Exhibit (10.4)
EXHIBIT B
to Securities Purchase Agreement
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), is made as of
December 12, 1997, by and among Biospherics Incorporated, a Delaware
corporation (the "Company"), with headquarters located at 12051 Indian Creek
Court, Beltsville, Maryland, and the undersigned (the "Purchaser").
RECITALS
A. In connection with the Securities Purchase Agreement dated of even
date herewith by and between the Company and Purchaser (the "Securities
Purchase Agreement"), the Company has agreed, upon the terms and subject to
the conditions contained therein, to issue and sell to Purchaser (i) shares
of the Company's Common Stock, par value $.005 per share (the "Common Stock")
and (ii) warrants to purchase shares of Common Stock in the form attached as
Exhibits A-1 and A-2 to the Securities Purchase Agreement. The shares of
Common Stock being purchased under the Securities Purchase Agreement are
referred to herein as the "Common Shares". The warrants being purchased
under the Securities Purchase Agreement are referred to herein as the
"Warrants". The shares of Common Stock issuable upon the exercise of or
otherwise pursuant to the Warrants are referred to herein as the "Warrant
Shares".
B. To induce Purchaser to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights
under the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "Securities
Act"), and applicable state securities laws.
AGREEMENTS
NOW THEREFORE, 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 Purchaser
hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following terms shall
have the following meanings:
(a) "Purchaser" means Purchaser and any transferees or assignees
who agree to become bound by the provisions of this Agreement in accordance
with Article IX hereof.
(b) "register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities
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Act and pursuant to Rule 415 under the Securities Act or any successor rule
providing for offering securities on a continuous basis ("Rule 415"), and the
declaration or ordering of effectiveness of such Registration Statement by
the United States Securities and Exchange Commission (the "SEC").
(c) "Registrable Securities" means the Common Shares and Warrant
Shares and any shares of capital stock issued or issuable, from time to time
(with any adjustments), on or in exchange for or otherwise with respect to
the Common Stock or any other Registrable Securities.
(d) "Registration Statement" means a registration statement of the
Company under the Securities Act.
1.2 Capitalized Terms. Capitalized terms used herein and not otherwise
defined herein shall have the respective meanings set forth in the Securities
Purchase Agreement.
ARTICLE II
REGISTRATION
2.1 Mandatory Registration. The Company shall prepare, and, on or prior
to forty-five (45) days after the date of the Closing (the "Filing Date"),
file with the SEC a Registration Statement on Form S-3 (or, if Form S-3 is
not then available, on such form of Registration Statement as is then
available to effect a registration of all of the Registrable Securities,
subject to the consent of Purchaser (as determined pursuant to Section 11.10
hereof)) covering the resale of all of the Registrable Securities, which
Registration Statement, to the extent allowable under the Securities Act and
the Rules promulgated thereunder (including Rule 416), shall state that such
Registration Statement also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon exercise of the Warrants
pursuant to the so-called anti-dilution provisions thereof. The Registrable
Securities included in the Registration Statement shall be allocated among
Purchaser as set forth in Section 11.11 hereof. The Registration Statement
(and each amendment or supplement thereto, and each request for acceleration
of effectiveness thereof) shall be provided to (and subject to the approval
of (which approval shall not be unreasonably withheld or denied)) Purchaser
and their counsel prior to its filing or other submission.
2.2 Underwritten 0ffering. If any offering pursuant to a Registration
Statement pursuant to Section 2.1 hereof involves an underwritten offering,
Purchaser who hold a majority in interest of the Registrable Securities
subject to such underwritten offering shall have the right to select a total
of one firm of legal counsel to represent Purchaser and an investment banker
or bankers and manager or managers to administer the offering, which
investment banker or bankers or manager or managers shall be reasonably
satisfactory to the Company.
2.3 Payments by the Company. The Company shall cause the registration
statement to become effective as soon as practicable, but in no event later
than the ninetieth (90th) day following the date of the Closing (the
"Registration Deadline"). If (i) the registration statement(s) covering the
Registrable Securities required to be filed by the Company pursuant to
Section 2.1 hereof is not declared effective by the SEC on or before the
Registration Deadline, or
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(ii) after the registration statement has been declared effective by the SEC,
sales of all the Registrable Securities (including any Registrable Securities
required to be registered pursuant to Section 3.2 hereof) cannot be made
pursuant to the registration statement (by reason of a stop order or the
Company's failure to update the registration statement or any other reason
outside the control of Purchaser) or (iii) the Common Stock is not listed or
included or quotation on the NASDAQ National Market, NASDAQ SmallCap Market,
the New York Stock Exchange or the American Stock Exchange after being so
listed or included for quotation, then the Company will make payments to
Purchaser in such amounts and at such times as shall be determined pursuant
to this Section 2.3 as partial relief for the damages to Purchaser by reason
of any such delay in or reduction of their ability to sell the Registrable
Securities (which remedy shall not be exclusive of any other remedies
available at law or in equity). In such event, the Company shall pay to
Purchaser an amount equal to (i) (A) .02 times (B) the aggregate purchase
price of the Common Shares and Warrants held by Purchaser (including, without
limitation, Warrants that have been converted into Warrant Shares) times (ii)
the sum of: (A) the number of months (prorated per day for partial months)
following the Registration Deadline prior to the date the Registration
Statement filed pursuant to Section 2.1 is declared effective by the SEC plus
(B) the number of months (prorated per day for partial months) following the
Registration Deadline but prior to the termination of the Registration
Periods that sales cannot be legally made pursuant to the Registration
Statement after the Registration Statement has been declared effective plus
(c) the number of months (prorated per day for partial months) that the
Common Stock is not listed or included for quotations on the NASDAQ National
Market, NASDAQ SmallCap Market, New York Stock Exchange, or American Stock
Exchange or that trading thereon is halted after the Registration Statement
has been declared effective. Such amounts shall be paid in cash. Payments of
cash pursuant hereto shall be made within five (5) days after the end of each
period that gives rise to such obligation, provided that, if any such period
extends for more than thirty (30) days, payments shall be made for each such
thirty (30) day period within five (5) days after the end of such thirty (30)
day period.
2.4 Piggy-Back Registrations. If at any time prior to the expiration of
the Registration Period (as hereinafter defined) the Company shall file with
the SEC a Registration Statement relating to an offering for its own account
or the account of others under the Securities Act of any of its equity
securities (other than on Form S-4 or Form S-8 or their then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans), then the
Company shall send to Purchaser, who has a right to have Registrable
Securities covered by a Registration Statement pursuant to this Agreement
written notice of such determination and, if within fifteen (15) days after
the date of such notice, Purchaser shall so request in writing, the Company
shall include in such Registration Statement all or any part of the
Registrable Securities Purchaser requests to be registered, except that if,
in connection with any underwritten public offering for the account of the
Company the managing underwriters) thereof shall impose a limitation on the
number of shares of Common Stock which may be included in the Registration
Statement because, in such underwriter(s)'judgment, marketing or other
factors dictate such limitation is necessary to facilitate public
distribution, then the Company shall be obligated to include in such
Registration Statement only such limited portion of the Registrable
Securities with respect to which Purchaser has requested inclusion hereunder
as the underwriter shall permit. Any exclusion of Registrable Securities
shall be made pro rata among Purchaser seeking to include Registrable
Securities, in proportion to the number of Registrable Securities sought to
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be included by Purchaser; provided, however, that the Company shall not
exclude any Registrable Securities unless the Company has first excluded all
outstanding securities, the holders of which are not entitled to inclusion of
such securities in such Registration Statement or are not entitled to pro
rata inclusion with the Registrable Securities; and provided, further,
however, that, after giving effect to the immediately preceding proviso, any
exclusion of Registrable Securities shall be made pro rata with holders of
other securities having the right to include such securities in the
Registration Statement. No right to registration of Registrable Securities
under this Section 2.4 shall be construed to limit any registration required
under Section 2.1 or 3.2 hereof. If an offering in connection with which
Purchaser is entitled to registration under this Section 2.4 is an
underwritten offering, then Purchaser whose Registrable Securities are
included in such Registration Statement shall, unless otherwise agreed by the
Company, offer and sell such Registrable Securities in an underwritten
offering using the same underwriter or underwriters and, subject to the
provisions of this Agreement, on the same terms and conditions as other
shares of Common Stock included in such underwritten offering.
2.5 Eligibility for Form S-3. The Company represents and warrants that
it meets the requirements for the use of Form S-3 for registration of the
re-sale by Purchaser of the Registrable Securities. The Company covenants
and agrees that throughout the Registration Period (as herein defined), the
Company shall continue to be eligible to use Form S-3 for registration of
such re-sale and the Company shall file all reports required to be filed by
the Company with the SEC in a timely manner so as to maintain such
eligibility for the use of Form S-3.
ARTICLE III
OBLIGATIONS OF THE COMPANY
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
3.1 The Company shall prepare promptly and file with the SEC not later
than the Filing Date the Registration Statement required by Section 2.1, and
cause such Registration Statement relating to Registrable Securities to
become effective as soon as practicable after such filing, and keep the
Registration Statement effective pursuant to Rule 415 at all times until such
date as is the earlier of (i) the date on which all of the Registrable
Securities have been sold (and no further Registrable Securities may be
issued in the future) and (ii) the date on which all of the Registrable
Securities (in the reasonable opinion of counsel to Purchaser) may be
immediately sold to the public without registration and without restriction
as to the number with Registrable Securities to be sold, whether pursuant to
Rule 144 or otherwise (the "Registration Period"). The Registration
Statement (including any amendments or supplements thereto and prospectuses
contained therein and all documents incorporated by reference therein) shall
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 not misleading.
3.2 The Company shall prepare and file with the SEC such amendments
(including post- effective amendments) and supplements to a Registration
Statement and the prospectus used in connection with the Registration
Statement as may be necessary to keep the Registration Statement effective at
all times during the Registration Period, and, during such period, comply
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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 termination of the Registration Period or, if earlier,
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. In the event the number
of shares available under a Registration Statement filed pursuant to this
Agreement is insufficient to cover all of the Registerable Securities issued
pursuant to the Securities Purchase Agreement and exercise of the Warrants,
the Company shall 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 Registerable Securities, in each case, as soon as
practicable, but in any event within twenty (20) business days after the
necessity therefore arises. The Company shall use its best efforts to cause
such amendment and/or new Registration Statement to become effective as soon
as practicable following the filing thereof. The provisions of Section 2.3
above shall be applicable with respect to such obligations, with the ninety
(90) days running from the day after the date on which the Company reasonably
first determines (or reasonably should have determined) the need therefor.
3.3 The Company shall furnish to Purchaser whose Registrable Securities
are included in the Registration Statement and its legal counsel (a) promptly
after the same is prepared and publicly distributed, filed with the SEC, or
received by the Company, one copy of the Registration Statement and any
amendment thereto, each preliminary prospectus and prospectus and each
amendment or supplement thereto, and, in the case of the Registration
Statement referred to in Section 2.1, each letter written by or on behalf of
the Company to the SEC or the staff of the SEC, and each item of
correspondence from the SEC or the staff of the SEC, in each case relating to
such Registration Statement (other than any portion, if any, thereof which
contains information for which the Company has sought confidential
treatment), and (b) such number of copies of a prospectus, including a
preliminary prospectus, and all amendments and supplements thereto and such
other documents as Purchaser may reasonably request in order to facilitate
the disposition of the Registrable Securities owned (or to be owned) by
Purchaser.
3.4 The Company shall use reasonable efforts to (a) register and qualify
the Registrable Securities covered by the Registration Statement under
securities laws of such jurisdictions in the United States as Purchaser who
holds (or has the right to hold) Registrable Securities being offered
reasonably requests, (b) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (c) take such other
actions as may be necessary to maintain such registrations and qualifications
in effect at all times during the Registration Period, and (d) take all other
actions reasonably necessary or advisable to qualify the Registrable
Securities for sale in such jurisdictions; provided, however, that the
Company shall not be required in connection therewith or as a condition
thereto 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 the Company material expense or burden, or (v) make
any change in its charter or by-laws, which in each case the board of
directors of the Company determines to be contrary to the best interests of
the Company and its stockholders.
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3.5 In the event Purchaser 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 Section
2.1 or 3.2 hereof select underwriters for the offering, the, Company shall
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 underwriters of such
offering.
3.6 As soon as practicable after becoming aware of such event, the
Company shall notify (by telephone and also by facsimile and reputable
overnight courier) Purchaser 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 omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and use
its best efforts promptly (but in any event within five (5) days) to prepare
a supplement or amendment to the Registration Statement to correct such
untrue statement or omission, and deliver such number of copies of such
supplement or amendment to Purchaser as Purchaser may reasonably request.
3.7 The Company shall 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, to obtain the withdrawal of such
order at the earliest practicable time and to notify (by telephone and also
by facsimile and reputable overnight carrier) Purchaser who 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.
3.8 The Company shall permit a single firm of counsel designated by
Purchaser to review the Registration Statement and all 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 not file any document in a form to which such counsel reasonably
objects and will not request acceleration of the Registration Statement
without prior notice to such counsel. The sections of the Registration
Statement covering information with respect to the Investors, the Investors'
beneficial ownership of securities of the Company or the Investors' intended
method of disposition of the Registerable Securities shall conform to the
information provided to the Company by each of the Investors.
3.9 The Company shall make generally available to its security holders
as soon as practical, but not later than ninety (90) days after the close of
the period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 under the Securities Act) covering a twelve-month
period beginning not later than the first day of the Company's fiscal quarter
next following the effective date of the Registration Statement.
3.10 At the request of Purchaser in connection with any underwritten
offer hereunder, the Company shall furnish, on the date of effectiveness of
the Registration Statement and thereafter from time to time on such dates as
Purchaser may reasonably request (a) an opinion, dated as of such applicable
date, from counsel representing the Company addressed to Purchaser and in
form, scope and substances as is customarily given in an underwritten public
offering and (b) a letter, dated as of such applicable date, from the
Company's independent certified public
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accountants addressed to Purchaser and in form, scope and substance as
customarily given to underwriters in an underwritten public offering.
3.11 The Company shall make available for inspection during the
Registration Period by (i) Purchaser, (ii) any underwriter participating in
any disposition pursuant to the Registration Statement, (iii) one firm of
attorneys and one firm of accountants retained by Purchaser, and (iv) one
firm of attorneys retained by all such underwriters (collectively, the
"Inspectors") all pertinent financial and other records, and pertinent
corporate documents and properties of the Company (collectively, the
"Records"), as shall be reasonably deemed necessary by each Inspector and
cause the Company's officers, directors and employees to supply all
information which any Inspector may reasonably request; provided, however,
that each Inspector shall hold in confidence and shall not make any
disclosure (except to Purchaser) of any Record or other information which the
Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified in writing, unless (a) the
disclosure of such Records is necessary to avoid or correct a misstatement or
omission in any Registration Statement, (b) the release of such Records is
ordered pursuant to a subpoena or other order from a court or government body
of competent jurisdiction, or is otherwise required by applicable law or
legal process or (c) 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 Purchaser). The Company shall not be
required to disclose any confidential information in such Records to any
Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and reasonable substance satisfactory to
the Company) with the Company with respect thereto, substantially in the form
of this Section 3.11. Purchaser agrees that it shall, upon learning that
disclosure of such Records 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 its expense, to undertake appropriate
action to prevent disclosure of, or to obtain a protective order for, the
Records deemed confidential. Nothing herein (or in any other confidentiality
agreement between the Company and Purchaser) shall be deemed to limit
Purchaser's ability to sell Registrable Securities in a manner which is
consistent with applicable laws and regulations.
3.12 The Company shall hold in confidence and not make any disclosure of
information concerning Purchaser provided to the Company unless (a)
disclosure of such information is necessary to comply with federal or state
securities laws, (b) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (c) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction or is otherwise
required by applicable law or legal process, (d) such information 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 Company), or (e)
Purchaser consents to the form and content of any such disclosure. The
Company agrees that it shall, upon learning that disclosure of such
information concerning Purchaser is sought in or by a court or governmental
body of competent jurisdiction or through other means, give prompt notice to
Purchaser prior to making such disclosure, and allow Purchaser, at its
expense, to undertake appropriate action to prevent disclosure of, or to
obtain a protective order for, such information.
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3.13 For so long as Purchaser owns any of the Securities or three (3)
years from the Closing Date, whichever is sooner, the Company shall cause the
listing and the continuation of listing of all the Registrable Securities
covered by the Registration Statement on the NASDAQ National Market System
and cause the Registrable Securities to be quoted or listed on each
additional national securities exchange or quotation system upon which the
Common Stock is then listed or quoted.
3.14 The Company shall provide a transfer agent and registrar, which may
be a single entity, for the Registrable Securities not later than the
effective date of the Registration Statement.
3.15 The Company shall cooperate with Purchaser who hold Registrable
Securities being offered and the managing underwriter or underwriters, if
any, to facilitate the timely preparation and delivery of certificates (not
bearing any restrictive legends) representing Registrable Securities to be
offered pursuant to the Registration Statement and enable such certificates
to be in such denominations or amounts, as the case may be, as the managing
underwriter or underwriters, if any, or Purchaser may reasonably request and
registered in such names as the managing underwriter or underwriters, if any,
or Purchaser may request, and, within one (1) business days after a
Registration Statement which includes Registrable Securities is ordered
effective by the SEC, the Company shall cause legal counsel selected by the
Company to deliver, to the transfer agent for the Registrable Securities
(with copies to Purchaser whose Registrable Securities are included in such
Registration Statement) an instruction in the form attached hereto as Exhibit
1 and an opinion of such counsel in the form attached hereto as Exhibit 2.
3.16 At the request of Purchaser, the Company shall promptly prepare and
file with the SEC such amendments (including post-effective amendments) and
supplements to a Registration Statement and the prospectus used in connection
with the Registration Statement as may be necessary in order to change the
plan of distribution set forth in such Registration Statement.
3.17 The Company shall comply with all applicable laws related to a
Registration Statement and offering and sale of securities and all applicable
rules and regulations of governmental authorities in connection therewith
(including, without limitation, the Securities Act and the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
by the Commission).
3.18 The Company shall take all such other actions as Purchaser or the
underwriters, if any, reasonably request in order to expedite or facilitate
the disposition of such Registrable Securities.
3.19 From and after the date of this Agreement, the Company shall not,
and shall not agree to, allow the holders of any securities of the Company to
include any of their securities in any Registration Statement or any
amendment or supplement thereto under Section 2.1 or 3.2 hereof without the
consent of the holders of a majority of the Registrable Securities.
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ARTICLE IV
OBLIGATIONS OF PURCHASER
In connection with the registration of the Registrable Securities,
Purchaser shall have the following obligations:
4.1 Purchaser shall 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 shall be reasonably
required to effect the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company
may reasonably request. At least ten (10) business days prior to the first
anticipated filing date of the Registration Statement, the Company shall
notify Purchaser of the information the Company requires from Purchaser.
4.2 Purchaser, by such Purchaser's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by
the Company in connection with the preparation and filing of the Registration
Statements hereunder, unless Purchaser has notified the Company in writing of
such Purchaser's election to exclude all of Purchaser's Registrable
Securities from the Registration Statement.
4.3 Purchaser whose Registrable Securities are included in a
Registration Statement understands that the Securities Act may require
delivery of a prospectus relating thereto in connection with any sale thereof
pursuant to such Registration Statement, and Purchaser shall use its
reasonable efforts to comply with the applicable prospectus delivery
requirements of the Securities Act in connection with any such sale.
4.4 Purchaser agrees that, upon receipt of written notice from the
Company of the happening of any event of the kind described in Section 3.6,
such Purchaser will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Purchaser's receipt of the copies of the supplemented
or amended prospectus contemplated by Section 3.6 and, if so directed by the
Company, Purchaser shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in Purchaser's possession (other than a limited number of
permanent file copies), of the prospectus covering such Registrable
Securities current at the time of receipt of such notice.
4.5 Without limiting Purchaser's rights under Section 2.1 or 3.2 hereof,
no Purchaser may participate in any underwritten distribution hereunder
unless Purchaser (a) agrees to sell Purchaser's Registrable Securities on the
basis provided in any underwriting arrangements in usual and customary form
entered into by the Company, (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 any expenses in excess of those payable by the Company
pursuant to Article V.
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ARTICLE V
EXPENSES OF REGISTRATION
All expenses, other than underwriting discounts and commissions, incurred
in connection with registrations, filings or qualifications pursuant to
Articles II and III, including, without limitation, all registration, listing
and qualification fees, printers and accounting fees, the fees and
disbursements of counsel for the Company, and the reasonable fees and
disbursements of one firm of counsel selected by Purchaser pursuant to
Section 2.2, hereof shall be borne by the Company.
ARTICLE VI
INDEMNIFICATION
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
6.1 To the extent permitted by law, the Company will indemnify, hold
harmless and defend (a) Purchaser who holds such Registrable Securities, (b)
each underwriter of Registrable Securities and (c) the directors, officers,
partners, members, employees, agents and persons who control Purchaser within
the meaning of Section 15 of the Securities Act or Section 20 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), if any,
(each, an "Indemnified Person"), against any joint or several losses, claims,
damages, liabilities or expenses (collectively, 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 may become subject insofar as such Claims arise out of or are based
upon: (i) any untrue statement or alleged untrue statement of a material fact
in a Registration Statement or the omission or alleged omission to state
therein a material fact required to be stated or necessary to make the
statements therein not misleading, (ii) any untrue statement or alleged
untrue statement of a material fact contained in any preliminary prospectus
if used prior to the effective date of such Registration Statement, or
contained in the final prospectus (as amended or supplemented, if the Company
files any amendment thereof or supplement thereto with the SEC) 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 (iii) any violation or
alleged violation by the Company of the Securities Act, the Exchange Act, any
other law, including, without limitation, any state securities law, or any
rule or regulation thereunder relating to the offer or sale of the
Registrable Securities (the matters in the foregoing clauses (i) through
(iii) being, collectively, "Violations"). Subject to the restrictions set
forth in Section 6.3 with respect to the number of legal counsel, the Company
shall reimburse Purchaser, each such underwriter and controlling person, and
each such other Indemnified Person, promptly as such expenses are incurred
and are due and payable, for any reasonable legal fees or other reasonable
expenses incurred by them in connection with investigating or defending any
such Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6.1: (x) shall not apply
to an Indemnified Person with respect to a Claim arising out of or based upon
a Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by such Indemnified Person expressly for
use in the Registration Statement or any such amendment thereof or supplement
thereto; (y) shall not apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld; and (z) with respect to any
preliminary prospectus, shall not inure to the benefit of any Indemnified
Person if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented, if such corrected prospectus was timely made
available by the Company pursuant to Section 3.3 hereof, and the Indemnified
Person was promptly advised in writing not to use the incorrect prospectus
prior to the use giving rise to a Violation and such Indemnified
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Person, notwithstanding such advice, used it. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by Purchaser pursuant to Article IX.
6.2 In connection with any Registration Statement in which Purchaser is
participating, Purchaser agrees to indemnify, hold harmless and defend, to
the same extent and in the same manner set forth in Section 6. 1, the
Company, each of its directors, each of its officers who signs the
Registration Statement, its employees, agents and persons, if any, who
control the Company within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, and any other stockholder selling securities
pursuant to the Registration Statement, together with its directors, officers
and members, and any person who controls such stockholder or underwriter
within the meaning of the Securities Act or the Exchange Act (such an
"Indemnified Party"), 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 Violation, 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
Purchaser expressly for use in connection with such Registration Statement;
and subject to Section 6.3 Purchaser will reimburse any legal or other
expenses (promptly as such expenses are incurred and are due and payable)
reasonably incurred by them in connection with investigating or defending any
such Claim; provided, however, that the indemnity agreement contained in this
Section 6.2 shall not apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of Purchaser,
which consent shall not be unreasonably withheld; provided, further, however,
that Purchaser shall be liable under this Agreement (including this Section
6.2 and Article VII) for only that amount as does not exceed the net proceeds
actually received by Purchaser as a result of the sale of Registrable
Securities pursuant to such Registration Statement. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of such Indemnified Party and shall survive the transfer of the
Registrable Securities by Purchaser pursuant to Article IX. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6.2 with respect to any preliminary prospectus
shall not inure to the benefit of any Indemnified Party if the untrue
statement or omission of material fact contained in the preliminary
prospectus was corrected on a timely basis in the prospectus, as then amended
or supplemented, and the Indemnified Party failed to utilize such corrected
prospectus.
6.3 Promptly after receipt by an Indemnified Person or Indemnified Party
under this Article VI of notice of the commencement of any action (including
any governmental action), such Indemnified Person or Indemnified Party shall,
if a Claim in respect thereof is to made against any indemnifying party under
this Article VI, deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party
and the Indemnified Person or the Indemnified Party, as the case may be;
provided, however, that such indemnifying party shall diligently pursue such
defense and that such indemnifying party shall not be entitled to assume such
defense and an Indemnified Person or Indemnified Party shall have the right
to retain its own counsel with the fees and expenses to be paid by the
indemnifying party, if the representation by such counsel of the Indemnified
Person or Indemnified Party and the indemnifying party would
11
be inappropriate due to actual or potential conflicts of interest between
such Indemnified Person or Indemnified Party and any other party represented
by such counsel in such proceeding or the actual or potential defendants in,
or targets of, any such action include both the Indemnified Person or the
Indemnified Party and any such Indemnified Person or Indemnified Party
reasonably determines that there may be legal defenses available to such
Indemnified Person or Indemnified Party which are different from or in
addition to those available to such indemnifvin2 party. The indemnifying
party shall pay for only one separate firm of legal counsel for the
Indemnified Persons or the Indemnified Parties, as applicable, and such legal
counsel shall be selected by Purchaser holding a majority-in-interest of the
Registrable Securities included in the Registration Statement to which the
Claim relates (with the approval of Purchaser if they hold Registrable
Securities included in such Registration Statement), if Purchaser are
entitled to indemnification hereunder, or by the Company, if the Company is
entitled to indemnification hereunder, as applicable. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of
any liability to the Indemnified Person or Indemnified Party under this
Article VI, except to the extent that the indemnifying party is actually
prejudiced in its ability to defend such action. The indemnification
required by this Article VI shall 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 any indemnification by an indemnifying party is prohibited
or limited by law, the indemnifying party agrees to 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; provided,
however, that (i) no contribution shall be made under circumstances where the
maker would not have been liable for indemnification under the fault
standards set forth in Article VI, (ii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person of Registrable Securities
who was not guilty of such fraudulent misrepresentation, and (iii)
contribution (together with any indemnification or other obligations under
this Agreement) by any seller of Registrable Securities shall be limited in
amount to the net amount of proceeds received by such seller from the sale of
such Registrable Securities.
ARTICLE VIII
REPORTS UNDER THE EXCHANGE ACT
With a view to making available to Purchaser the benefits of Rule 144
promulgated under the Securities Act or any other similar rule or regulation
of the SEC that may at any time permit Purchaser to sell securities of the
Company to the public without registration ("Rule 144"), the Company agrees,
during the Registration Period and for one year thereafter, to:
8.1 Make and keep public information available, as those terms are
understood and defined in Rule 144;
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8.2 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 shall limit the
Company's obligations under Section 4.3 of the Securities Purchase Agreement)
and the filing and availability of such reports and other documents is
required for the applicable provisions of Rule 144; and
8.3 Furnish to Purchaser so long as Purchaser holds Warrants or
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, 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 so filed
by the Company, and (iii) such other information as may be reasonably
requested to permit Purchaser to sell such securities pursuant to Rule 144
without registration.
ARTICLE IX
ASSIGNMENT OF REGISTRATION RIGHTS
The rights of Purchaser hereunder, including the right to have the
Company register Registrable Securities pursuant to this Agreement, shall be
automatically assignable by Purchaser to any transferee of all or any portion
of the Warrants or the Registrable Securities if: (a) Purchaser 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 (i) the name and
address of such transferee or assignee, and (ii) the securities with respect
to which such registration rights are being transferred or assigned, (c)
following such transfer or assignment, the further disposition of such
securities by the transferee or assignee is restricted under the Securities
Act or applicable state securities laws, (d) at or before the time the
Company receives the written notice contemplated by clause (ii) of this
sentence, the transferee or assignee agrees in writing for the benefit of the
Company to be bound by all of the provisions contained herein, and (e) such
transfer shall have been made in accordance with the applicable requirements
of the Securities Purchase Agreement. Notwithstanding any provision to the
contrary herein, Purchaser shall have the right to pledge the Registrable
Securities and in the event that the pledgee forecloses on the pledged
Registrable Securities, then the pledgee shall be entitled to exercise the
rights of the Purchaser hereunder.
ARTICLE X
AMENDMENT OF REGISTRATION RIGHTS
Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with written consent of the Company and
Purchaser who hold a majority interest of the Registrable Securities
(determined as if all Warrants then outstanding had been exercised for
Warrant Shares). Any amendment or waiver effected in accordance with this
Article X shall be binding upon Purchaser and the Company. Notwithstanding
the foregoing, no amendment or waiver shall retroactively affect Purchaser
without its consent or prospectively adversely affect Purchaser who no longer
owns any Warrants or Registrable Securities without its consent.
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Neither Article VI nor Article VII hereof may be amended or waived in a
manner adverse to Purchaser without its consent.
ARTICLE XI
MISCELLANEOUS
11.1 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 shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
11.2 Any notices herein required or permitted to be given shall be in
writing and may be personally served or delivered by courier (including a
recognized overnight delivery service) or by confirmed telecopy, and shall be
deemed delivered at the time and date of receipt (which shall include
telephone line facsimile transmission). The addresses for such
communications shall be:
If to the Company:
Biospherics Incorporated
12051 Indian Creek Court
Beltsville, MD 20705
Telecopy: 301-210-4908/09
Attention: Dr. Gilbert V. Levin
with a copy to:
Smith, Somerville & Case, L.L.C.
Attorneys At Law
100 Light Street
Baltimore, MD 21202
Telecopy: 410-385-8060
Attention: James Baker, Esq.
If to RGC International Investors, LDC:
c/o Rose Glen Capital Management, L.P.
251 St. Asaphs Road
Suite 200
3 Bala Plaza East
Bala Cynwyd, PA 19004
Telecopy: 610-617-0570
Attention: Wayne D. Bloch
with a copy to:
14
Ballard, Spahr, Andrews & Ingersoll
1735 Market Street
51st Floor
Philadelphia, PA 19103
Telecopy: 215-864-8999
Attention: Gerald J. Guarcini, Esq.
and if to Purchaser, at such address as Purchaser shall have provided in
writing to the Company, or at such other address as each such party furnishes
by notice given in accordance with this Section 11.2.
11.3 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, shall not operate as a waiver thereof.
11.4 This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware applicable to contracts made and to be
performed in the State of Delaware. The Company irrevocably consents to the
jurisdiction of the federal courts located in the state of Delaware and the
state courts of the State of Delaware located in the County of New Castle in
the State of Delaware in any suit or proceeding based on or arising under
this Agreement and irrevocably agrees that all claims in respect of such suit
or proceeding may be determined in such courts. The Company irrevocably
waives the defense of an inconvenient forum to the maintenance of such suit
or proceeding. The parties hereto further agree that service of process upon
the parties hereto mailed by first class mail shall be deemed in every
respect effective service of process upon each such party in any such suit or
proceeding. Nothing herein shall affect either party's right to serve
process in any other manner permitted by law. The parties hereto agree that
a final non-appealable judgment, in any such suit or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on such
judgment or in any other lawful manner.
11.5 This Agreement, the Warrants and the Securities Purchase Agreement
(including all schedules and exhibits thereto and all certificates and
opinions required thereby) 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 and therein. This Agreement, the Warrants and
the Securities Purchase Agreement supersede all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof and thereof.
11.6 Subject to the requirements of Article IX hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and
permitted assigns of each of the parties hereto.
11.7 The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof.
11.8 This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and
the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto, by facsimile
15
transmission of a copy of this Agreement bearing the signature of the party
so delivering this Agreement.
11.9 Each party shall do and perform, or cause to be done and performed,
all such further acts and things, and shall execute and deliver all such
other agreements, certificates, instruments and documents, as the other party
may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions
contemplated hereby.
11.10 All consents and other determinations to be made by Purchaser
pursuant to this Agreement shall be made by Purchaser holding a majority of
the Registrable Securities (determined as if all Warrants then outstanding
had been exercised for Warrant Shares) held by Purchaser.
11.11 The initial number of Registrable Securities included on any
Registration Statement and each increase to the number of Registrable
Securities included thereon shall be allocated 100% to Purchaser based on the
number of Registrable Securities held by Purchaser at the time of such
establishment or increase, as the case may be. In the event Purchaser shall
sell or otherwise transfer any of such holder's Registrable Securities, each
transferee shall be allocated a pro rata portion of the number of Registrable
Securities included on a Registration Statement for such transferor. Any
shares of Common Stock included on a Registration Statement and which remain
allocated to any person or entity which does not hold any Registrable
Securities shall be allocated to Purchaser, pro rata based on the number of
shares of Registrable Securities then held by Purchaser. Without implication
that the contrary would otherwise be true, for purposes, of this paragraph,
all Warrants then outstanding shall be assumed exercised for Warrant Shares.
11.12 If any provision of this Agreement shall be invalid or
unenforceable, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement.
11.13 The language used in this Agreement will be 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.
* * * * *
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
COMPANY:
BIOSPHERICS INCORPORATED
By: _______________________________
Name: _______________________________
Title: _______________________________
PURCHASER:
RGC INTERNATIONAL INVESTORS, LDC
By: Rose Glen Capital Management, L.P.
Investment Manager
By: RGC General Partner Corp., as General Partner
By: _____________________________
Its: ______________________________
17
EXHIBIT 1
to Registration
Rights Agreement
Date
American Stock Transfer and Trust Co.
6201 15th Avenue, 3rd Floor
Brooklyn, NY 11219
Ladies and Gentlemen:
This letter shall serve as our irrevocable authorization and direction to
you (1) to transfer or re-register (or at the holders request to reissue to
the holder thereof without any restrictive legend) the certificates for the
shares of Common Stock, par value $.005 per share (the "Common Stock"), of
Biospherics Incorporated, a Delaware corporation (the "Company"), represented
by certificate numbers _____ for an aggregate of _____ shares (the
"Outstanding Shares") of Common Stock presently registered in the name of
[Name of Investor] (the "Investor") (which shares were previously issued
pursuant to the Securities Purchase Agreement dated December 12, 1997 (the
"Agreement") or exercise of the Warrants (as hereinafter defined)), upon
surrender of such certificates to you, notwithstanding the legend appearing
on such certificates, and (2) to issue shares (the "Warrant Shares") of the
Common Stock to or upon the order of the registered holder from time to time
of the Warrants of the Company (the "Warrants") upon surrender to you of a
properly completed and duly executed Exercise Agreement and such Warrants
notwithstanding the legend appearing on such Warrants. The transfer or
re-registration of the certificates for the Outstanding Shares by you should
be made at such time as you are requested to do so by the record holder of
the Outstanding Shares. The certificate issued upon such transfer or
re-registration should be registered in such name as requested by the holder
of record of the certificate surrendered to you and should not bear any
legend which would restrict the transfer of the shares represented thereby.
In addition, you are hereby directed to remove any stop-transfer instruction
relating to the Outstanding Shares. Certificates for the shares issued
pursuant to the Agreement and Warrant Shares should not bear any restrictive
legend and should not be subject to any stop-transfer restriction.
Pursuant to applicable securities laws or certain agreements between the
Company and the Investor, the Investor may be prohibited during certain
limited periods of time from selling its Outstanding Shares or other shares
of Common Stock issued pursuant to the Agreement or issuable upon exercise of
the Warrants under the Registration Statement; provided, however, that such
Investor may continue to sell such securities pursuant to an exemption from
registration under the Securities Act of 1933, as amended (the "1933 Act").
The Company may, during such periods, deliver a notice to you advising you to
refrain from transferring any Outstanding Shares pursuant to such
Registration Statement, provided that such notice shall not prohibit the
transfer of such shares pursuant to an exemption from registration under the
1933 Act during such periods.
18
Contemporaneous with the delivery of this letter, the Company is
delivering to you a letter of ____________ as to registration of the
Outstanding Shares and the Conversion Shares under the Securities Act of
1933, as amended.
Should you have any questions concerning this matter, please contact me.
Very truly yours,
BIOSPHERICS INCORPORATED
________________________________
By:
Title:
Enclosures:
cc: [Name of Investor]
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EXHIBIT 2
to Registration
Rights Agreement
Date
American Stock Transfer and Trust Co.
6201 15th Avenue, 3rd Floor
Brooklyn, NY 11219
RE: Biospherics Incorporated
Ladies and Gentlemen:
We are counsel to Biospherics Incorporated, a Delaware corporation (the
"Company"), and we understand that [Name of Purchaser] (the "Holder") has
purchased from the Company (i) shares of the Company's common stock, par
value $.005 per share (the "Common Stock") and (ii) warrants to purchase
shares of Common Stock. Such securities were purchased by the Holder
pursuant to a Securities Purchase Agreement, dated as of December 12, 1997,
by and among the Company and the signatories thereto (the "Agreement").
Pursuant to a Registration Rights Agreement, dated as of December 12, 1997,
by and among the Company and the signatories thereto (the "Registration
Rights Agreement"), the Company agreed with the Holder, among other things,
to register the Registrable Securities (as that term is defined in the
Registration Rights Agreement) under the Securities Act of 1933, as amended
(the "Securities Act"), upon the terms provided in the Registration Rights
Agreement. In connection with the Company's obligations under the
Registration Rights Agreement, on ________ ___, 1998, the Company filed a
Registration Statement on Form S-_____ (File No. 333-_____________) (the
"Registration Statement") with the Securities and Exchange Commission (the
"SEC") relating to the Registrable Securities, which names the Holder as a
selling stockholder thereunder.
[Other customary introductory and scope of examination language to be inserted]
Based on the foregoing, we are of the opinion that the Registrable
Securities have been registered under the Securities Act.
[Other appropriate customary language to be included.]
Very truly yours,
cc: [Name of Purchaser]
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