Exhibit 10.11
VISIBLE GENETICS INC.
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of July 15, 1999,
among the investors listed on Schedule I hereto (the "Investors") and Visible
Genetics Inc., an Ontario corporation (the "Company").
R E C I T A L S
WHEREAS, the Investors have, pursuant to the terms of the
Securities Purchase Agreement, dated as of July 15, 1999, by and among the
Company and the Investors (the "Purchase Agreement"), agreed to purchase 30,000
shares of Series A preferred shares of the Company, without par value (the
"Shares"), which are convertible into common shares of the Company, without par
value (the "Common Stock"), and to purchase Warrants initially exercisable with
respect to 1,100,000 shares of Common Stock (the "Warrants"); and
WHEREAS, the Company has agreed, as a condition precedent to
the Investors' obligations under the Purchase Agreement, to grant the Investors
certain registration rights; and
WHEREAS, the Company and the Investors desire to define the
registration rights of the Investors on the terms and subject to the conditions
herein set forth.
NOW, THEREFORE, in consideration of the foregoing premises and
for other good and valuable consideration, the parties hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following terms have the
respective meaning set forth below:
COMMISSION: shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act;
CONTROL, CONTROLLING, CONTROLLED BY, and UNDER COMMON CONTROL
WITH: shall mean the possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of a person, whether through
the ownership of voting securities, by contract, or otherwise.
EXCHANGE ACT: shall mean the Securities Exchange Act of 1934,
as amended;
HOLDER: shall mean any holder of Registrable Securities;
INITIATING HOLDER: shall mean any Holder or Holders who in the
aggregate are Holders of more than 50% of the then outstanding Registrable
Securities;
MAJORITY HOLDERS OF THE REGISTRATION shall mean, with respect
to a particular registration, one or more of the Initiating Holders who hold a
majority of the Registrable Securities to be included in such registration.
PERSON: shall mean an individual, partnership, limited
liability company, joint-stock company, corporation, trust or unincorporated
organization, and a government or agency or political subdivision thereof;
REGISTER, registered and registration: shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act (and any post-effective amendments filed or
required to be filed) and the declaration or ordering of effectiveness of such
registration statement;
REGISTRABLE SECURITIES: shall mean (A) the shares of Common
Stock issuable on conversion of the Shares, (B) shares of Common Stock issuable
upon exercise or exchange of the Warrants, (C) any additional shares of Common
Stock acquired by the Investors and (D) any stock of the Company issued as a
dividend or other distribution with respect to, or in exchange for or in
replacement of, the shares of Common Stock referred to in clauses (A), (B) or
(C);
REGISTRATION EXPENSES: shall mean all expenses incurred by the
Company in compliance with Sections 2(a) and (b) hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, fees and expenses of one counsel for
all the Holders in an amount not to exceed $15,000, blue sky fees and expenses
and the expense of any special audits 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);
SECURITY, SECURITIES: shall have the meaning set forth in
Section 2(1) of the Securities Act;
SECURITIES ACT: shall mean the Securities Act of 1933, as
amended; and
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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 each of the Holders other than fees and
expenses of one counsel for all the Holders in an amount not to exceed $15,000.
2. REGISTRATION RIGHTS
(a) REQUESTED REGISTRATION.
(i) REQUEST FOR REGISTRATION. If the Company shall
receive from an Initiating Holder, at any time after the first
anniversary of the date hereof, a written request that the Company
effect any registration with respect to all or a part of the
Registrable Securities, the Company will:
(A) promptly give written notice of the
proposed registration, qualification or compliance to all
other Holders; and
(B) as soon as practicable, use its diligent
best efforts to effect such registration (including, without
limitation, the execution of 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 may be so requested and as would
permit or facilitate the sale and distribution of all or such
portion of such Registrable Securities as are specified in
such request, together with all or such portion of the
Registrable Securities of any Holder or Holders joining in
such request as are specified in a written request received by
the Company within 10 business days after written notice from
the Company is given under Section 2(a)(i)(A) above; PROVIDED
that the Company shall not be obligated to effect, or take any
action to effect, any such registration pursuant to this
Section 2(a):
(x) In any particular jurisdiction in which
the Company would be required to (1) execute a general
consent to service of process in effecting such
registration, qualification or compliance, unless the
Company is already subject to service in such jurisdiction
and except as may be required by the Securities Act or
applicable rules or regulations thereunder; (2) qualify
generally to do any business in any jurisdiction where it
would not otherwise be required to qualify but for this
Section 2(a)(i)(B); or (3) subject itself to taxation in
any such jurisdiction.
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(y) After the Company has effected two (2)
such registrations pursuant to this Section 2(a) and such
registrations have been declared or ordered effective; or
(z) If the Registrable Securities requested
by all Holders to be registered pursuant to such request do
not have an anticipated aggregate public offering price
(before any underwriting discounts and commissions) of at
least $10,000,000.
The registration statement filed pursuant to the
request of the Initiating Holders may, subject to the provisions of
Section 2(a)(ii) below, include other securities of the Company which
are held by Persons who, by virtue of agreements with the Company, are
entitled to include their securities in any such registration ("Other
Stockholders").
The registration rights set forth in this Section 2
may be assigned, in whole or in part, to any transferee of Registrable
Securities (who shall be bound by all obligations of this Agreement).
(ii) UNDERWRITING. If the Initiating Holders intend
to distribute the Registrable Securities covered by their request by
means of an underwriting, they shall so advise the Company as a part of
their request made pursuant to Section 2(a).
If Other Stockholders request that shares of Common
Stock be included in such registration, the Holders shall offer to
include the securities of such Other Stockholders in the underwriting
and may condition such offer on their acceptance of the further
applicable provisions of this Section 2. The Holders whose shares are
to be included in such registration and the Company shall (together
with all Other Stockholders proposing to distribute their securities
through such underwriting) enter into an underwriting agreement in
customary form with the representative of the underwriter or
underwriters selected for such underwriting by the Initiating Holders
and reasonably acceptable to the Company. Notwithstanding any other
provision of this Section 2(a), if the representative advises the
Holders in writing that marketing factors require a limitation on the
number of shares to be underwritten, the securities of the Company held
by Other Stockholders shall be excluded from such registration to the
extent so required by such limitation. If, after the exclusion of such
shares, further reductions are still required, the number of shares
included in the registration by each Holder shall be reduced on a pro
rata basis (based on the number of shares held by such Holder), by such
minimum number of shares as is necessary to comply with such
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request. No Registrable Securities or any other securities excluded
from the underwriting by reason of the underwriter's marketing
limitation shall be included in such registration. If any Other
Stockholder who has requested inclusion in such registration as
provided above disapproves of the terms of the underwriting, such
person may elect to withdraw therefrom by written notice to the
Company, the underwriter and the Initiating Holders. The securities so
withdrawn shall also be withdrawn from registration. If the underwriter
has not limited the number of Registrable Securities or other
securities to be underwritten, the Company and officers and directors
of the Company may include its or their securities for its or their own
account in such registration if the representative so agrees and if the
number of Registrable Securities and other securities which would
otherwise have been included in such registration and underwriting will
not thereby be limited.
(iii) WITHDRAWALS. A request for registration
pursuant to this Section 2(a) may be withdrawn by the Majority Holders
of the Registration prior to the initial filing of a registration
statement (a "Withdrawn Request") and a registration statement filed
pursuant to this Section 2(a) may be withdrawn by the Majority Holders
of the Registration prior to the effectiveness thereof (a "Withdrawn
Registration Statement") and such withdrawals shall be treated as a
demand registration which shall have been effected pursuant to this
Section 2(a), unless the Holders of Registrable Securities to be
included in such registration statement reimburse the Company for its
out-of-pocket Registration Expenses relating to the preparation and
filing of such registration statement to the extent actually incurred;
provided, however, that if a Withdrawn Request or Withdrawn
Registration Statement is made because of a material adverse change in
the business or financial condition of the Company then such withdrawal
shall not be treated as a registration effected pursuant to this
Section 2(a) and shall not be counted towards the total number of
registrations which Holders may request pursuant to this Section 2(a).
If any Holder requesting inclusion in a registration pursuant to this
Section 2(a) revokes such request and, as a result of such revocation,
the anticipated aggregate public offering price of the Registrable
Securities requested to be included in such registration falls below
the minimum required by Section 2(a)(i)(B)(z) and the Holders
continuing to seek such registration do not request to include
additional Registrable Securities to make up such shortfall then the
registration statement shall automatically without any further action
on behalf of the Holders or any other parties be deemed to have been
withdrawn by the Majority Holders of the registration and the Company
shall not be required to bear any Registration Expenses in connection
therewith.
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(b) COMPANY REGISTRATION.
(i) If the Company shall determine to register any of
its equity securities either for its own account or for the account of
Other Stockholders, other than a registration relating solely to
employee benefit plans, or a registration relating solely to a
Commission Rule 145 transaction, or a registration on any registration
form which does not permit secondary sales or does not include
substantially the same information as would be required to be included
in a registration statement covering the sale of Registrable
Securities, the Company will:
(A) promptly give to each of the Holders a
written notice thereof (which shall include a list of the
jurisdictions in which the Company intends to attempt to qualify
such securities under the applicable blue sky or other state
securities laws); and
(B) include in such registration (and any
related qualification under blue sky laws or other compliance),
and in any underwriting involved therein, all the Registrable
Securities specified in a written request or requests, made by the
Holders within fifteen (15) days after receipt of the written
notice from the Company described in clause (i) above, except as
set forth in Section 2(b)(ii) below. Such written request may
specify all or a part of the Holders' Registrable Securities
provided, however, that the Company shall not be obligated to
effect any such registration pursuant to this Section 2(b) in any
particular jurisdiction in which the Company would be required as
a result of such registration to (i) execute a general consent to
service of process in effecting such registration, qualification
or compliance, unless the Company is already subject to service in
such jurisdiction and except as may be required by the Securities
Acts or applicable rules or regulations thereunder; (ii) qualify
generally to do business in any jurisdiction where it would not
otherwise be required to qualify or (iii) subject itself to
taxation.
If at any time after giving written notice of its
intention to register any securities and prior to the effective
date of a registration statement filed pursuant to this Section
2(b), the Company shall determine for any reason not to register
or to delay registration of such securities, the Company may, at
its election, give written notice of such determination to each
Holder of Registrable Securities and thereupon (A) in the case of
a determination not to register, the Company shall be relieved of
its obligation to register any Registrable Securities in
connection with such registration and (B) in the case of a
determination to delay such
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registration, the Company shall be permitted to delay such
registration of such Registration of such Registrable Securities
for the same period as the delay in the registering such other
securities.
(ii) UNDERWRITING. If the registration of which the
Company gives notice is for a registered public offering involving an
underwriting, the Company shall so advise each of the Holders as a part
of the written notice given pursuant to Section 2(b)(i)(A). In such
event, the right of each of the Holders to registration pursuant to
this Section 2(b) shall be conditioned upon such Holders' participation
in such underwriting and the inclusion of such Holders' Registrable
Securities in the underwriting to the extent provided herein. The
Holders whose shares are to be included in such registration shall
(together with the Company and the Other Stockholders distributing
their securities through such underwriting) enter into an underwriting
agreement in customary form with the representative of the underwriter
or underwriters selected for underwriting by the Company.
Notwithstanding any other provision of this Section 2(b), if the
representative determines that marketing factors require a limitation
on the number of shares to be underwritten, the representative may
(subject to the allocation priority set forth below) limit the number
of Registrable Securities to be included in the registration and
underwriting. The Company shall so advise all holders of securities
requesting registration, and the number of shares of securities that
are entitled to be included in the registration and underwriting shall
be allocated and included in the registration in the following order of
priority: (A), in the case of a registration initiated by the Company;
(1) first, the securities that the Company proposed to register for its
own account, (2) second, the Registrable Securities requested to be
included in such registration by the Holders and by any Other
Stockholders of the Company, pro rata in proportion to the number of
securities requested to be included in such registration by each of
them and (3) third, other securities of the Company to be registered on
behalf of any Person, including officers and directors of the Company,
pro rata in proportion to the number of securities requested to be
included in such registration by each of them; and
(B), in the case of a registration initiated by any
Person or Persons other than the Company or a Holder; (1) first, the
securities requested to be included in such registration by any such
Persons initiating such registration, allocated pro rata in proportion
to the number of securities requested to be so included in such
registration by each of them, (2) second, the Registrable Securities of
any Holder seeking to have its shares included in such registration and
the securities of any other Persons who have been granted incidental or
piggyback Registration
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Rights that have requested that such securities be included in such
Registration Statement, allocated pro rata in proportion to the number
of securities requested to be so included in such registration by each
of them; (3) third, the securities that the Company proposes to
register for its own account; and (4) fourth, other securities of the
Company to be registered on behalf of any other Person including
officers and directors of the Company, pro rata in proportion to the
number of securities requested to be included in such registration by
each of them.
If any of the Holders or any officer, director or
Other Stockholder disapproves of the terms of any such underwriting, he
may elect to withdraw therefrom by written notice to the Company and
the underwriter. Any Registrable Securities or other securities
excluded or withdrawn from such underwriting shall be withdrawn from
such registration.
(iii) APPLICATION TO CANADIAN PUBLIC OFFERINGS. If
the Company proposes to file a prospectus for sale of any of the
Company's securities to the public with any Canadian securities
regulatory authority or otherwise to qualify any of its securities for
distribution to the public in any province of Canada (excluding any
filing solely for the purpose of listing any securities of the Company
on the Toronto Stock Exchange) (a "Canadian Public Offering"), each
Holder shall be entitled, subject to applicable Canadian securities
law, to participate in the Canadian Public Offering to the same extent
and on the same terms and conditions (before, during and after the
Canadian Public Offering), mutatis mutandis, as such Holder is entitled
to participate in a registration under this Agreement.
(c) FORM F-3. The Investors shall have the right to request
three (3) registrations in the aggregate for all Holders on Form F-3 (such
requests shall be in writing and shall state the number of shares of Registrable
Securities to be disposed of and the intended method of disposition of shares by
such holders), subject only to the following:
(i) The Company shall not be required to effect a
registration pursuant to this Section 2(c) prior to the first
anniversary of the date hereof.
(ii) The Company shall not be required to effect a
registration pursuant to this Section 2(c) unless the Holder or Holders
requesting registration propose to dispose of shares of Registrable
Securities having an aggregate price to the public (before deduction of
underwriting discounts and expenses of sale) of more than $5,000,000.
(iii) The Company shall not be required to effect a
registration pursuant to this Section 2(c) within 180 days
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of the effective date of the most recent registration pursuant to this
Section 2 in which securities held by the requesting Holder could have
been included for sale or distribution.
(iv) The Company shall not be obligated to effect any
registration pursuant to this Section 2(c) in any particular
jurisdiction in which the Company would be required to (1) execute a
general consent to service of process in effecting such registration,
qualification or compliance, unless the Company is already subject to
service in such jurisdiction and except as may be required by the
Securities Act or applicable rules or regulations thereunder; (2)
qualify generally to do any business in any jurisdiction where it would
not otherwise be required to qualify but for this Section 2(c); or (3)
subject itself to taxation in any such jurisdiction.
Notwithstanding the provisions of Section 2(c)(i), to the extent the
Company acts at the request of funds affiliated with Hilal Capital Management
LLC to prepare and file a comparable registration statement, the Company shall
prepare and file with the Commission on or prior to October 30, 1999, a
registration statement on Form F-3 (which shall be counted as one of the three
(3) requests contemplated by this Section 2(c)) covering the resale by the
Holders of all of the Common Stock issuable upon exercise of the Warrants or
upon conversion of the Shares, from time to time in open market transactions,
and the Company shall use all commercially reasonable efforts to cause such
registration to become effective on or prior to December 31, 1999.
The Company shall give written notice to all Holders of the receipt of
a request for registration pursuant to this Section 2(c) and shall provide a
reasonable opportunity for other Holders to participate in the registration,
provided that if the registration is for an underwritten offering, the terms of
Section 2(a)(ii) shall apply to all participants in such offering. Subject to
the foregoing, the Company will use its best efforts to effect promptly the
registration of all shares of Registrable Securities on Form F-3 to the extent
requested by the Holder or Holders thereof for purposes of disposition.
The provisions of Section 2(a)(iii) shall apply also to withdrawals of
requests for registration under this Section 2(c).
(d) EXPENSES OF REGISTRATION. All Registration
Expenses incurred in connection with any registration, qualification or
compliance pursuant to this Section 2 shall be borne by the Company, and all
Selling Expenses shall be borne by the Holders of the securities so registered
pro rata on the basis of the number of their shares so registered, except as
otherwise provided with respect to a Withdrawn Request or a Withdrawn
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Registration Statement in Section 2(a) or 2(c) or as otherwise expressly
provided herein.
(e) REGISTRATION PROCEDURES. In the case of each
registration effected by the Company pursuant to this Section 2, the Company
will keep the Holders, as applicable, advised in writing as to the initiation of
each registration and as to the completion thereof. At its expense, the Company
will:
(i) keep such registration effective for a period of
one hundred twenty (120) days or until the Holders, as applicable, have
completed the distribution described in the registration statement
relating thereto, whichever first occurs; provided, however, that in
the case of any registration of Registrable Securities on Form F-3
which are intended to be offered on a continuous or delayed basis, such
120-day period shall be extended until all such Registrable Securities
are sold, provided that Rule 415, or any successor rule under the
Securities Act, permits an offering on a continuous or delayed basis,
and provided further that applicable rules under the Securities Act
governing the obligation to file a post-effective amendment permit, in
lieu of filing a post-effective amendment which (y) includes any
prospectus required by Section 10(a) of the Securities Act or (z)
reflects facts or events representing a material or fundamental change
in the information set forth in the registration statement, the
incorporation by reference of information required to be included in
(y) and (z) above to be contained in periodic reports filed pursuant to
Section 12 or 15(d) of the Exchange Act in the registration statement;
(ii) furnish such number of prospectuses and other
documents incident thereto as each of the Holders, as applicable, from
time to time may reasonably request;
(iii) notify each Holder of Registrable Securities
covered by such registration at any time when a prospectus relating
thereto is required to be delivered under the Securities Act of the
happening of any event as a result of which the prospectus included in
such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing; and
(iv) furnish, on the date that such Registrable
Securities are delivered to the underwriters for sale, if such
securities are being sold through underwriters or, if such securities
are not being sold through underwriters, on the date that the
registration statement with respect to such securities becomes
effective, (1) an opinion, dated as of such date, of the counsel
representing the Company for
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the purposes of such registration, in form and substance as is
customarily given to underwriters in an underwritten public offering
and reasonably satisfactory to a majority in interest of the Holders
participating in such registration, addressed to the underwriters, if
any, and to the Holders participating in such registration and (2) a
letter, dated as of such date, from the independent certified public
accountants of the Company, in form and substance as is customarily
given by independent certified public accountants to underwriters in an
underwritten public offering and reasonably satisfactory to a majority
in interest of the Holders participating in such registration,
addressed to the underwriters, if any, and if permitted by applicable
accounting standards, to the Holders participating in such
registration.
(f) INDEMNIFICATION.
(i) The Company will indemnify each of the Holders,
as applicable, each of its officers, directors and partners, and each
person controlling each of the Holders, with respect to each
registration which has been effected pursuant to this Section 2, and
each underwriter of any registration effected pursuant to section 2(a),
if any, and each person who controls any underwriter, 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 (A) registration
statement (relating to any such registration) (a "Registration
Statement") or any omission or alleged omission to state a material
fact required to be stated therein and necessary to make the statements
therein not misleading or (B) any prospectus (including any
preliminary, final or summary prospectus, amendment or supplement
thereto) included in any such Registration Statement (a "Prospectus")
or any omission or alleged omission to state a material fact required
to be stated therein or necessary to make any statements therein, in
light of the circumstances under which they were made, not misleading
or (C) any other violation by the Company of the Securities Act or the
Exchange Act or 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 of the Holders, each of its officers, directors and
partners, and each person controlling each of the Holders, each such
underwriter and each person who controls any such underwriter, for any
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 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
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information furnished to the Company by the Holders or underwriter and
stated to be specifically for use therein.
(ii) Each of the Holders will, if Registrable
Securities held by it are included in the securities as to which such
registration, qualification or compliance is being effected, indemnify
the Company, each of its directors and officers and each underwriter,
if any, of the Company's securities covered by such a registration
statement, each person who controls the Company or such underwriter,
each Other Stockholder and other Persons whose securities may be
included in such registration and each of their officers, directors,
and partners, and each person controlling such Other Stockholder and
other Persons against all claims, losses, damages and liabilities (or
actions in respect thereof) (whether arising in an action between the
Holders and such indemnified parties or any other Person and such
indemnified parties) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact or any omission or
alleged omission to state a material fact required to be stated therein
or necessary to make any statements therein, in light of the
circumstances under which they were made, not misleading, contained in
any such Registration Statement or Prospectus and will reimburse the
Company and such Other Stockholders, directors, officers, partners,
persons, underwriters or control persons for any legal or any other
expenses reasonably incurred in connection with investigating or
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 or Prospectus in reliance upon and in
conformity with written information furnished to the Company by such
Holder and stated to be specifically for use therein; provided,
however, that the obligations of each of the Holders hereunder shall be
limited to an amount equal to the net proceeds to such Holder of
securities sold as contemplated herein.
(iii) Each party entitled to indemnification under
this Section 2(f) (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 or 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 unreasonably be withheld) and the Indemnified Party may
participate in such defense at such party's expense (unless the
Indemnified Party shall have reasonably concluded upon advice of
counsel
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that there may be a conflict of interest between the Indemnifying Party
and the Indemnified Party in such action, in which case the fees and
expenses of counsel shall be at the expense of the Indemnifying Party;
provided, however, that the Indemnified Party shall be entitled to
elect only one counsel at the expense of the Indemnifying Party and
such counsel shall be approved by the Indemnifying Party, which
approval shall not be unreasonably withheld), 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
Section 2 unless the Indemnifying Party is materially prejudiced
thereby. 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. No Indemnifying Party
shall be held liable for any settlement or any judgment of, or in
connection with, any such claim or action effected without its written
consent, which consent shall not be unreasonably withheld. 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.
(iv) If the indemnification provided for in this
Section 2(f) is held by a court of competent jurisdiction to be
unavailable to an Indemnified Party with respect to any loss,
liability, claim, damage or expense referred to herein, then the
Indemnifying Party, in lieu of indemnifying such Indemnified Party
hereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage or
expense in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party on the one hand and of the Indemnified
Party on the other in connection with the statements or omissions which
resulted in such loss, liability, claim, damage or expense, as well as
any other relevant equitable considerations. The relative fault of the
Indemnifying Party and of the Indemnified Party shall be determined by
reference to, among other things, whether the untrue (or alleged
untrue) statement of a material fact or the omission (or alleged
omission) to state a material fact relates to information supplied by
the Indemnifying Party or by the Indemnified Party and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
(v) Notwithstanding the foregoing, to the extent that
the provisions on indemnification and contribution
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contained in the underwriting agreement entered into in connection with
any underwritten public offering contemplated by this Agreement are in
conflict with the foregoing provisions, the provisions in such
underwriting agreement shall be controlling.
(vi) The foregoing indemnity agreement of the Company
and Holders is subject to the condition that, insofar as they relate to
any loss, claim, liability or damage made in a preliminary prospectus
but eliminated or remedied in the amended prospectus on file with the
Commission at the time the registration statement in question becomes
effective or the amended prospectus filed with the Commission pursuant
to Commission Rule 424(b) (the "Final Prospectus"), such indemnity or
contribution agreement shall not inure to the benefit of any
underwriter or Holder if a copy of the Final Prospectus was furnished
to the underwriter and was not furnished to the person asserting the
loss, liability, claim or damage at or prior to the time such action is
required by the Securities Act.
(g) INFORMATION BY THE HOLDERS. Each of the Holders
holding securities included in any registration shall furnish to the Company
such information regarding such Holder and the distribution 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 Section 2. If any registration statement or comparable
statement under state securities laws refers to any Holder by name or otherwise
as the holder of any securities of the Company, then such Holder shall promptly
notify the Company of any fact of which such Holder becomes aware and the
happening of any event which relates to the Holder or the distribution of the
securities owned by such Holder which results in the Registration Statement or
the Prospectus included in such Registration Statement containing an untrue
statement of material fact or omitting to state a material fact required to be
stated therein or necessary to make the statements therein not misleading and
shall provide to the Company such information as shall be necessary to enable
the Company to prepare a supplement, or post-effective amendment to such
Registration Statement or related prospectus or any document incorporated
thereunder by reference or file any other documents required so that such
Registration Statement or Prospectus will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein.
In the event that, either immediately prior to or subsequent
to the effectiveness of any registration statement, a Holder shall distribute
Registrable Securities to its partners, the Holder shall so advise the Company
and provide such information as shall be necessary to permit an amendment to
such registration statement to provide information with respect to such
partners, as selling securityholders. Promptly following
14
receipt of such information, the Company shall file an appropriate amendment to
such registration statement reflecting the information so provided. Any expense
to the Company resulting from such amendment shall be borne by the Holder.
(h) RULE 144 REPORTING.
With a view to making available the benefits of certain rules
and regulations of the Commission which may permit the sale of restricted
securities to the public without registration, the Company agrees to:
(i) at all times make and keep public information
available as those terms are understood and defined in Rule 144 under
the Securities Act ("Rule 144");
(ii) use its best efforts to file with the Commission
in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act; and
(iii) so long as the Holder owns any Registrable
Securities, furnish to the Holder upon request, a written statement by
the Company as to its compliance with the reporting requirements of
Rule 144 and of the Securities Act and the Exchange Act, a copy of the
most recent annual or quarterly report of the Company, and such other
reports and documents so filed as the Holder may reasonably request in
availing itself of any rule or regulation of the Commission allowing
the Holder to sell any such securities without registration.
(i) RIGHT TO DEFER REGISTRATION; NO OBLIGATION TO
REGISTER. (A) Subject to the provisions of Section 2(i)(B), if (i) in the good
faith judgment of the Board of Directors of the Company, a registration would be
seriously detrimental to the Company and the Board of Directors of the Company
concludes, as a result, that it is necessary to defer the filing of such
registration statement at such time and (ii) the Company shall furnish to the
requesting Holders a certificate signed by the President of the Company stating
that, in the good faith judgment of the Board of Directors of the Company, it
would be seriously detrimental to the Company for such registration statement to
be filed in the near future and that it is therefore necessary to defer the
filing of such registration statement, then the Company shall have the right to
defer the filing of any registration statement requested under Section 2(a) or
2(c) hereunder, or taking of any other action otherwise required hereunder to
effect a registration, for the period during which such registration would be
detrimental, such period not to exceed 90 days; provided, however, that the
Company shall be entitled to exercise its rights under this Section 2(i) not
more than once during any twelve month period during the term of this Agreement.
15
(B) Notwithstanding anything in this Agreement to the
contrary, the Company shall not be obligated to effect or take any action to
effect any registration pursuant to Section 2(a)(i) or 2(c) during the period
starting 90 days prior to the Company's good faith estimate of the date of
filing of, and ending on a date 180 days after the effective date of, a Company
initiated registration or (ii) if, within 14 days after its receipt of a written
request to effect such a registration, the Company causes to be delivered to the
Initiating Holders an opinion of counsel reasonably acceptable to the Initiating
Holders to the effect that the proposed disposition of Registrable Securities by
the Initiating Holders will not require registration or qualification under the
Securities Act or compliance with Rule 144(b), it being specifically understood
and agreed that the Initiating Holders will promptly furnish to the company and
such counsel all information such counsel may reasonably request in order to
enable such counsel to determine whether it would be able to render such
opinion.
(j) TERMINATION. With respect to any particular
Registrable Securities, such securities shall cease to be Registrable Securities
and the registration rights set forth in this Agreement shall not be available
to the Holder thereof when (i) a registration statement with respect to the sale
of such securities shall have been declared effective under the Securities Act
and such securities shall have been disposed of in accordance with such
registration statement, (ii) such securities may be sold pursuant to Rule 144(k)
(or any similar provisions then in effect under the Securities Act), (iii) such
securities have been otherwise transferred, a new certificate or other evidence
of ownership for them not bearing the legend restricting further transfer shall
have been delivered by the Company and subsequent public distribution of such
securities shall not require registration under the Securities Act, or (iv) such
securities shall cease to be outstanding.
3. MISCELLANEOUS
(a) DIRECTLY OR INDIRECTLY. Where any provision in
this Agreement refers to action to be taken by any Person, or which such Person
is prohibited from taking, such provision shall be applicable whether such
action is taken directly or indirectly by such Person.
(b) GOVERNING LAW. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York
applicable to contracts made and to be performed entirely within such State
(without giving effect to the principle of conflicts of laws).
(c) SECTION HEADINGS. The headings of the sections
and subsections of this Agreement are inserted for convenience only and shall
not be deemed to constitute a part thereof.
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(d) NOTICES.
(i) All communications under this Agreement shall be
in writing and shall be delivered by hand or facsimile or mailed by
overnight courier or by registered or certified mail, postage prepaid:
(A) if to the Company, to:
Visible Genetics Inc.
▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇, Spring, ▇▇▇▇▇▇▇▇ & Kichler
▇▇▇▇▇ ▇▇▇
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Bear Marks & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address as it may have
furnished in writing to the Investors;
(B) if to the Investors, at the address or
facsimile number listed on Schedule I hereto, or at such other
address or facsimile number as may have been furnished the
Company in writing, with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(iii) Any notice so addressed shall be deemed to be
given: if delivered by hand or facsimile (with confirmation of
transmission), on the date of such delivery; if mailed by courier, when
received; and if mailed by registered or certified mail, when received.
(e) REPRODUCTION OF DOCUMENTS. This Agreement and all
documents relating thereto, including, without limitation, any consents,
waivers and modifications which may
17
hereafter be executed may be reproduced by the Investor and the Company by any
photographic, photostatic, microfilm, microcard, miniature photographic or other
similar process and the Investors may destroy any original document so
reproduced. The parties hereto agree and stipulate that any such reproduction
shall be admissible in evidence as the original itself in any judicial or
administrative proceeding (whether or not the original is in existence and
whether or not such reproduction was made by the Investors in the regular course
of business) and that any enlargement, facsimile or further reproduction of such
reproduction shall likewise be admissible in evidence.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall
inure to the benefit of and be binding upon the successors and permitted
assigns of each of the parties. Any Holder may assign to any transferee of its
Registrable Securities (other than a transferee that acquires such Registrable
Securities in a registered public offering or pursuant to a sale under Rule 144
of the Securities Act) its rights and obligations under this Agreement;
provided, however, that if any transferee shall take and hold Registrable
Securities, such transferee shall promptly notify the Company and by taking and
holding such Registrable Securities such transferee shall automatically be
entitled to receive the benefits of and be conclusively deemed to have to agreed
to be bound by and to perform all of the terms and provisions of this Agreement
as if it were a party hereto.
(g) ENTIRE AGREEMENT; AMENDMENT AND WAIVER. This
Agreement constitutes the entire understanding of the parties hereto and
supersedes all prior understanding among such parties with respect to the
subject matter herein. This Agreement may be amended, and the observance of any
term of this Agreement may be waived, with (and only with) the written consent
of the Company and the Investors holding a majority of the then outstanding
Registrable Securities provided, however, that nothing herein shall prohibit any
amendment, modification, supplement, termination, waiver or consent to
departure, the effect of which is limited only to those Holders who have agreed
to such amendment, modification, supplement, termination, waiver or consent to
departure.
(h) SEVERABILITY. In the event that any part or parts
of this Agreement shall be held illegal or unenforceable by any court or
administrative body of competent jurisdiction, such determination shall not
effect the remaining provisions of this Agreement which shall remain in full
force and effect.
(i) COUNTERPARTS. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original and all
of which together shall be considered one and the same agreement.
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IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first set forth above.
COMPANY: INVESTORS:
VISIBLE GENETICS INC. WARBURG, ▇▇▇▇▇▇ EQUITY PARTNERS, L.P.
By: ________________________ By: Warburg, ▇▇▇▇▇▇ & Co.,
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ General Partner
Title: President and CEO
By: ___________________________
WARBURG, ▇▇▇▇▇▇ VENTURES INTERNATIONAL, L.P.
By: Warburg, ▇▇▇▇▇▇ & Co.,
General Partner
By: ___________________________
WARBURG, ▇▇▇▇▇▇ NETHERLANDS EQUITY PARTNERS I,
C.V.
By: Warburg, ▇▇▇▇▇▇ & Co.,
General Partner
By: ___________________________
WARBURG, ▇▇▇▇▇▇ NETHERLANDS EQUITY PARTNERS II,
C.V.
By: Warburg, ▇▇▇▇▇▇ & Co.,
General Partner
By: ___________________________
WARBURG, ▇▇▇▇▇▇ NETHERLANDS EQUITY PARTNERS
III, C.V.
By: Warburg, ▇▇▇▇▇▇ & Co.,
General Partner
By: ___________________________
19