EXHIBIT 10.2
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT, dated as of May 7, 2002 (this
"Agreement"), is made by and among Aksys, Ltd., a Delaware corporation, with
headquarters located at Two Marriott Drive, Lincolnshire, IL 60069 (the
"Company"), and the investors named on the signature pages hereto (the "Initial
Investors").
RECITALS:
A. In connection with the Securities Purchase Agreement, dated May 7, 2002,
by and among the Initial Investors and the Company (the "Purchase Agreement"),
the Company has agreed, upon the terms and subject to the conditions of the
Purchase Agreement, to issue and sell to the Initial Investors 3,319,396 shares
of the Company's Common Stock, par value $0.01 per share (the "Common Shares").
B. In order to induce the Initial Investors to execute and deliver the
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act and applicable state securities laws with
respect to the Common Shares.
In consideration of the premises and the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Company and the Initial Investors hereby agree as
follows:
ARTICLE I.
DEFINITIONS
Capitalized terms used and not otherwise defined herein have the respective
meanings given them in the Purchase Agreement. In addition, as used in this
Agreement, the following terms have the following meanings:
1.1 "Investors" means the Initial Investors and any of their transferees or
assignees who receive or acquire Registrable Securities and who are entitled to
the benefit of this Agreement as provided in Article IX hereof.
1.2 "Registrable Securities" means the Common Shares sold pursuant to the
Purchase Agreement and any shares of capital stock issued or issuable from time
to time in exchange for or otherwise with respect to the Common Shares; provided
that Common Shares will cease to be Registrable Securities at such time as they
have been sold under a Registration Statement or pursuant to Rule 144.
1.3 "Registration Period" means the period between the date of this
Agreement and the earliest of (i) the second anniversary of the date of this
Agreement, (ii) the date on which all of the Registrable Securities have been
sold by the Investors under the Registration Statement or pursuant to Rule 144
or (iii) the date on which all the Registrable
Securities may be immediately sold by the Investors without registration and
without restriction as to the number of Registrable Securities to be sold,
pursuant to Rule 144 or otherwise.
1.4 "Registration Statement" means a Registration Statement of the Company
filed under the Securities Act.
1.5 The terms "register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
statements in compliance with the Securities Act and pursuant to Rule 415 and
the declaration or ordering of effectiveness of such Registration Statement by
the SEC.
1.6 "Rule 415" means Rule 415 under the Securities Act, or any successor
rule providing for offering securities on a continuous basis, and applicable
rules and regulations thereunder.
ARTICLE II.
REGISTRATION
2.1 Mandatory Registration. The Company will use its best efforts to file
with the SEC a Registration Statement on Form S-3 registering only the
Registrable Securities for resale within 10 business days after the Closing Date
of the purchase of the Common Shares under the Purchase Agreement. If Form S-3
is not available at that time, then the Company will use its best efforts to
file a Registration Statement on such form as is then available to effect a
registration of the Registrable Securities within such 10-day period.
2.2 Effectiveness of the Registration Statement. The Company will use its
best efforts to cause the Registration Statement contemplated by the previous
Section to be declared effective by the SEC as soon as practicable after filing,
and in any event no later than the 30th day after the Closing Date (the
"Required Effective Date"). However, so long as the Company filed the
Registration Statement within 10 business days after the Closing Date, if the
Registration Statement receives any SEC review, then the Required Effective Date
will be the 100th day after the Closing Date. The Company's best efforts will
include, but are not be limited to, promptly responding to all comments received
from the staff of the SEC. If the Company receives notification from the SEC
that the Registration Statement will receive no action or review from the SEC,
then the Company will request that the Registration Statement become effective
within three business days after such SEC notification.
2.3 Payments by the Company. If (i) at any time after effectiveness of the
Registration Statement, sales cannot be made thereunder during the Registration
Period for any reason, other than by reason of the operation of Section 3.6, for
a period of more than 10 consecutive business days, or 30 business days in the
aggregate, during any 12-month period or (ii) the Common Stock is not listed or
included for quotation on Nasdaq, Nasdaq SmallCap, the NYSE or AMEX for more
than an aggregate of 10 business days in any 12-month period, then the Company
will thereafter make a payment (by wire transfer or check) to each Investor as
partial compensation for such delay. The amount of the payment made to each
Investor will be equal to 1% of the purchase price paid for the Common Shares
purchased by the Investor and not
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previously sold by the Investor for each 30 business days that sales cannot be
made under the effective Registration Statement or the Common Stock is not
listed or included for quotation on Nasdaq, Nasdaq SmallCap, the NYSE or AMEX
(but in no event to exceed 12% in the aggregate) beyond the allowed period. The
number of shares not previously sold as specified in the previous sentence shall
be determined as of the end of the respective 30-day period. These payments will
be prorated on a daily basis during the 30 business day period and will be paid
to each Investor by check within five business days following the end of each
month as to which payment is due hereunder, assuming that the respective
Investor delivered to the Company at least 2 business days prior thereto
information with respect to the number of Common Shares not previously sold by
such Investor (together with reasonable supporting documentation).
2.4 Effect of Late Registration. If the Registration Statement has not been
declared effective by the Required Effective Date, then the Company will make a
payment (by wire transfer or check) to each Investor as partial compensation for
such delay (the "Late Registration Payments"). The Late Registration Payments
will be equal to 1% of the purchase price paid for the Common Shares purchased
by such Investor and not previously sold by such Investor for each 30 business
days after the Required Effective Date (but in no event to exceed 12% in the
aggregate). The Late Registration Payments will be prorated on a daily basis
during the 30 business day period and will be paid to the Initial Investors by
check within five business days after the earlier of (i) the end of the 30
business days following the Required Effective Date or (ii) the effective date
of the Registration Statement.
2.5 Piggyback Registrations.
(a) If, at any time prior to the expiration of the Registration Period,
(i) a Registration Statement is not then effective with respect to all of the
Registrable Securities and (ii) the Company decides to register any of its
securities for its own account or for the account of others, then the Company
will promptly give the Investors written notice thereof and will use its best
efforts to include in such registration all or any part of the Registrable
Securities requested by such Investors to be included therein (excluding any
Registrable Securities previously included in a Registration Statement). This
requirement does not apply to Company registrations on Form S-4 or S-8 or their
equivalents (relating to equity securities to be issued in connection with an
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans) or to registration
statements that would otherwise (a) not permit the registration of resales of
previously issued securities. Each Investor must give its request for
registration under this subsection to the Company in writing within 15 days
after receipt from the Company of notice of such pending registration. If the
registration for which the Company gives notice is a public offering involving
an underwriting, the Company will so advise the Investors as part of the above
described written notice. In that event, if the managing underwriter(s) of the
public offering impose a limitation on the number of shares of Common Stock that
may be included in the Registration Statement because, in such underwriter(s)'
judgment, such limitation would be necessary to effect an orderly public
distribution, then the Company shall include in such registration (i) first, the
securities the Company proposes to sell, (ii) second, the securities desired to
be sold pursuant to such Registration Statement by the stockholder or
stockholders which are requiring the Company pursuant to a contractual
registration right to file such Registration Statement and (iii) third, the
Registrable Securities requested by the Investors to be included in such
offering, pro rata among the holders of such
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Registrable Securities on the basis of the number of shares requested to be
included by each such holder.
(b) No right to registration of Registrable Securities under this
Section 2.5 limits in any way the registration required under Section 2.1 above.
The obligations of the Company under this Section 2.5 expire upon the earliest
of (i) the effectiveness of the Registration Statement filed pursuant to Section
2.1 above with respect to the Registrable Securities or the respective portion
thereof, (ii) after the Company has afforded the opportunity for the Investors
to exercise registration rights under this Section 2.5 for two registrations
(provided, however, that any Investor that has had any Registrable Securities
excluded from any Registration Statement in accordance with this Section 2.5 may
include in any additional Registration Statement filed by the Company the
Registrable Securities so excluded), or (iii) expiration of the Registration
Period.
2.6 Eligibility to Use Form S-3. The Company represents and warrants that,
as of the date of this Agreement, it meets the requirements for the use of Form
S-3 for registration of the resale by the Investors of the Registrable
Securities.
ARTICLE III.
ADDITIONAL OBLIGATIONS OF THE COMPANY
3.1 Continued Effectiveness of Registration Statement. Subject to the
limitations set forth in Section 3.6, the Company will use its best efforts to
keep the Registration Statement covering the Registrable Securities effective
under Rule 415 at all times during the Registration Period. In the event that
the number of shares available under a Registration Statement filed pursuant to
this Agreement is insufficient to cover all of the Registrable Securities issued
under the Purchase Agreement, the Company will (if permitted) amend the
Registration Statement or file a new Registration Statement (on the short form
available therefor, if applicable), or both, so as to cover all of the
Registrable Securities. The Company will file such amendment or new Registration
Statement as soon as practicable, but in no event later than 20 business days
after the necessity therefor arises. The Company will use its best efforts to
cause such amendment or new Registration Statement to become effective as soon
as is practicable after the filing thereof.
3.2 Accuracy of Registration Statement. Assuming the accuracy of
information furnished by or on behalf of the Investors, any Registration
Statement (including any amendments or supplements thereto and prospectuses
contained therein) filed by the Company covering Registrable Securities will not
contain any 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, in
light of the circumstances in which they were made, not misleading. The Company
will promptly prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to permit sales pursuant to the Registration Statement at all times
during the Registration Period (but subject to Section 3.6), and, during such
period, will comply with the provisions of the Securities Act with respect to
the disposition of all Registrable Securities of the Company covered by the
Registration Statement until the
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termination of the Registration Period, or if earlier, until such time as all of
such Registrable Securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof as set forth in
the Registration Statement.
3.3 Furnishing Documentation. The Company agrees to provide to
each Investor an opportunity to review and provide reasonable comments to the
Registration Statement, provided that such Investor furnishes such comments
within 48 hours of its receipt of the Registration Statement. The Company will
furnish to each Investor whose Registrable Securities are included in a
Registration Statement, or to its legal counsel, (a) promptly after each
document is filed with the SEC, one copy of any Registration Statement filed
pursuant to this Agreement and any amendments thereto, each preliminary
prospectus (if any) and final prospectus and each amendment or supplement
thereto; and (b) a number of copies of a prospectus, including a preliminary
prospectus (if any), and all amendments and supplements thereto, and such other
documents as the Investor may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by the Investor. The Company
will promptly notify by facsimile each Investor whose Registrable Securities are
included in any Registration Statement of the effectiveness of the Registration
Statement and any post-effective amendment.
3.4 Additional Obligations. The Company will use its best efforts
to (a) register and qualify the Registrable Securities covered by a Registration
Statement under such other securities or blue sky laws of such jurisdictions as
each Investor who holds (or has the right to hold) Registrable Securities being
offered reasonably requests, (b) prepare and file in those jurisdictions any
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain their
effectiveness during the Registration Period, (c) take any other actions
necessary to maintain such registrations and qualifications in effect at all
times during the Registration Period, and (d) take any other actions reasonably
necessary or advisable to qualify the Registrable Securities for sale in such
jurisdictions. Notwithstanding the foregoing, the Company is not required, in
connection with such obligations, to (i) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3.4, (ii) subject itself to general taxation in any such jurisdiction,
(iii) file a general consent to service of process in any such jurisdiction,
(iv) provide any undertakings that cause material expense or burden to the
Company, or (v) make any change in its charter or bylaws, which in each case the
Company determines to be contrary to the best interests of the Company and its
stockholders.
3.5 Underwritten Offerings. If the Investors who hold a majority
in interest of the Registrable Securities being offered in an offering pursuant
to a Registration Statement or any amendment or supplement thereto under this
Agreement select underwriters reasonably acceptable to the Company for such
offering, the Company will enter into and perform its obligations under an
underwriting agreement in usual and customary form including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering.
3.6 Suspension of Resale Rights.
(a) The Company will notify (by telephone and also by
facsimile and reputable overnight courier) each Investor who holds Registrable
Securities being sold pursuant
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to a Registration Statement of the happening of any event of which the Company
has knowledge as a result of which the prospectus included in the 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, in light of the circumstances under which they were
made, not misleading. The Company will make such notification as promptly as
practicable after the Company becomes aware of the event (but in no event will
the Company disclose to any Investor any of the facts or circumstances regarding
the event), will promptly prepare a supplement or amendment to the Registration
Statement to correct such untrue statement or omission, and will deliver a
number of copies of such supplement or amendment to each Investor as such
Investor may reasonably request.
(b) Notwithstanding the obligations under Section 3.6(a) or
any other provision of this Agreement, if in the good faith judgment of the
Company, following consultation with legal counsel, it would be detrimental to
the Company and its stockholders for resales of Registrable Securities to be
made pursuant to the Registration Statement due to (i) the existence of a
material development or potential material development involving the Company
which the Company would be obligated to disclose in the Registration Statement,
which disclosure would be premature or otherwise inadvisable at such time or
would have a Material Adverse Effect upon the Company and its stockholders, or
(ii) in the good faith judgment of the Company, it would adversely affect or
require premature disclosure of the filing of a Company-initiated registration
of any class of its equity securities, the Company will have the right to
suspend the use of the Registration Statement for a period of not more than
thirty days, provided, however, that the Company will use its commercially
reasonable efforts to keep the length of any such suspension to as short a
period as is practicable given the then existing circumstances and may so defer
or suspend the use of the Registration Statement no more than two times in any
eighteen-month period, and provided, further, that, after deferring or
suspending the use of the Registration Statement, the Company may not again
defer or suspend the use of the Registration Statement until a period of thirty
days has elapsed after resumption of the use of the Registration Statement.
(c) Subject to the Company's rights under this Section 3, the
Company will use its best efforts to prevent the issuance of any stop order or
other suspension of effectiveness of a Registration Statement and, if such an
order is issued, will use its best efforts to obtain the withdrawal of such
order at the earliest possible time and the Company will promptly notify each
Investor that holds Registrable Securities being sold (or, in the event of an
underwritten offering, the managing underwriters) of the issuance of such order
and the resolution thereof.
(d) Notwithstanding anything to the contrary contained herein
or in the Purchase Agreement, if the use of the Registration Statement is
suspended by the Company, the Company will promptly give notice of the
suspension to all Investors whose securities are covered by the Registration
Statement, and will promptly notify each such Investor as soon as the use of the
Registration Statement may be resumed.
3.7 Review by the Investors. The Company will permit a single
firm of legal counsel, designated by the Investors who hold a majority in
interest of the Registrable Securities being sold pursuant to a Registration
Statement, to review the Registration Statement and all
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amendments and supplements thereto (as well as all requests for acceleration or
effectiveness thereof) a reasonable period of time prior to their filing with
the SEC, and will not file any document in a form to which such counsel
reasonably objects, unless otherwise required by law in the opinion of the
Company's counsel; provided that the time periods set forth in Section 2.2 shall
be tolled to the extent that such legal counsel does not deliver its final
comments relating to such Registration Statement to the Company within 3
business days after receipt of such Registration Statement. The sections of any
such Registration Statement including information with respect to the Investors,
the Investors' beneficial ownership of securities of the Company or the
Investors' intended method of disposition of Registrable Securities must conform
to the information provided to the Company by each of the Investors.
3.8 Comfort Letter; Legal Opinion. At the request of the Investors who hold
a majority in interest of the Registrable Securities being sold pursuant to a
Registration Statement, and on the date that Registrable Securities are
delivered to an underwriter for sale in connection with the Registration
Statement, the Company will furnish to the Investors and the underwriters (i) a
letter, dated such date, from the Company's independent certified public
accountants, in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
addressed to the underwriters; and (ii) an opinion, dated such date, from
counsel representing the Company for purposes of the Registration Statement, in
form and substance as is customarily given in an underwritten public offering,
addressed to the underwriters and Investors.
3.9 Due Diligence; Confidentiality.
(a) The Company will make available upon reasonable advance notice
during normal business hours for inspection by any Investor whose Registrable
Securities are being sold pursuant to a Registration Statement, any underwriter
participating in any disposition pursuant to the Registration Statement, and any
attorney, accountant or other agent retained by any such Investor or underwriter
(collectively, the "Inspectors"), all pertinent financial and other records,
pertinent corporate documents and properties of the Company (collectively, the
"Records"), as reasonably necessary to enable the Inspector to exercise its due
diligence responsibility in connection with or related to the contemplated
offering. The Company will cause its officers, directors and employees to supply
all information that any Inspector may reasonably request for purposes of
performing such due diligence.
(b) Each Inspector will hold in confidence, use only in connection
with the contemplated offering, and will not make any disclosure (except to an
Investor) of, all Records and other information that the Company determines in
good faith to be confidential, and of which determination the Inspectors are so
notified, unless (i) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in any Registration Statement, (ii) the
release of such Records is ordered pursuant to a subpoena or other order from a
court or government body of competent jurisdiction, (iii) the information in
such Records has been made generally available to the public other than by
disclosure in violation of this or any other agreement (to the knowledge of the
relevant Inspector), (iv) the Records or other information was developed
independently by an Inspector without breach of this Agreement, (v) the
information was known to the Inspector before receipt of such information from
the Company, or (vi) the information was disclosed to the Inspector by a third
party not under an obligation of
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confidentiality. The Company is not required to disclose any confidential
information in the Records to any Inspector unless and until such Inspector has
entered into a confidentiality agreement (in form and substance satisfactory to
the Company) with the Company with respect thereto, substantially in the form of
this Section 3.9. Each Investor will, upon learning that disclosure of Records
containing confidential information is sought in or by a court or governmental
body of competent jurisdiction or through other means, give prompt notice to the
Company and allow the Company, at the Company's expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, the Records deemed confidential. Nothing herein will be deemed to limit the
Investor's ability to sell Registrable Securities in a manner that is otherwise
consistent with applicable laws and regulations.
(c) The Company will hold in confidence, and will not make any
disclosure of, information concerning an Investor provided to the Company under
this Agreement unless (i) disclosure of such information is necessary to comply
with federal or state securities laws, or any exchange listing or similar rules
and regulations, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction, (iv) such
information has been made generally available to the public other than by
disclosure in violation of this Agreement or any other agreement, (v) the
information was disclosed to the Company by a third party not under an
obligation of confidentiality or (vi) such Investor consents to the form and
content of any such disclosure. If the Company learns that disclosure of such
information concerning an Investor is sought in or by a court or governmental
body of competent jurisdiction or through other means, the Company will give
prompt notice to such Investor prior to making such disclosure and allow such
Investor, at its expense, to undertake appropriate action to prevent disclosure
of, or to obtain a protective order for, such information.
3.10 Listing. All of the Registrable Securities covered by each
Registration Statement shall be listed on each national securities exchange on
which securities of the same class or series issued by the Company are then
listed, if any, or to the extent the securities of the same class or series are
not then listed on a national securities exchange, secure the designation and
quotation of all of the Registrable Securities covered by each Registration
Statement on Nasdaq.
3.11 Share Certificates. The Company will cooperate with the Investors who
hold Registrable Securities being sold and with the managing underwriter(s), if
any, to facilitate the timely preparation and delivery of certificates (not
bearing any restrictive legends) representing Registrable Securities to be
offered pursuant to a Registration Statement and will enable such certificates
to be in such denominations or amounts as the case may be, and registered in
such names as the Investors or the managing underwriter(s), if any, may
reasonably request, all in accordance with Article V of the Purchase Agreement.
3.12 Plan of Distribution. At the request of the Investors holding a
majority in interest of the Registrable Securities registered pursuant to a
Registration Statement, the Company will promptly prepare and file with the SEC
such amendments (including post-effective amendments) and supplements to the
Registration Statement, and the prospectus used
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in connection with the Registration Statement, as may be necessary in order to
change the plan of distribution set forth in such Registration Statement.
3.13 Securities Laws Compliance. The Company will comply with all
applicable laws related to any Registration Statement relating to the sale of
Registrable Securities and to offering and sale of securities and with all
applicable rules and regulations of governmental authorities in connection
therewith (including, without limitation, the Securities Act, the Exchange Act
and the rules and regulations promulgated by the SEC).
3.14 Further Assurances. The Company will take all other reasonable actions
as any Investor or the underwriters, if any, may reasonably request to expedite
and facilitate disposition by such Investor of the Registrable Securities
pursuant to the Registration Statement.
3.15 No Additional Selling Shareholders. Other than the holders of
securities covered by the Private Placement Registration Rights Agreements (as
defined in the Purchase Agreement), the Company will not, and will not agree to,
allow the holders of any securities of the Company to include any of their
securities in any Registration Statement under Section 2.1 hereof, or any
amendment or supplement thereto under Section 3.2 hereof, without the consent of
the holders of a majority in interest of the Registrable Securities.
ARTICLE IV.
OBLIGATIONS OF THE INVESTORS
4.1 Investor Information. As a condition to the obligations of the Company
to complete any registration pursuant to this Agreement with respect to the
Registrable Securities of each Investor, such Investor will furnish to the
Company such information regarding itself, the Registrable Securities held by it
and the intended method of disposition of the Registrable Securities held by it
as is reasonably required by the Company to effect the registration of the
Registrable Securities. At least 5 business days prior to the first anticipated
filing date of a Registration Statement for any registration under this
Agreement, the Company will notify each Investor of the information the Company
requires from that Investor if the Investor elects to have any of its
Registrable Securities included in the Registration Statement. If, within two
business days prior to the filing date, the Company has not received the
requested information from an Investor, then the Company may file the
Registration Statement without including Registrable Securities of that
Investor.
4.2 Further Assurances. Each Investor will cooperate with the Company, as
reasonably requested by the Company, in connection with the preparation and
filing of any Registration Statement hereunder, unless such Investor has
notified the Company in writing of such Investor's irrevocable election to
exclude all of such Investor's Registrable Securities from such Registration
Statement.
4.3 Suspension of Sales. Upon receipt of any notice from the Company under
Section 3.6, each Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until (i) it receives copies of a supplemented or amended
prospectus contemplated by Section 3.6(a) or (ii)
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the Company advises the Investor that a suspension of sales under Section 3.6(b)
has terminated. If so directed by the Company, each Investor will deliver to the
Company (at the expense of the Company) or destroy (and deliver to the Company a
certificate of destruction) all copies in the Investor's possession (other than
a limited number of file copies) of the prospectus covering such Registrable
Securities that is current at the time of receipt of such notice.
4.4 Underwritten Offerings.
(a) If Investors holding a majority in interest of the
Registrable Securities being registered (with the approval of a majority in
interest of the Initial Investors) determine to engage the services of an
underwriter, each Investor will enter into and perform such Investor's
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering, and will take such
other actions as are reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of its Registrable
Securities from such Registration Statement.
(b) Without limiting any Investor's rights under Section 2.1
hereof, no Investor may participate in any underwritten distribution hereunder
unless such Investor (a) agrees to sell such Investor's Registrable Securities
on the basis provided in any underwriting arrangements approved by the Investors
entitled hereunder to approve such arrangements, (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements, and (c) agrees to pay its pro rata share of all underwriting
discounts and commissions and other fees and expenses of investment bankers and
any manager or managers of such underwriting, and legal expenses of the
underwriter, applicable with respect to its Registrable Securities, in each case
to the extent not payable by the Company under the terms of this Agreement.
ARTICLE V.
EXPENSES OF REGISTRATION
The Company will bear all reasonable expenses, other than underwriting
discounts and commissions, and transfer taxes, if any, incurred in connection
with registrations, filings or qualifications pursuant to Articles II and III of
this Agreement, including, without limitation, all registration, listing and
qualifications fees, transfer agent fees, printers and accounting fees, the fees
and disbursements of counsel for the Company, and the reasonable fees and
disbursements of one firm of legal counsel selected by the Initial Investors
pursuant to Section 3.7 hereof (not to exceed $5,000). The Investors shall
reimburse the Company for any out-of-pocket expenses the Company incurs in an
underwritten offering initiated by the Investors.
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ARTICLE VI.
INDEMNIFICATION
In the event that any Registrable Securities are included in a
Registration Statement under this Agreement:
6.1 To the extent permitted by law, the Company will indemnify and
hold harmless each Investor that holds such Registrable Securities, any
underwriter (as defined in the Securities Act) for the Investors, any directors
or officers of such Investor or such underwriter and any person who controls
such Investor or such underwriter within the meaning of the Securities Act or
the Exchange Act (each, an "Indemnified Person") against any losses, claims,
damages, expenses or liabilities (joint or several) (collectively, and together
with actions, proceedings or inquiries by any regulatory or self-regulatory
organization, whether commenced or threatened in respect thereof, "Claims") to
which any of them become subject under the Securities Act, the Exchange Act or
otherwise, insofar as such Claims arise out of or are based upon any of the
following statements, omissions or violations in a Registration Statement filed
pursuant to this Agreement, any post-effective amendment thereof or any
prospectus included therein: (a) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
post-effective amendment thereof or 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, (b) any untrue statement or alleged untrue
statement of a material fact contained in the prospectus related to the
Registration Statement (as it may be amended or supplemented) or the omission or
alleged omission to state therein any material fact necessary to make the
statements made therein, in light of the circumstances under which the
statements therein were made, not misleading, or (c) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act or any other
law related to the Registration Statement, including without limitation any
state securities law or any rule or regulation thereunder (the matters in the
foregoing clauses (a) through (c) being, collectively, "Violations"). Subject to
the restrictions set forth in Section 6.3 with respect to the number of legal
counsel, the Company will reimburse the Investors and each such underwriter or
controlling person and each such other Indemnified Person, promptly as such
expenses are incurred and are due and payable, for any legal fees or other
reasonable expenses incurred by them in connection with investigating or
defending any Claim. Notwithstanding anything to the contrary contained herein,
the indemnification agreement contained in this Section 6.1: (i) does not apply
to Claims arising out of or based upon a Violation that occurs in reliance upon
and in conformity with information furnished in writing to the Company by an
Indemnified Person expressly for use in connection with the preparation of the
Registration Statement or any such amendment thereof or supplement thereto, if
such prospectus was timely made available by the Company pursuant to Section 3.3
hereof; (ii) does not apply to a Claim arising out of or based on any failure by
any Indemnified Person to comply with prospectus delivery requirements (or the
Securities Act, the Exchange Act or any other law or legal requirement
applicable to them) or any covenant or agreement contained in the Purchase
Agreement or this Agreement; and (iii) does not apply to amounts paid in
settlement of any Claim if such settlement is made without the prior written
consent of the Company, which consent will not be unreasonably withheld. This
indemnity obligation will remain in full force and effect regardless of any
investigation made by or on behalf of the
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Indemnified Persons and will survive the transfer of the Registrable Securities
by the Investors under Article IX of this Agreement.
6.2 In connection with any Registration Statement in which an Investor
is participating, each such Investor will indemnify and hold harmless, severally
and not jointly, to the same extent and in the same manner set forth in Section
6.1 above, the Company, each of its directors, each of its officers who signs
the Registration Statement, each person, if any, who controls the Company within
the meaning of the Securities Act or the Exchange Act (each an "Indemnified
Person") against any Claim to which any of them may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such Claim arises out
of or is based upon any of the following: (a) any matter of the type referred to
clause (a) or (b) in Section 6.1 above in each case to the extent (and only to
the extent) that such violation occurs in reliance upon and in conformity with
written information furnished to the Company by such Investor expressly for use
in connection with such Registration Statement or (b) any failure by such
Investor to comply with prospectus delivery requirements (or the Securities Act,
the Exchange Act or any other law or legal requirement applicable to sales under
the Registration Statement) or any covenant or agreement contained in the
Purchase Agreement or this Agreement with respect to sales under the
Registration Statement. Subject to the restrictions set forth in Section 6.3,
such Investor will promptly reimburse any legal or other expenses (promptly as
such expenses are incurred and due and payable) reasonably incurred by them in
connection with investigating or defending any such Claim. However, the
indemnity agreement contained in this Section 6.2 does not apply to amounts paid
in settlement of any Claim if such settlement is effected without the prior
written consent of such Investor, which consent will not be unreasonably
withheld, and no Investor will be liable under this Agreement (including this
Section 6.2 and Article VII) for the amount of any Claim that exceeds the net
proceeds actually received by such Investor as a result of the sale of
Registrable Securities pursuant to such Registration Statement. This indemnity
will remain in full force and effect regardless of any investigation made by or
on behalf of an Indemnified Party and will survive the transfer of the
Registrable Securities by the Investors under Article IX of this Agreement.
6.3 Promptly after receipt by an Indemnified Person under this Article
VI of notice of the commencement of any action (including any governmental
action), such Indemnified Person will, if a Claim in respect thereof is to be
made against any indemnifying party under this Article VI, deliver to the
indemnifying party a written notice of the commencement thereof. The
indemnifying party may participate in, and, to the extent the indemnifying party
so desires, jointly with any other indemnifying party similarly given notice,
assume control of the defense thereof with counsel mutually satisfactory to the
indemnifying parties and the Indemnified Person. In that case, the indemnifying
party will diligently pursue such defense. If, in the reasonable opinion of
counsel retained by the indemnifying party, the representation by such counsel
of the Indemnified Person and the indemnifying party would be inappropriate due
to actual or potential conflicts of interest between the Indemnified Person and
any other party represented by such counsel in such proceeding or the actual or
potential defendants in, or targets of, any such action including the
Indemnified Person and such Indemnified Person reasonably determines that there
may be legal defenses available to such Indemnified Person that are different
from or in addition to those available to the indemnifying party, then the
Indemnified Person is entitled to assume such defense and may retain its own
counsel, with the fees and expenses to be paid by the indemnifying party
(subject to the
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restrictions on settlement under Section 6.1 or 6.2, as applicable). The Company
will pay for only one separate legal counsel for the Investors collectively, and
such legal counsel will be selected by the Investors holding a majority in
interest of the Registrable Securities. The failure to deliver written notice to
the indemnifying party within a reasonable time of the commencement of any such
action does not relieve an indemnifying party of any liability to an Indemnified
Person under this Article VI, except to the extent that the indemnifying party
is prejudiced in its ability to defend such action. The indemnification required
by this Article VI will be made by periodic payments of the amount thereof
during the course of the investigation or defense, as such expense, loss, damage
or liability is incurred and is due and payable.
ARTICLE VII.
CONTRIBUTION
To the extent that any indemnification provided for herein is
prohibited or limited by law, the indemnifying party will make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Article VI to the fullest extent permitted by law. However, (a) no
contribution will be made under circumstances where the maker would not have
been liable for indemnification under the fault standards set forth in Article
VI, (b) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
will be entitled to contribution from any seller of Registrable Securities who
was not guilty of such fraudulent misrepresentation, and (c) contribution
(together with any indemnification or other obligations under this Agreement) by
any seller of Registrable Securities will be limited in amount to the net amount
of proceeds received by such seller from the sale of such Registrable
Securities.
ARTICLE VIII.
EXCHANGE ACT REPORTING
In order to make available to the Investors the benefits of Rule 144
or any similar rule or regulation of the SEC that may at any time permit the
Investors to sell securities of the Company to the public without registration,
the Company will, until all of the Common Shares have been sold by the
Investors:
(a) File with the SEC in a timely manner, and make and keep
available, all reports and other documents required of the Company under the
Securities Act and the Exchange Act so long as the Company remains subject to
such requirements (it being understood that nothing herein limits the Company's
obligations under Section 4.3 of the Purchase Agreement) and the filing and
availability of such reports and other documents is required for the applicable
provisions of Rule 144; and
(b) Furnish to each Investor, so long as such Investor holds
Registrable Securities, promptly upon the Investor's request, (i) a written
statement by the Company that it has complied with the reporting requirements of
the Securities Act and the Exchange Act, (ii) a copy of the most recent annual
or quarterly report of the Company and such other reports and documents filed by
the Company with the SEC and (iii) such other information
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as may be reasonably requested to permit the Investors to sell such securities
pursuant to Rule 144 without registration.
ARTICLE IX.
ASSIGNMENT OF REGISTRATION RIGHTS
The rights of the Investors hereunder, including the right to have the
Company register Registrable Securities pursuant to this Agreement, will be
automatically assigned by the Investors to transferees or assignees of all or
any portion of the Registrable Securities, but only if (a) the Investor agrees
in writing with the transferee or assignee to assign such rights, and a copy of
such agreement is furnished to the Company within a reasonable time after such
assignment, (b) the Company is, within a reasonable time after such transfer or
assignment, 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 transferred or assigned, (c) such transfer or
assignment was not made under the Registration Statement or Rule 144, (d) at or
before the time the Company received the written notice contemplated by clause
(b) of this sentence, the transferee or assignee agrees in writing with the
Company to be bound by all of the provisions contained herein, (e) such transfer
is made in accordance with the applicable requirements of the Purchase Agreement
and (f) the transferee is an "accredited investor" as that term is defined in
Rule 501 of Regulation D. Any transferee or assignee of an Investor under
Article IX shall be deemed an "Investor" for all purposes of this Agreement, and
shall be entitled to all rights of, and subject to all obligations (including
indemnification obligations) of, an Investor hereunder.
ARTICLE X.
AMENDMENT OF REGISTRATION RIGHTS
This Agreement may be amended and the obligations hereunder may be
waived (either generally or in a particular instance, and either retroactively
or prospectively) only with the written consent of the Company and of the
Investors who then hold a majority in interest of the Registrable Securities
(but not including any Investor who is not affected by such amendment or
waiver). Any amendment or waiver effected in accordance with this Article X is
binding upon each Investor and the Company. Notwithstanding the foregoing, no
amendment or waiver will adversely affect any Investor without its consent.
Neither Article VI nor Article VII hereof may be amended or waived in a manner
adverse to an Investor without its consent.
ARTICLE XI.
MISCELLANEOUS
11.1 Conflicting Instructions. A person or entity is deemed to be a
holder of Registrable Securities whenever such person or entity owns of record
such Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more persons or entities with respect to the
same Registrable Securities, the Company will act upon the basis of
instructions, notice or election received from the registered owner of such
Registrable Securities.
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11.2 Notices. Any notices required or permitted to be given under the
terms of this Agreement will be given and deemed received as set forth in the
Purchase Agreement.
11.3 Waiver. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, does not operate as a waiver thereof.
11.4 Governing Law. This Agreement will be governed by and interpreted
in accordance with the laws of the State of Delaware without regard to the
principles of conflict of laws. The parties hereto hereby submit to the
exclusive jurisdiction of the United States federal and state courts located in
the State of Delaware with respect to any dispute arising under this Agreement,
the agreements entered into in connection herewith or the transactions
contemplated hereby or thereby.
11.5 Severability. If any provision of this Agreement is invalid or
unenforceable under any applicable statute or rule of law, then such provision
will be deemed modified in order to conform with such statute or rule of law.
Any provision hereof that may prove invalid or unenforceable under any law
will not affect the validity or enforceability of any other provision hereof.
11.6 Entire Agreement. This Agreement and the Purchase Agreement
(including all schedules and exhibits thereto) constitute the entire agreement
among the parties hereto with respect to the subject matter hereof and thereof.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein or therein. This Agreement supersedes
all prior agreements and understandings among the parties hereto with respect
to the subject matter hereof.
11.7 Successors and Assigns. Subject to the requirements of Article IX
hereof, this Agreement inures to the benefit of and is binding upon the
successors and assigns of each of the parties hereto. Notwithstanding anything
to the contrary herein, including, without limitation, Article IX, the rights of
an Investor hereunder are assignable to and exercisable by a bona fide pledgee
of the Registrable Securities in connection with an Investor's margin or
brokerage accounts.
11.8 Use of Pronouns. All pronouns refer to the masculine,feminine or
neuter, singular or plural, as the context may require.
11.9 Headings. The headings of this Agreement are for convenience
of reference only, are not part of this Agreement and do not affect its
interpretation.
11.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which is deemed an original but all of which constitute
one and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by facsimile transmission, and facsimile
signatures are binding on the parties hereto.
11.11 Further Assurances. Each party will do and perform, or cause to
be done and performed, all such further acts and things, and will execute and
deliver all other agreements, certificates, instruments and documents, as
another party may reasonably request in order to
15
carry out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
11.12 Consents. All consents and other determinations to be made by the
Investors pursuant to this Agreement will be made by the Initial Investors or
the Investors holding a majority in interest of the Registrable Securities.
11.13 No Strict Construction. The language used in this Agreement is deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
* * * *
IN WITNESS WHEREOF, the undersigned Investors and the Company have caused
this Agreement to be duly executed as of the date first above written.
COMPANY:
AKSYS, LTD.
By:
-------------------------------------
Name:
------------------------------
Title:
------------------------------
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IN WITNESS WHEREOF, the undersigned Investors and the Company have caused
this Agreement to be duly executed as of the date first above written.
INVESTORS:
-----------------------------------------
By:
-------------------------------------
Name:
------------------------------
Title:
------------------------------
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