purposes of
paragraph (a) above unless it becomes effective and the
participating Investors are able to sell at least 80% of the
Restricted Shares sought to be included in such registration
statement.
SECTION 7. PIGGYBACK REGISTRATION.
If at any time the Company proposes for any reason to register Primary
Shares or Other Shares under the Securities Act (other than on Form S-4 or
Form S-8 promulgated under the Securities Act or any successor forms thereto),
it shall promptly give written notice to each Investor of its intention to so
register the Primary Shares or Other Shares and, upon the written request,
given within 15 days after delivery of any such notice by the Company, of any
Investor to include in such registration Restricted Shares held by such
Investor (which request shall specify the number of Restricted Shares proposed
to be included in such registration), the Company shall use its best efforts
to cause all such Restricted Shares to be included in such registration on the
same terms and conditions as the securities otherwise being sold in such
registration; PROVIDED, HOWEVER, that if the managing underwriter advises the
Company that the inclusion of all Restricted Shares or Other Shares proposed
to be included in such registration would interfere with the successful
marketing (including pricing) of the Primary Shares proposed to be registered
by the Company, then the number of Primary Shares, Restricted Shares and Other
Shares proposed to be included in such registration shall be included in the
following order:
(a) FIRST, the Primary Shares;
(b) SECOND, the Restricted Shares requested to be included in such
registration, PRO RATA based upon the number of Shares of Common Stock (based
upon Common Stock Equivalents) owned by each such seller at the time of such
registration; and
(c) THIRD, the Other Shares.
SECTION 8. SHORT FORM REGISTRATIONS.
If at any time after the third anniversary of the date hereof any
Investor requests that the Company file a registration statement on Form X-0,
Xxxx X-0 or any successor forms thereto for a public offering of all or any
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portion of the Restricted Shares held by such Investor, and the Company is a
registrant entitled to use Form S-3 or any successor thereto to register such
shares, then the Company shall use its best efforts to register under the
Securities Act on Form S-3 or any successor thereto, for public sale in
accordance with the method of disposition specified in such notice, the number
of shares of Restricted Shares specified in such notice. Whenever the Company
is required by this Section 8 to use its best efforts to effect the
registration of Restricted Shares, each of the procedures and requirements of
Section 6 (including but not limited to the requirement that the Company
notify all holders of Restricted Shares from whom notice has not been received
and provide them with the opportunity to participate in the offering) shall
apply to such registration. Notwithstanding anything to the contrary contained
herein, no request may be made under this Section 8 within three months after
the effective date of a registration statement filed by the Company covering a
firm commitment underwritten public offering in which the holders of
Restricted Shares shall have been entitled to join pursuant to Section 6 or 7
in which there shall have been effectively registered all Restricted Shares as
to which registration shall have been requested. There is no limitation on the
number of registrations pursuant to this Section 8 that the Company is
obligated to effect.
SECTION 9. EXPENSES.
The Company shall bear the expense of any registrations effected
pursuant to Sections 5, 6, 7 and 8 including, without limitation, all
registration and filing fees (including all expenses incident to filing with
the NASD), fees and expenses of complying with securities and blue sky laws,
printing expenses, and fees and expenses of the Company's counsel and
accountants, and the fees and expenses of the Selling Investors' Counsel (as
defined below), but excluding any underwriters' or brokers' discounts or
commissions, transfer taxes (to the extent that such taxes are required by law
to be paid by the Selling Investors) and the fees of any counsel to any
Selling Investor, other than the Selling Investors' Counsel (it being
understood that the fees and expenses of any underwriter and such
underwriter's counsel shall be the responsibility of such underwriter).
SECTION 10. PREPARATION AND FILING.
If and whenever the Company is under an obligation pursuant to the
provisions of this Agreement to use its best efforts to effect the
registration of any Restricted Shares, the Company shall, as expeditiously as
practicable:
(a) with respect to a registration under Sections 6, 7 and 8, use its
best efforts to cause a registration statement that registers such Restricted
Shares to become and remain effective for a period of 180 days or until all of
such Restricted Shares have been disposed of (if earlier);
(b) furnish, at least five business days before filing a registration
statement that registers such Restricted Shares, a prospectus relating thereto
or any amendments or supplements relating to such a registration statement or
prospectus, to each holder of Restricted Shares, to any counsel to any seller
of Restricted Shares (the "SELLING INVESTOR") and to one counsel selected by
the holders of a majority of such Restricted Shares (the "SELLING INVESTORS'
COUNSEL"), copies of all such documents proposed to be filed (it being
understood that such five-business-day period need not apply to successive
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drafts of the same document proposed to be filed so long as such successive
drafts are supplied to each Selling Investor and such counsel in advance of
the proposed filing by a period of time that is customary and reasonable under
the circumstances);
(c) prepare and file with the Commission such amendments and supplements
to such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective for at least
the periods set forth in Section 9(a) or until all of such Restricted Shares
have been disposed of (if earlier) and to comply with the provisions of the
Securities Act with respect to the sale or other disposition of such
Restricted Shares;
(d) notify in writing any Selling Investor, any counsel to any Selling
Investor and the Selling Investors' Counsel promptly (i) of the receipt by the
Company of any notification with respect to any comments by the Commission
with respect to such registration statement or prospectus or any amendment or
supplement thereto or any request by the Commission for the amending or
supplementing thereof or for additional information with respect thereto, (ii)
of the receipt by the Company of any notification with respect to the issuance
by the Commission of any stop order suspending the effectiveness of such
registration statement or prospectus or any amendment or supplement thereto or
the initiation or threatening of any proceeding for that purpose and (iii) of
the receipt by the Company of any notification with respect to the suspension
of the qualification of such Restricted Shares for sale in any jurisdiction or
the initiation or threatening of any proceeding for such purposes;
(e) use its best efforts to register or qualify such Restricted Shares
under such other securities or blue sky laws of such jurisdictions as any
seller of Restricted Shares reasonably requests and do any and all other acts
and things which may be reasonably necessary or advisable to enable such
seller of Restricted Shares to consummate the disposition in such
jurisdictions of the Restricted Shares owned by such seller; PROVIDED,
HOWEVER, that the Company will not be required to qualify generally to do
business, subject itself to general taxation or consent to general service of
process in any jurisdiction where it would not otherwise be required so to do
but for this paragraph (e);
(f) furnish to each seller of such Restricted Shares such number of
copies of a summary prospectus or other prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and
such other documents as such seller of Restricted Shares may reasonably
request in order to facilitate the public sale or other disposition of such
Restricted Shares;
(g) use its best efforts to cause such Restricted Shares to be
registered with or approved by such other governmental agencies or authorities
as may be necessary by virtue of the business and operations of the Company to
enable the seller or sellers thereof to consummate the disposition of such
Restricted Shares;
(h) notify on a timely basis each seller of such Restricted Shares at
any time when a prospectus relating to such Restricted Shares is required to
be delivered under the Securities Act within the appropriate period mentioned
in paragraph (a) of this Section, of the happening of any event as a result of
which the prospectus included in such registration statement, as then in
11
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 light of the circumstances then existing
and, at the request of 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
offerees 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 in light of
the circumstances then existing;
(i) make available for inspection by any Selling Investor, any counsel
to any Selling Investor and the Selling Investors' Counsel or any underwriter
participating in any disposition pursuant to such registration statement and
any attorney, accountant or other agent retained by any such underwriter
(collectively, the "INSPECTORS"), all pertinent financial and other records,
pertinent corporate documents and properties of the Company (collectively, the
"RECORDS"), as shall be reasonably necessary to enable them to exercise their
due diligence responsibility, and cause the Company's officers, directors and
employees to supply all information (together with the Records, the
"INFORMATION") reasonably requested by any such Inspector in connection with
such registration statement. Any of the Information which the Company
determines in good faith to be confidential, and of which determination the
Inspectors are so notified, shall not be disclosed by the Inspectors unless
(i) the disclosure of such Information is necessary to avoid or correct a
misstatement or omission in the registration statement, (ii) the release of
such Information is ordered pursuant to a subpoena or other order from a court
of competent jurisdiction or (iii) such Information has been made generally
available to the public. The seller of Restricted Shares agrees that it will,
upon learning that disclosure of such Information is sought in a court of
competent jurisdiction, give notice to the Company and allow the Company, at
the Company's expense, to undertake appropriate action to prevent disclosure
of the Information deemed confidential;
(j) use its best efforts to obtain from its independent certified public
accountants "comfort" letters in customary form and at customary times and
covering matters of the type customarily covered by comfort letters;
(k) use its best efforts to obtain from its counsel an opinion or
opinions in customary form;
(l) provide a transfer agent and registrar (which may be the same entity
and which may not be the Company) for such Restricted Shares;
(m) issue to any underwriter to which any seller of Restricted Shares
may sell shares in an offering certificates evidencing such Restricted Shares;
PROVIDED, HOWEVER, that the Company shall have the right to approve any such
underwriter with such approval not to be unreasonably withheld;
(n) list such Restricted Shares on the NYSE and any other national
securities exchange on which any shares of the Common Stock are listed and on
NASDAQ if then included, or if the Common Stock is not listed on a national
securities exchange, use its best efforts to qualify such Restricted Shares
12
for inclusion on such national securities exchange or NASDAQ as the holders of
a majority of such Restricted Shares shall request;
(o) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission and make available to its securityholders,
as soon as reasonably practicable, earnings statements (which need not be
audited) covering a period of 12 months beginning within three months after
the effective date of the registration statement, which earnings statements
shall satisfy the provisions of Section 11(a) of the Securities Act; and
(p) use its best efforts to take all other steps necessary to effect the
registration of such Restricted Shares contemplated hereby.
SECTION 11. INDEMNIFICATION.
(a) In connection with any registration of any Restricted Shares under
the Securities Act pursuant to this Agreement, the Company shall indemnify and
hold harmless the seller of such Restricted Shares, its officers and
directors, each underwriter, broker or any other person acting on behalf of
such seller and each other person, if any, who controls any of the foregoing
persons within the meaning of the Securities Act against any losses, claims,
damages or liabilities, joint or several, (or actions in respect thereof) to
which any of the foregoing 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 the registration
statement under which such Restricted Shares were registered under the
Securities Act, any preliminary prospectus or final prospectus contained
therein or otherwise filed with the Commission, any amendment or supplement
thereto or any document incident to registration or qualification of any
Restricted Shares, 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 shall reimburse
such seller, such officer or director, such underwriter, such broker or such
other person acting on behalf of such seller and each such controlling person
for any legal or other expenses reasonably incurred by any of them in
connection with investigating or defending any such loss, claim, damage,
liability or action; PROVIDED, HOWEVER, that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage, liability or
action arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in said registration statement,
preliminary prospectus, final prospectus, amendment, supplement or document
incident to registration or qualification of any Restricted Shares in reliance
upon and in conformity with written information furnished to the Company
through an instrument duly executed by such seller or underwriter specifically
for use in the preparation thereof; PROVIDED, FURTHER, that with respect to
any preliminary prospectus, the foregoing indemnity shall not inure to the
benefit of (a) any underwriter or, in the case of a registration statement
filed with respect to an offering which is not an underwritten offering, any
Selling Investor, from whom the person asserting any losses, claims, damages
and liabilities and judgments purchased Restricted Shares or (b) any person
controlling such underwriter or Selling Investor, if (i) a copy of the
prospectus (as then amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) was required by law to have
been delivered by such underwriter or Selling Investor (as applicable), (ii)
the prospectus had not been sent or given by or on behalf of such underwriter
or Selling Investor (as applicable) to such person with or prior to a written
13
confirmation of the sale of the Restricted Shares to such person, (iii) the
prospectus (as so amended and supplemented) would have cured the defect giving
rise to such loss, claim, damage, liability or judgment and (iv) such failure
to deliver the prospectus (as so amended and supplemented) was not the result
of noncompliance by the Company with Section 10(f) hereof.
(b) In connection with any registration of Restricted Shares under the
Securities Act pursuant to this Agreement, each seller of Restricted Shares
shall indemnify and hold harmless (in the same manner and to the same extent
as set forth in the preceding paragraph of this Section) the Company, each
director of the Company, each officer of the Company who shall sign such
registration statement, each underwriter, broker or other person acting on
behalf of such seller, each person who controls any of the foregoing persons
within the meaning of the Securities Act and each other seller of Restricted
Shares under such registration statement with respect to any statement or
omission from such registration statement, any preliminary prospectus or final
prospectus contained therein or otherwise filed with the Commission, any
amendment or supplement thereto or any document incident to registration or
qualification of any Restricted Shares, if such statement or omission was made
in reliance upon and in conformity with written information furnished to the
Company or such underwriter through an instrument duly executed by such seller
specifically for use in connection with the preparation of such registration
statement, preliminary prospectus, final prospectus, amendment, supplement or
document; PROVIDED, HOWEVER, that the obligation to indemnify will be several,
not joint and several, among such sellers of Restricted Shares, and the
maximum amount of liability in respect of such indemnification shall be in
proportion to and limited to, in the case of each seller of Restricted Shares,
an amount equal to the net proceeds actually received by such seller from the
sale of Restricted Shares effected pursuant to such registration.
(c) The indemnification required by this Section 11 will be made by
periodic payments during the course of the investigation or defense, as and
when bills are received or expenses incurred, subject to prompt refund in the
event any such payments are determined not to have been due and owing
hereunder.
(d) Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in the preceding
paragraphs of this Section, such indemnified party will, if a claim in respect
thereof is made against an indemnifying party, give written notice to the
latter of the commencement of such action (it being understood that no delay
in delivering or failure to deliver such notice shall relieve the indemnifying
persons from any liability or obligation hereunder unless (and then solely to
the extent that) the indemnifying person is prejudiced by such delay and/or
failure). In case any such action is brought against an indemnified party, the
indemnifying party will be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly notified
to the extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be responsible for any legal or other expenses
subsequently incurred by the latter in connection with the defense thereof;
PROVIDED, HOWEVER, that if any indemnified party shall have reasonably
concluded that there may be one or more legal or equitable defenses available
to such indemnified party which are additional to or conflict with those
available to the indemnifying party, or that such claim or litigation involves
or could have an effect upon matters beyond the scope of the indemnity
14
agreement provided in this Section, the indemnifying party shall not have the
right to assume the defense of such action on behalf of such indemnified party
and such indemnifying party shall reimburse such indemnified party and any
person controlling such indemnified party for that portion of the fees and
expenses of any counsel retained by the indemnified party which is reasonably
related to the matters covered by the indemnity agreement provided in this
Section.
(e) The indemnification provided for under this Agreement will remain in
full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling person of such
indemnified party and will survive the transfer of securities.
(f) If the indemnification provided for in this Section 11 is held by a
court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, claim, damage, liability or action referred to herein,
then the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amounts paid or payable by such indemnified
party as a result of such loss, claim, damage, liability or action 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 which resulted in such loss, claim, damage or
liability 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 or alleged 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. The Company and the sellers of Restricted Shares agree that it would
not be just and equitable if contributions pursuant to this paragraph were
determined by PRO RATA allocation or by any other method of allocation which
did not take into account the equitable considerations referred to herein. The
amount paid or payable to an indemnified party as a result of the losses,
claims, damages, liabilities or expenses referred to above shall be deemed to
include, subject to the limitation set forth in Section 11(d), any legal or
other expenses reasonably incurred in connection with investigating or
defending the same. Notwithstanding the foregoing, in no event shall the
amount contributed by a seller of Restricted Shares exceed the aggregate net
offering proceeds received by such seller from the sale of its Restricted
Shares.
SECTION 12. UNDERWRITING AGREEMENT.
Notwithstanding the provisions of Sections 9 and 10, to the extent that
the Company and the holders selling Restricted Shares in a proposed
registration shall enter into an underwriting or similar agreement, which
agreement contains provisions covering one or more issues addressed in such
Sections, the provisions contained in such Sections addressing such issue or
issues shall be superseded with respect to such registration by such other
agreement.
SECTION 13. INFORMATION BY INVESTOR.
Each Investor selling Restricted Shares in a proposed registration shall
furnish to the Company such written information regarding such Investor and
the distribution proposed by such Investor as the Company may reasonably
15
request in writing and as shall be reasonably required in connection with any
registration, qualification or compliance referred to in this Agreement.
SECTION 14. EXCHANGE ACT COMPLIANCE.
The Company shall comply with all of the reporting requirements of the
Exchange Act and with all other public information reporting requirements of
the Commission which are conditions to the availability of Rule 144 for the
sale of the Common Stock. The Company shall cooperate with each Investor in
supplying such information as may be necessary for such Investor to complete
and file any information reporting forms presently or hereafter required by
the Commission as a condition to the availability of Rule 144.
SECTION 15. NO CONFLICT OF RIGHTS.
The Company represents and warrants to the Investors that the
registration rights granted to the Investors hereby do not conflict with any
other registration rights granted by the Company to any Person other than any
Investor. The Company shall not, after the date hereof, grant any registration
rights which conflict with or are not expressly subordinated to the
registration rights granted hereby.
SECTION 16. MISCELLANEOUS.
(a) REMEDIES. In case any one or more of the representations,
warranties, covenants and/or agreements set forth in this Agreement shall have
been breached by the Company, the Investors (or any Investor) may proceed to
protect and enforce its or their rights either by suit in equity and/or by
action at law, including an action for damages as a result of any such breach
and/or an action for specific performance of any such covenant or agreement
contained in this Agreement.
(b) SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the
benefit of the Company and the Investors and their respective successors,
assigns, heirs and personal representatives. Upon any transfer of any
Applicable Securities, the transferee shall be bound by, and entitled to the
benefits of, this Agreement with respect to such transferred Securities in the
same manner as the transferring Investor.
(c) ENTIRE AGREEMENT. This Agreement and the other writings referred to
herein or delivered pursuant hereto which form a part hereof contain the
entire agreement among the parties with respect to the subject matter hereof
and thereof and supersede all prior and contemporaneous arrangements or
understandings with respect thereto.
(d) NOTICES. All notices, requests, consents and other communications
hereunder to any party shall be deemed to be sufficient if contained in a
written instrument and shall be deemed to have been duly given when delivered
in person, by telecopy, by nationally-recognized overnight courier, or by
first class registered or certified mail, postage prepaid, addressed to such
party at the address set forth in the Securities Purchase Agreement or such
other address as may hereafter be designated in writing by the addressee to
the addressor. All such notices, requests, consents and other communications
16
shall be deemed to have been delivered (a) in the case of personal delivery or
delivery by telecopy, on the date of such delivery, (b) in the case of
nationally-recognized overnight courier, on the next business day and (c) in
the case of mailing, on the third business day following such mailing if sent
by certified mail, return receipt requested.
(e) AMENDMENTS, MODIFICATIONS AND WAIVERS. The terms and provisions of
this Agreement may not be modified or amended, nor may any of the provisions
hereof be waived, temporarily or permanently, except pursuant to a written
instrument executed by the Company and the Requisite Senior Holders; PROVIDED
HOWEVER that any such amendment, modification or waiver that would adversely
affect the rights hereunder of any Investor, in its capacity as a Investor,
without similarly affecting the rights hereunder of all Investors, in their
capacities as Investors, shall not be effective as to such Investor without
its prior written consent. No waiver by any party shall operate or be
construed as a waiver of any subsequent breach by any other party.
(f) GOVERNING LAW; WAIVER OF JURY TRIAL. All questions concerning the
construction, interpretation and validity of the Documents shall be governed
by and construed and enforced in accordance with the domestic laws of the
State of Delaware, without giving effect to any choice or conflict of law
provision or rule (whether in the State of Delaware or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than
the State of Delaware. In furtherance of the foregoing, the internal law of
the State of Delaware will control the interpretation and construction of the
Documents, even if under such jurisdiction's choice of law or conflict of law
analysis, the substantive law of some other jurisdiction would ordinarily or
necessarily apply.
BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL
TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND
EXPERT PERSON AND THE PARTIES WISH APPLICABLE LAWS TO APPLY (RATHER THAN
ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A
JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST
COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE
PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR
PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS
AGREEMENT OR ANY DOCUMENTS RELATED HERETO.
(g) SUBMISSION TO JURISDICTION. Any legal action or proceeding with
respect to this Agreement or the other Documents may be brought in the courts
of the State of New York and the United States of America for the Southern
District of New York and, by execution and delivery of this Agreement, the
Company hereby accepts for itself and in respect of its property, generally
and unconditionally, the jurisdiction of the aforesaid courts. The Company
hereby irrevocably waives, in connection with any such action or proceeding,
any objection, including, without limitation, any objection to the venue or
based on the grounds of forum non conveniens, which it may now or hereafter
have to the bringing of any such action or proceeding in such respective
jurisdictions. The Company hereby irrevocably consents to the service of
process of any of the aforementioned courts in any such action or proceeding
by the mailing of copies thereof by registered or certified mail, postage
17
prepaid, to it at its address as set forth herein. Nothing herein shall affect
the right of the Investors to serve process in any other manner permitted by
law or to commence legal proceedings or otherwise proceed against the Company
in any other jurisdiction.
(h) SEVERABILITY. It is the desire and intent of the parties that the
provisions of this Agreement be enforced to the fullest extent permissible
under the law and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, in the event that any provision of this
Agreement would be held in any jurisdiction to be invalid, prohibited or
unenforceable for any reason, such provision, as to such jurisdiction, shall
be ineffective, without invalidating the remaining provisions of this
Agreement or affecting the validity or enforceability of such provision in any
jurisdiction. Notwithstanding the foregoing, if such provision could be more
narrowly drawn so as not be invalid, prohibited or unenforceable in such
jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
(i) INDEPENDENCE OF AGREEMENTS, COVENANTS, REPRESENTATIONS AND
WARRANTIES. All agreements and covenants hereunder shall be given independent
effect so that if a certain action or condition constitutes a default under a
certain agreement or covenant, the fact that such action or condition is
permitted by another agreement or covenant shall not affect the occurrence of
such default, unless expressly permitted under an exception to such initial
covenant.
(j) COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement may be executed
in any number of counterparts, and each such counterpart hereof shall be
deemed to be an original instrument, but all such counterparts together shall
constitute but one agreement. Facsimile counterpart signatures to this
Agreement shall be acceptable an binding.
* * * * * *
18
IN WITNESS WHEREOF, the parties hereto have executed this Investor
Rights Agreement on the date first written above.
HANGER ORTHOPEDIC GROUP, INC.
By: /s/XXXX X. XXXXX
------------------------------------
Name: Xxxx X. Xxxxx
Title: Chairman, President and Chief
Executive Officer
PURCHASERS
CHASE EQUITY ASSOCIATES, L.P.
By: Chase Capital Partners,
its General Partner
By: /s/XXXXXXXX X. XXXXX, M.D.
------------------------------
Name: Xxxxxxxx X. Xxxxx, M.D.
Title: Executive Partner
PARIBAS NORTH AMERICA, INC.
By: /s/XXXX X. XXXXXXXX
---------------------------
Name: Xxxx X. Xxxxxxxx
Title: Financial Controller
