Exhibit 4.12
REGISTRATION RIGHTS AGREEMENT
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THIS REGISTRATION RIGHTS AGREEMENT ("AGREEMENT") is entered into as
of June 29, 1999 by and between CYGNUS, INC., a Delaware corporation with
offices at 400 Penobscot Drive, Redwood City, California 94063 (the
"COMPANY"), and each person or entity listed as an investor on SCHEDULE I to
this Agreement (each individually an "INVESTOR" and collectively the
"INVESTORS").
W I T N E S S E T H:
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WHEREAS, pursuant to that certain Convertible Debenture and Warrant
Purchase Agreement by and between the Company and the Investors dated as of
June 29, 1999 (the "PURCHASE AGREEMENT"), the Company has agreed to sell and
issue to the Investor, and the Investor has agreed to purchase from the
Company, $14,000,000 principal amount of 8.5% Convertible Debentures Due June
29, 2004, and up to an additional $12,000,000 principal amount of such
Convertible Debentures pursuant to Article V of the Purchase Agreement
(collectively, the "DEBENTURES"), on the terms and conditions set forth
therein;
WHEREAS, the Purchase Agreement contemplates that the Debentures may
be converted into shares (the "COMMON SHARES") of common stock, $0.001 par
value, of the Company ("COMMON STOCK") pursuant to the terms and conditions
set forth in the Debentures; and
WHEREAS, pursuant to the terms of, and in partial consideration for,
the Investors' agreement to enter into the Purchase Agreement, at Closing the
Company has agreed to issue to the Investors warrants (the "Warrants")
exercisable for shares of Common Stock (the "Warrant Shares") in the form
attached as Exhibit 1.1B to the Purchase Agreement;
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in the
Purchase Agreement and this Agreement, the Company and each of the Investors
agree as follows:
1. CERTAIN DEFINITIONS. Capitalized terms used herein and not
otherwise defined shall have the meaning ascribed thereto in the Purchase
Agreement, the Warrants or the Debentures. As used in this Agreement, the
following terms shall have the following respective meanings:
"CLOSING" and "CLOSING DATE" shall have the meanings
ascribed to such terms in the Purchase Agreement.
"COMMISSION" or "SEC" shall mean the Securities and
Exchange Commission or any other federal agency at the time administering the
Securities Act.
"HOLDER" and "HOLDERS" shall include the Investors and any
transferee of the Debentures, Warrants, Warrant Shares, Common Shares or
other Registrable Securities
which have not been sold to the public to whom the registration rights
conferred by this Agreement have been transferred in compliance with this
Agreement.
"REGISTRABLE SECURITIES" shall mean: (i) the Common Shares
and Warrant Shares issued to each Holder or its permitted transferee or
designee upon conversion of the Debentures or exercise of the Warrants, as
applicable, or upon any stock split, stock dividend, recapitalization or
similar event with respect to such Common Shares or Warrant Shares; (ii) any
securities issued or issuable to each Holder upon the conversion, exercise or
exchange of any Debentures, Warrants, Warrant Shares, or Common Shares; and
(iii) any other security of the Company issued as a dividend or other
distribution with respect to, or upon conversion or exchange of or in
replacement of Registrable Securities.
The terms "REGISTER", "REGISTERED" and "REGISTRATION" shall
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act and applicable rules and
regulations thereunder, and the declaration or ordering by the SEC of the
effectiveness of such registration statement.
"REGISTRATION EXPENSES" shall mean all reasonable expenses
to be incurred by the Company in connection with the Holder's registration
rights under this Agreement, including, without limitation, all registration
and filing fees, printing expenses, fees and disbursements of counsel for the
Company, blue sky fees and expenses, and the expense of any audited financial
statements incident to or required by any such registration (but excluding
the compensation of regular employees of the Company, which shall be paid in
any event by the Company; provided that Registration Expenses shall not
include Selling Expenses).
"REGISTRATION STATEMENT" shall have the meaning set forth
in Section 2(a)(i) herein.
"REGULATION D" shall mean Regulation D as promulgated
pursuant to the Securities Act, and as subsequently amended.
"SECURITIES ACT" or "ACT" shall mean the Securities Act of
1933, as amended, together with the rules and regulations promulgated
thereunder.
"SELLING EXPENSES" shall mean all underwriting discounts
and selling commissions applicable to the sale of Registrable Securities and
all fees and disbursements of counsel for Holders.
2. REGISTRATION REQUIREMENTS. The Company shall use reasonable
commercial efforts to effect the registration of the Registrable Securities
(including, without limitation, an undertaking to file post-effective
amendments, appropriate qualification under applicable blue sky or other
state securities laws and appropriate compliance with applicable regulations
issued under the Securities Act) as would permit or facilitate the sale or
distribution of all the Registrable Securities in the manner (including
manner of sale) and in all states reasonably requested by the Holder on a
Principal Market. Such reasonable commercial efforts by the Company shall
include the following:
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(a) The Company shall, as expeditiously as reasonably
practicable after the Closing Date:
(i) Prepare and file a registration statement with
the Commission pursuant to Rule 415 under the Securities Act on Form S-3
under the Securities Act (or such other form as the Company is eligible to
use under the Securities Act) covering the Registrable Securities
("REGISTRATION STATEMENT") which Registration Statement (including any
amendments or supplements thereto and prospectuses contained 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. Such Registration Statement shall
initially register for resale a number of shares of Common Stock equal the
number of Common Shares issuable upon the conversion or exercise of the
Debentures and Warrants. Such Registration Statement shall, in addition and
without limitation, register (pursuant to Rule 416 under the Securities Act,
or otherwise) such additional indeterminate number of Registrable Securities
as shall be necessary to permit the conversion in full of the Debentures or
exercise of the Warrants to prevent dilution resulting from stock splits,
stock dividends or similar transactions. Thereafter, the Company shall use
reasonable commercial efforts to cause such Registration Statement and other
filings to be declared effective as soon as possible, and in any event within
to 90 days following the Closing Date (the "EFFECTIVE DATE"); PROVIDED,
HOWEVER, that, notwithstanding Sections 2(a)(ii) and 2(a)(v) below, the
Company's obligations hereunder to file a Registration Statement and to keep
a registration statement continuously in effect under the Securities Act
shall be suspended if (A) the fulfillment of such obligations would require
the Company to make a disclosure that would, in the reasonable judgment of
the Company's Board of Directors, have a Material Adverse Effect (as such
term is defined in the Purchase Agreement) on the Company or a material
adverse effect on the future prospects of the Company or its stockholders,
(B) the Company has filed or proposes to file a registration statement with
respect to any of its securities to be distributed in an underwritten public
offering and it is advised by its lead or managing underwriter that an
offering by a Holder of Registrable Securities would materially adversely
affect the distribution of such securities, or (C) the fulfillment of such
obligations would require the Company to prepare financial statements under
the Securities Act that would not otherwise be required to be prepared by the
Company in order to comply with its obligations under the Exchange Act. Such
obligations shall be reinstated (x) in the case of clause (A) above, upon the
making of such disclosure by the Company (or, if earlier, when such
disclosure would either no longer be necessary for the fulfillment of such
obligations or no longer be detrimental), (y) in the case of clause (B)
above, upon the conclusion of any period during which the Company would not,
pursuant to the terms of its underwriting arrangements, be permitted to sell
Registrable Securities for its own account and (z) in the case of clause (C)
above, as soon as it would no longer be necessary to prepare such financial
statements to comply with the Securities Act. In the event that the Company's
obligations are suspended as provided above, the Company shall deliver a
certificate in writing, signed by an officer of the Company, to each Holder,
which shall state that its obligations hereunder have been suspended in
accordance with this Section 2(a)(i).
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(ii) Prepare and file with the SEC such amendments
and supplements to such Registration Statement and the prospectus used in
connection with such Registration Statement as may be necessary to keep the
Registration Statement effective, subject to Section 2(a)(i) above, and to
comply with the provisions of the Act with respect to the disposition of all
securities covered by such Registration Statement 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 such Registration Statement and notify the Holders of the filing and
effectiveness of such Registration Statement and any amendments or
supplements.
(iii) Furnish to each Holder such numbers of copies
of a current prospectus conforming with the requirements of the Act, copies
of the Registration Statement, any amendment or supplement thereto and any
documents incorporated by reference therein and such other documents as such
Holder may reasonably require in order to facilitate the disposition of
Registrable Securities owned by such Holder and, in the case of the
Registration Statement referred to in Section 2(a)(i), 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 of any thereof which
contains information for which the Company has sought confidential
treatment). The Company will immediately notify the Holder by facsimile of
the effectiveness of the Registration Statement or any post-effective
amendment. The Company will promptly respond to any and all comments received
from the SEC, with a view towards causing the Registration Statement or any
amendment thereto to be declared effective by the SEC as soon as reasonably
practicable and shall promptly file an acceleration request as soon as
practicable following the resolution or clearance of all SEC comments or, if
applicable, following notification by the SEC that the Registration Statement
or any amendment thereto will not be subject to review.
(iv) (a) If legally required, register and qualify,
or obtain an appropriate exemption from registration or qualification, the
securities covered by such Registration Statement under such other securities
or "Blue Sky" laws of such jurisdictions as shall be reasonably requested by
each Holder (b) prepare and file in those jurisdictions such supplements
(including post-effective amendments) and supplements to such registrations
and qualifications as may be necessary to maintain the effectiveness thereof,
(c) take such other actions as may be necessary to maintain such
registrations and qualifications in effect at all times, and (d) take all
other actions reasonably necessary or advisable to qualify the Registrable
Securities for sale in such jurisdictions; provided that the Company shall
not be required in connection therewith or as a condition thereto to qualify
to do business or to file a general consent to service of process in any such
states or jurisdictions, and shall not be required to register or qualify in
any jurisdiction where such registration or qualification is not permitted or
approved by such jurisdiction following the Company's reasonable efforts to
obtain such permission or approval.
(v) Notify each Holder immediately of the happening
of any event as a result of which the prospectus (including any supplements
thereto or thereof) included in such Registration Statement, as then in
effect, includes an untrue statement of
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material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances then existing, and use its best efforts to promptly update
and/or correct such prospectus to correct such untrue statement or omission,
and deliver such number of copies of such supplement or amendment to each
Holder as such Holder may reasonably request.
(vi) Notify each Holder immediately of the issuance
by the Commission or any state securities commission or agency of any stop
order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose. The Company shall use
reasonable efforts to prevent the issuance of any stop order and, if any stop
order is issued, to obtain the lifting thereof at the earliest practicable
time.
(vii) Permit a single firm of counsel, designated as
Holders' counsel by the Holders of a majority of the Registrable Securities
included in the Registration Statement (the fees and expenses of which shall
be paid in their entirety by the Holders not withstanding Section 3 below),
to review the Registration Statement and all amendments and supplements
thereto within a reasonable period of time prior to each filing, and shall
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 Investor's intended method of
disposition of Registrable Securities shall conform in all material respects
to the information provided to the Company by the Investors.
(viii) List the Registrable Securities covered by
such Registration Statement with all securities exchange(s) and/or markets on
which the Common Stock is then listed and prepare and file any required
filings with the National Association of Securities Dealers, Inc. or any
exchange or market where the Common Shares are then traded.
(ix) If applicable, take all reasonable steps
necessary to enable Holders to avail themselves of the prospectus delivery
mechanism set forth in Rule 153 (or successor thereto) under the Act.
(x) The Company shall hold in confidence and not make
any disclosure of information concerning the Investors provided to the
Company unless (a) disclosure of such information is reasonably necessary in
the Company's good faith judgment to comply with federal or state securities
laws, (b) the disclosure of such information is reasonably necessary in the
Company's good faith judgment 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 (d) such information has been made generally
available to the public other than by disclosure in violation of this or any
other agreement. The Company agrees that it shall, upon learning 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,
give prompt notice to such Investor prior to making such disclosure,
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and allow each Investor, at its expense, to undertake appropriate action to
prevent disclosure of, or obtain a protective order for, such information.
(xi) The Company shall provide a transfer agent (the
"Transfer Agent") and registrar, which may be a single entity, for the
Registrable Securities not later than the effective date of the Registration
Statement.
(xii) The Company shall cooperate with the Investors
who hold Registrable Securities being offered to facilitate the timely
preparation and delivery of certificates 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 Investors may reasonably request and registered in such names as the
Investors may request, and, within three (3) business days after a
Registration Statement which includes Registrable Securities is ordered
effective by the SEC, the Company shall deliver, and shall cause legal
counsel selected by the Company to deliver, to the transfer agent for the
Registrable Securities (with copies to the Investors 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.
(xiii) From and after the date of this Agreement,
except for shares of Common Stock listed on Schedule 2.1(a) attached hereto,
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 under this Section 2(a) without the consent of the
holders of a majority-in-interest of the Registrable Securities.
(xiv) The Company shall take all other reasonable
actions necessary to allow disposition by the Investors of Registrable
Securities pursuant to the Registration Statement.
(b) Set forth below in this Section 2(b) are (I) events
that may arise that the Investors consider will interfere with the full
enjoyment of their rights under the the Purchase Agreement and this Agreement
(the "Interfering Events"), and (II) certain remedies applicable in each of
these events.
Paragraphs (i) through (iv) of this Section 2(b)
describe the Interfering Events, provide a remedy to the Investors if an
Interfering Event occurs and provide that each of the Investors may require
that the Company convert outstanding shares of Debentures at a specified
price if certain Interfering Events are not timely cured.
Paragraph (v) provides, INTER ALIA, that if cash
payments required as the remedy in the case of certain of the Interfering
Events are not paid when due, the Company may be required by each of the
Investors to convert outstanding Debentures at a specified price.
Paragraph (vi) provides, INTER ALIA, that the
Investors have the right to specific performance.
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The preceding paragraphs in this Section 2(b) are
meant to serve only as an introduction to this Section 2(b), are for
convenience only, and are not to be considered in applying, construing or
interpreting this Section 2(b).
(i) DELAY IN EFFECTIVENESS OF REGISTRATION STATEMENT.
The Company agrees that it shall file the Registration Statement complying
with the requirements of this Agreement promptly and shall use its best
efforts to cause such Registration Statement to become effective as soon as
possible and in any event prior to 90 days following the initial closing of
the purchase (the "EFFECTIVE DATE"). In the event that the Registration
Statement has not been declared effective within 90 days from the Closing
Date, then the "CONVERSION PRICE" pursuant to Section 5(c) of the Debentures
shall be reduced by 1% during and after the first 30-day period from and
after the 90th day following the Closing Date during any part of which such
Registration Statement is not effective, and such "CONVERSION PRICE" shall be
further reduced by an additional 1.5% during and after each subsequent 30-day
period thereafter during any part of which the Registration Statement is not
effective. The Company acknowledges that the Conversion Price is also subject
to further adjustment as set forth in the Debentures, and the Purchase
Agreement; provided, however, that once the Registration Statement first
becomes effective, there can be no further adjustment to the Conversion Price
under this Section 2(b)(i). If the Registration Statement has not been
declared effective within 150 days after the Closing Date, then each Holder
shall have the right in its sole discretion to sell its Debentures to the
Company (in whole or in part) at a price in immediately available funds (the
"PREMIUM CONVERSION PRICE") equal to the greater of (x) 1.2 times (I.E., 120%
of) the Outstanding Principal Amount of the Debentures then held by such
Holder plus any accrued but unpaid interest or default payments and (y) the
number of shares of Common Stock issuable upon conversion of the Outstanding
Principal Amount of the Debentures then held by such Holder plus any accrued
but unpaid or unrecognized interest or default payments relating to such
Debentures times the Market Price for one Share of Common Stock on the day
prior to the day such Holder notifies the Company it intends to exercise its
right to the Premium Conversion Price.
(ii) NO LISTING; PREMIUM PRICE CONVERSION FOR
DELISTING OF CLASS OF SHARES.
(A) In the event that the Company fails, refuses
or is unable to cause the Registrable Securities covered by the Registration
Statement to be listed with the Approved Market and each other securities
exchange and market on which the Common Stock is then traded at all times
during the period ("LISTING PERIOD") commencing the earlier of the effective
date of the Registration Statement or the 90th day following the Closing
Date, and continuing thereafter for so long as the Debentures are
outstanding, then the Company shall pay in cash to each Holder a default
payment at a rate (the "DEFAULT PAYMENT RATE") equal to one and one half
percent (1.5%) of the sum of (x) the Outstanding Principal Amount of, (y) the
accrued but unpaid interest on, plus (z) the accrued but unpaid or
unrecognized default payments on the Debentures (the "Debenture Amount") held
by such Holder for each 30-day period (or portion thereof) during the Listing
Period from and after such failure, refusal or inability to so list the
Registrable
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Securities until the Registrable Securities are so listed. Alternatively, at
any time five (5) days after the commencement of the running of the first
30-day period described above, a holder shall have the right to require the
Company to purchase the Debentures for cash in an amount equal to the Premium
Conversion Price.
(B) In the event that shares of Common Stock of
the Company are delisted from the Approved Market at any time following the
Closing Date and remain delisted for five (5) consecutive trading days, then
at the option of each Holder and to the extent such Holder so elects, the
Holder will be entitled to require the Company to purchase the Debentures for
cash in an amount equal to the Premium Conversion Price.
(iii) BLACKOUT PERIODS. In the event any Holder's
ability to sell Registrable Securities under the Registration Statement is
suspended for more than (i) five (5) consecutive Trading Days or (ii) fifteen
(15) days in any 12 month period (except in the case of an event described in
Sections 2(a)(i)(A), 2(a)(i)(B) or 2(a)(i)(C), in which case such time
periods shall be extended to twenty (20) consecutive Trading Days and forty
(40) Trading Days in any 12 month period, respectively) ("SUSPENSION GRACE
PERIOD"), including without limitation by reason of a suspension of trading
or delisting of the Common Stock on the Approved Market, or any suspension or
stop order with respect to the Registration Statement or the fact that an
event has occurred as a result of which the prospectus (including any
supplements thereto) included in such Registration Statement then in effect
includes an untrue statement of material fact or omits to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing, then the
Company shall pay in cash to each Holder a default payment at the Default
Payment Rate of the Debenture Amount for the Debentures held by such Holder
for each 30-day period (or portion thereof) from and after the expiration of
the Suspension Grace Period. Alternatively, a Holder shall have the right to
require the Company to purchase the Debentures for cash in an amount equal to
the Premium Conversion Price.
(iv) CONVERSION DEFICIENCY; PREMIUM PRICE CONVERSION
FOR CONVERSION DEFICIENCY. In the event that the Company does not have a
sufficient number of Common Shares available to satisfy the Company's
obligations to any Holder upon receipt of a Conversion Notice (as defined in
the Debenture) or is otherwise unable or unwilling to issue such Common
Shares (including without limitation by reason of the limit described in
Section 10 below) in accordance with the terms of the Debenture for any
reason after receipt of a Conversion Notice, then:
(A) The Company shall pay in cash to each Holder
a default payment at the Default Payment Rate on the Outstanding Amount for
the Debentures held by such Holder for each 30-day period (or portion
thereof) that the Company fails or refuses to issue Common Shares in
accordance with the Debenture terms; and
(B) At any time five (5) days after the
commencement of the running of the first 30-day period described above in
clause (A) of this paragraph (iv), at the request of any Holder pursuant to a
redemption notice, the Company promptly (x) shall
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purchase from such Holder, at a purchase price equal to the Premium
Conversion Price, the Outstanding Amount of Debentures equal to such Holder's
pro rata share of the "Deficiency", as such terms are defined below, if the
failure to issue Common Shares results from the lack of a sufficient number
thereof and (y) shall purchase all (or such portion as such Holder may elect)
of such Holder's Debentures at such Premium Conversion Price if the failure
to issue Common Shares results from any other cause. The "Deficiency" shall
be equal to the outstanding amount of Debentures that would not be able to be
converted for Common Shares, due to an insufficient number of Common Shares
available, if all the outstanding Debentures were submitted for conversion at
the Conversion Price set forth in the Debentures as of the date such
Deficiency is determined. Any request by a Holder pursuant to this paragraph
(iv)(B) shall be revocable by that Holder at any time prior to its receipt of
the Premium Conversion Price.
(v) PREMIUM PRICE CONVERSION FOR CASH PAYMENT
DEFAULTS.
(A) The Company acknowledges that any failure,
refusal or inability by the Company described in the foregoing paragraphs (i)
through (iv) will cause the Holders to suffer damages in an amount that will
be difficult to ascertain, including without limitation damages resulting
from the loss of liquidity in the Registrable Securities and the additional
investment risk in holding the Registrable Securities. Accordingly, the
parties agree that it is appropriate to include in this Agreement the
foregoing provisions for default payments, discounts and mandatory
conversions in order to compensate the Holders for such damages. The parties
acknowledge and agree that the default payments, discounts and mandatory
conversions set forth above are liquidated damages representing the parties'
good faith effort to quantify such damages and, as such, agree that the form
and amount of such default payments, discounts and mandatory conversions are
reasonable and will not constitute a penalty.
(B) Each default payment provided for in the
foregoing paragraphs (ii) through (iv) shall be in addition to each other
default payment. All default payments (which payments shall be pro rata on a
per diem basis for any period of less than 30 days) required to be made in
connection with the above provisions shall be paid in cash at any time upon
demand, and whether or not a demand is made, by the tenth (10th) day of each
calendar month for each partial or full 30-day period occurring prior to that
date.
(C) In the event that the Company fails or
refuses to pay any default payment or honor any penalty or similar amounts
when due, at any Holder's request and option the Company shall purchase (1)
all or a portion of the Debentures, Common Shares and/or Warrant Shares held
by such Holder (with default payments accruing through the date of such
purchase), within five (5) days of such request, at a purchase price equal to
the Premium Conversion Price, and/or (2) all or a portion of the Warrants,
within five (5) days of such request, held by such Holder at a purchase price
equal to the Warrant Redemption Price, provided that such Holder may revoke
either such request at any time prior to receipt of such payment of such
purchase price. Until such time as the Company purchases such Debentures at
the request of such Holder pursuant to the preceding sentence, at any
Holder's request and option the Company shall as to such Holder
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pay such amount by adding and including the amount of such default payment to
the Outstanding Principal Amount of a Holder's Debentures.
(vi) CUMULATIVE REMEDIES. Except as provided above,
nothing herein is intended to limit any other rights the Holders may have at
law, in equity or under the terms of the Debentures, the Purchase Agreement,
the Warrants or this Agreement, including without limitation the right to
specific performance. Each Holder shall be entitled to specific performance
of any and all obligations of the Company in connection with the registration
rights of the Holders hereunder.
(c) Subject to Section 2(b) above, the Company may
suspend the use of any prospectus used in connection with the Registration
Statement only in the event, and for such period of time as, such a
suspension is required by the rules and regulations of the Commission. The
Company will use reasonable commercial efforts to cause such suspension to
terminate at the earliest possible date.
(d) The Company shall file a Registration Statement with
respect to any newly authorized and/or reserved shares, if necessary to
fulfill its obligations under this Agreement, within fifteen (15) business
days of any stockholders meeting authorizing same and shall use reasonable
commercial efforts to cause such Registration Statement to become effective
within ninety (90) days of such stockholders meeting. If the Holders become
entitled, pursuant to an event described in clause (iii) of the definition of
Registrable Securities, to receive any securities in respect of Registrable
Securities that were already included in a Registration Statement, subsequent
to the date such Registration Statement is declared effective, and the
Company is unable under the securities laws to add such securities to the
then effective Registration Statement, the Company shall as soon as
practicable file, in accordance with the procedures set forth herein, an
additional Registration Statement with respect to such newly Registrable
Securities. The Company shall use reasonable commercial efforts to (i) cause
any such additional Registration Statement, when filed, to become effective
under the Securities Act, and (ii) keep such additional Registration
Statement effective during the period described in Section 5 below. All of
the registration rights and remedies under this Agreement shall apply to the
registration of such newly reserved shares and such new Registrable
Securities, including without limitation the provisions providing for default
payments contained herein.
3. EXPENSES OF REGISTRATION. All Registration Expenses
incurred in connection with any registration, qualification or compliance
with registration pursuant to this Agreement shall be borne by the Company,
and all Selling Expenses of a Holder shall be borne by such Holder.
4. REGISTRATION ON FORM S-3. The Company shall seek to qualify
for registration on Form S-3 or any comparable or successor form or forms, or
in the event that the Company is ineligible to use such form, such form as
the Company is eligible to use under the Securities Act.
5. REGISTRATION PERIOD. In the case of the registration
effected by the Company pursuant to this Agreement, the Company will use its
best efforts to keep such registration
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effective until all the Holders have completed the sales or distribution
described in the Registration Statement relating thereto, provided that the
Company shall not be required to keep such Registration Statement effective
(a) with respect to Warrant Shares, after the earlier of (i) the sale by the
Holder of such Warrant Shares under the Registration Statement and (ii) two
(2) years after the acquisition from the Company of such Warrant Shares and
(b) with respect to Common Shares, after such shares are freely tradable by
the Holder under Rule 144(k); PROVIDED, HOWEVER, that if Rule 144 is amended,
the obligations of the Company under this Section 5 will terminate at such
time as the Common Shares and Warrant Shares are freely tradable under such
amended Rule 144.
6. INDEMNIFICATION.
(a) THE COMPANY INDEMNITY. The Company will indemnify
each Holder, each of its officers, directors and partners, and each person
controlling each Holder, within the meaning of Section 15 of the Securities
Act and the rules and regulations thereunder, with respect to which
registration, qualification or compliance has been effected pursuant to this
Agreement, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus, offering
circular or other document (including any related registration statement,
notification or the like) incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, or any violation by the Company of the
Securities Act or any state securities law or in either case, any rule or
regulation thereunder applicable to the Company and relating to action or
inaction required of the Company in connection with any such registration,
qualification or compliance, and will reimburse each Holder, each of its
officers, directors and partners, and each person controlling such Holder,
each such underwriter and each person who controls any such underwriter, for
any reasonable legal and any other expenses reasonably incurred in connection
with investigating and defending any such claim, loss, damage, liability or
action, provided that the Company will not be liable in any such case to a
Holder to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission based upon
written information furnished to the Company by such Holder or the
underwriter (if any) therefor and stated to be specifically for use therein.
The indemnity agreement contained in this Section 6(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the consent of the Company
(which consent will not be unreasonably withheld).
(b) HOLDER INDEMNITY. Each Holder will, severally and not
jointly, if Registrable Securities held by or issuable to it are included in
the securities as to which such registration, qualification or compliance is
being effected, indemnify the Company, each of its directors, officers and
partners, each person who controls the Company within the meaning of Section
15 of the Securities Act and the rules and regulations thereunder, each other
Holder (if any), and each of their officers, directors and partners, and each
person controlling such other Holder(s), against all claims, losses, damages
and liabilities (or actions in respect thereof) arising out of or based on
any untrue statement (or alleged untrue
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statement) of a material fact contained in any such registration statement,
prospectus, offering circular or other document, or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse
the Company and such other Holder(s) and their respective directors, officers
and partners, underwriters or control persons for any reasonable legal or any
other expenses reasonably incurred in connection with investigating and
defending any such claim, loss, damage, liability or action, in each case to
the extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular or other document in
reliance upon and in conformity with written information furnished to the
Company by such Holder and stated to be specifically for use therein, and
provided that the maximum amount for which such Holder shall be liable under
this indemnity shall not exceed the net proceeds received by such Holder from
the sale of the Registrable Securities. The indemnity agreement contained in
this Section 6(b) shall not apply to amounts paid in settlement of any such
claims, losses, damages or liabilities if such settlement is effected without
the consent of such Holder (which consent shall not be unreasonably withheld).
(c) PROCEDURE. Each party entitled to indemnification
under this Article (the "INDEMNIFIED PARTY") shall give notice to the party
required to provide indemnification (the "INDEMNIFYING PARTY") promptly after
such Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, and shall permit the Indemnifying Party to assume
the defense of any such claim in any litigation resulting therefrom, provided
that counsel for the Indemnifying Party, who shall conduct the defense of
such claim or any litigation resulting therefrom, shall be approved by the
Indemnified Party (whose approval shall not be unreasonably withheld), and
the Indemnified Party may participate in such defense at such party's
expense, and provided further that the failure of any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Article except to the extent that the Indemnifying
Party is prejudiced by such failure to provide notice. No Indemnifying Party,
in the defense of any such claim or litigation, shall, except with the
consent of each Indemnified Party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof
the giving by the claimant or plaintiff to such Indemnified Party of a
release from all liability in respect to such claim or litigation. Each
Indemnified Party shall furnish such information regarding itself or the
claim in question as an Indemnifying Party may reasonably request in writing
and as shall be reasonably required in connection with the defense of such
claim and litigation resulting therefrom.
7. CONTRIBUTION. If the indemnification provided for in
Section 6 herein is unavailable to the Indemnified Parties in respect of any
losses, claims, damages or liabilities referred to herein (other than by
reason of the exceptions provided therein), then each such Indemnifying
Party, in lieu of indemnifying such Indemnified Party, shall contribute to
the amount paid or payable by such Indemnified Party as a result of such
losses, claims, damages or liabilities as between the Company on the one hand
and any Holder on the other, in such proportion as is appropriate to reflect
the relative fault of the Company and of such Holder in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
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relative fault of the Company on the one hand and of any Holder on the other
shall be determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by the
Company or by such Holder.
In no event shall the obligation of any Indemnifying Party
to contribute under this Section 7 exceed the amount that such Indemnifying
Party would have been obligated to pay by way of indemnification if the
indemnification provided for under Section 6(a) or 6(b) hereof had been
available under the circumstances.
The Company and the Holders agree that it would not be just
and equitable if contribution pursuant to this Section 7 were determined by
PRO RATA allocation (even if the Holders or the underwriters were treated as
one entity for such purpose) or by any other method of allocation which does
not take account of the equitable considerations referred to in the
immediately preceding paragraphs. The amount paid or payable by an
Indemnified Party as a result of the losses, claims, damages and liabilities
referred to in the immediately preceding paragraphs shall be deemed to
include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such Indemnified Party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this section, no Holder shall be required to contribute any
amount in excess of the amount by which the net proceeds received by such
Holder from the sale of Registrable Securities exceeds, in any such case, the
amount of any damages that such Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person liable for or guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled
to contribution from any person who was not liable for or guilty of such
fraudulent misrepresentation.
8. SURVIVAL. The indemnity and contribution agreements
contained in Sections 6 and 7 shall remain operative and in full force and
effect regardless of any termination of this Agreement or the Purchase
Agreement.
9. INFORMATION BY HOLDERS. Each Holder shall furnish to the
Company such information regarding such Holder and the distribution and/or
sale proposed by such Holder as the Company may reasonably request in writing
and as shall be reasonably required in connection with any registration,
qualification or compliance referred to in this Agreement. The intended
method or methods of disposition and/or sale (Plan of Distribution) of such
securities as so provided by such Holder shall be included without alteration
in the Registration Statement covering the Registrable Securities, subject to
any reasonable objection of the Company and shall not be changed without
written consent of such Holder or its designated representative.
10. NASDAQ LIMIT ON STOCK ISSUANCES. Notwithstanding anything
to the contrary herein, the Company shall not be obligated to issue or
register with the SEC any shares of Common Stock to the extent that such
issuance or registration is prohibited by any rule, regulation or policy of
Nasdaq or any exchange or market upon which the Common Stock may be traded.
-13-
11. TRANSFER OR ASSIGNMENT. Except as otherwise provided
herein, this Agreement shall be binding upon and inure to the benefit of the
parties and their successors and permitted assigns. The rights granted to the
Investors by the Company under this Agreement to cause the Company to
register Registrable Securities may be transferred or assigned (in whole or
in part) to a transferee or assignee which transfer has been effected in
compliance with the Debentures and Warrants; provided in each case that the
Company must be given written notice by the such Investor at the time of or
within a reasonable time after said transfer or assignment, stating the name
and address of said transferee or assignee and identifying the securities
with respect to which such registration rights are being transferred or
assigned; and provided further that the transferee or assignee of such rights
agrees in writing to be bound by the registration provisions of this
Agreement.
12. MISCELLANEOUS.
(c) REMEDIES. The Company and each of the Investors
acknowledge and agree that irreparable damage would occur in the event that
any of the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to prevent
or cure breaches of the provisions of this Agreement and to enforce
specifically the terms and provisions hereof, this being in addition to any
other remedy to which any of them may be entitled by law or equity.
(b) NOTICES. Any notice or other communication required
or permitted to be given hereunder shall be in writing by facsimile, mail or
personal delivery and shall be effective upon actual receipt of such notice.
The addresses for such communications shall be:
to the Company:
Cygnus, Inc.
400 Penobscot Drive
Redwood City, California 94063
Attention: Chief Executive Officer
Facsimile: (650) 599-3972
with copies to:
Cygnus, Inc.
400 Penobscot Drive
Redwood City, California 94063
Attention: General Counsel
Facsimile: (650) 599-3913
to the Holder:
----------------
c/o The Palladin Group, L.P.
-14-
195 Maplewood Avenue
Maplewood, New Jersey 07040
Attention: Robert L. Chender
Facsimile: (973) 313-6490
with copies to:
Arnold & Porter
555 Twelfth Street, NW
Washington, D.C. 20004
Attention: Richard E. Baltz
Facsimile: (202) 942-5999
Any party hereto may from time to time change its address for notices by
giving at least 10 days' written notice of such changed address to the other
parties hereto.
(d) WAIVERS. No waiver by any party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission
of any party to exercise any right hereunder in any manner impair the
exercise of any such right accruing to it thereafter. The representations and
warranties and the agreements and covenants of the Company and each Investor
contained herein shall survive the Closing.
(e) EXECUTION. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same
agreement, it being understood that all parties need not sign the same
counterpart.
(f) PUBLICITY. The Company agrees that it will not
disclose, and will not include in any public announcement, the name of any of
the Investors without its consent, unless and until such disclosure is
required by law or applicable regulation, and then only to the extent of such
requirement.
(g) ENTIRE AGREEMENT. This Agreement, together with the
Purchase Agreement, the Debentures and the Warrants and the agreements and
documents contemplated hereby and thereby, contains the entire understanding
and agreement of the parties, and may not be modified or terminated except by
a written agreement signed by both parties.
(h) GOVERNING LAW; CONSENT OF JURISDICTION. THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS TO BE EXECUTED AND
PERFORMED ENTIRELY WITHIN SUCH STATE. EACH PARTY (I) HEREBY IRREVOCABLY
SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED
IN SAN FRANCISCO COUNTY, CALIFORNIA FOR THE PURPOSES OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT AND (II) HEREBY
WAIVES, AND AGREES NOT TO ASSERT IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY
CLAIM THAT
-15-
IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURT, THAT THE
SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE
VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH PARTY CONSENTS TO
PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY
THEREOF TO SUCH PARTY AS PROVIDED HEREIN AND AGREES THAT SUCH SERVICE SHALL
CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING
IN THIS PARAGRAPH SHALL AFFECT OR LIMIT ANY RIGHT TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW.
(i) JURY TRIAL. EACH PARTY HERETO WAIVES THE RIGHT TO A
TRIAL BY JURY.
(j) TITLES. The titles used in this Agreement are used
for convenience only and are not to be considered in construing or
interpreting this Agreement.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
CYGNUS, INC.
By: /s/ Craig W. Carlson
--------------------------------
Name: Craig W. Carlson
--------------------------
Title: Sr. VP Finance, CFO
--------------------------
INVESTORS:
CONESCO DIRECT LIFE INSURANCE COMPANY
BY: THE PALLADIN GROUP
ATTORNEY-IN-FACT AND INVESTMENT
ADVISOR
By: /s/ Jeffrey E. Devers
--------------------------------
Jeffrey E. Devers
THE GLENEAGLES FUND COMPANY
BY: THE PALLADIN GROUP
ATTORNEY-IN-FACT AND INVESTMENT
ADVISOR
By: /s/ Jeffrey E. Devers
--------------------------------
Jeffrey E. Devers
LANCER SECURITIES (CAYMAN) LIMITED
BY: THE PALLADIN GROUP
ATTORNEY-IN-FACT AND INVESTMENT
ADVISOR
By: /s/ Jeffrey E. Devers
--------------------------------
Jeffrey E. Devers
-17-
PALLADIN PARTNERS I, L.P.
BY: THE PALLADIN GROUP
ATTORNEY-IN-FACT AND INVESTMENT
ADVISOR
By: /s/ Jeffrey E. Devers
--------------------------------
Jeffrey E. Devers
PALLADIN OVERSEAS FUND LIMITED
BY: THE PALLADIN GROUP
ATTORNEY-IN-FACT AND INVESTMENT
ADVISOR
By: /s/ Jeffrey E. Devers
--------------------------------
Jeffrey E. Devers
PGEP III, L.L.C.
BY: THE PALLADIN GROUP
ATTORNEY-IN-FACT AND INVESTMENT
ADVISOR
By: /s/ Jeffrey E. Devers
--------------------------------
Jeffrey E. Devers
HALIFAX FUND, L.P.
BY: THE PALLADIN GROUP
ATTORNEY-IN-FACT AND INVESTMENT
ADVISOR
By: /s/ Jeffrey E. Devers
--------------------------------
Jeffrey E. Devers
-18-
SCHEDULE I
1. Conseco Direct Life Insurance Company
c/o The Palladin Group, L.P.
195 Maplewood Avenue
Maplewood, N.J. 07040
2. The Gleneagles Fund Company
c/o The Palladin Group, L.P.
195 Maplewood Avenue
Maplewood, N.J. 07040
3. Lancer Securities (Cayman) Limited
c/o The Palladin Group, L.P.
195 Maplewood Avenue
Maplewood, N.J. 07040
4. Palladin Partners I, L.P.
c/o Palladin Administrative Services LLC
195 Maplewood Avenue
Maplewood, N.J. 07040
5. Palladin Overseas Fund Limited
c/o The Palladin Group, L.P.
195 Maplewood Avenue
Maplewood, N.J. 07040
6. PGEP III, L.L.C.
c/o The Palladin Group, L.P.
195 Maplewood Avenue
Maplewood, N.J. 07040
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7. Halifax Fund, L.P.
c/o The Palladin Group, L.P.
195 Maplewood Avenue
Maplewood, N.J. 07040
-20-
EXHIBIT 1
TO REGISTRATION RIGHTS
AGREEMENT
[Company Letterhead]
[Date]
[Name and address of Transfer Agent]
Ladies and Gentlemen:
This letter shall serve as our irrevocable authorization and
direction to you (1) to issue shares (the "COMMON SHARES") of Common Stock,
par value $0.001 per share (the "COMMON STOCK"), of Cygnus, Inc., a Delaware
corporation (the "COMPANY"), to or upon the order of the registered holder
from time to time of 8.5% Convertible Debentures Due June 29, 2004 of the
Company (the "DEBENTURES") upon surrender to you of the Debentures and (2) to
issue shares (the "WARRANT SHARES") of 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 [TO BE PROVIDED] and such Warrants notwithstanding the
legend appearing on such Warrants. Certificates for the Common Shares 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 shares of
Common Stock issuable upon conversion of the Debentures and 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 "SECURITIES
ACT"). The Company may, during such periods, deliver a notice to you advising
you to refrain from transferring any Common Shares or Warrant 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 Securities Act during such periods.
Contemporaneous with the delivery of this letter, the Company is
delivering to you a letter of ___________________________ as to registration
of the Common Shares and the Warrant Shares under the Securities Act.
Should you have any questions concerning this matter, please contact
me.
Very truly yours,
CYGNUS, INC.
By:___________________________
Title:
Enclosures
cc: ________________
-2-
EXHIBIT 2
TO REGISTRATION RIGHTS
AGREEMENT
[Date]
[Name and address
of Transfer Agent]
RE: CYGNUS, INC.
Ladies and Gentlemen:
We are counsel to Cygnus, Inc., a Delaware corporation (the
"COMPANY"), and we understand that ________________ (the "HOLDER") has
purchased from the Company a 8.5% Convertible Debenture Due June 29, 2004 of
the Company (the "DEBENTURE") and warrants (the "WARRANTS") that are
convertible into or exercisable into the Company's Common Stock, par value
$0.001 per share (the "COMMON STOCK"). Pursuant to a Registration Rights
Agreement, dated as of June 29, 1999, between the Company and the Holder (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 ______________, 1999, the Company filed a
Registration Statement on Form S-3 (File No. 333-___________) (the
"REGISTRATION STATEMENT") with the Securities and Exchange Commission
relating to the Registrable Securities, which names the Holder as a selling
stockholder thereunder.
[OTHER INTRODUCTORY 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 LANGUAGE TO BE INCLUDED.]
Very truly yours,
cc: _______________