<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Date of Report (Date of earliest event reported): April 11, 2000
Aksys, Ltd.
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(Exact name of registrant as specified in its charter)
Delaware 0-28290 36-3890205
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
Two Marriott Drive, Lincolnshire, IL 60069
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(Address of principal executive offices) (Zip Code)
(847) 229-2020
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events.
On April 11, 2000, Aksys, Ltd. (the "Company") issued 1,516,697 shares of
its common stock at $7.75 per share in a private placement to institutional
investors. Pursuant to the Registration Rights Agreement attached hereto as
Exhibit 4.1, the Company has agreed to prepare and file with the Securities and
Exchange Commission a registration statement covering the resale of the shares
of common stock issued to the investors in the offering. The terms of the
private placement are more fully set forth in the Securities Purchase Agreement
attached hereto as Exhibit 10.1.
On April 12, 2000, the Company issued a press release relating to the
offering. A copy of the press release is filed herewith as Exhibit 99.1 and is
hereby incorporated herein by reference.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
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Exhibit
Number Description
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4.1 Registration Rights Agreement
10.1 Securities Purchase Agreement
99.1 Press Release dated April 12, 2000
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: April 19, 2000
AKSYS, LTD.
By: /s/ Steven A. Bourne
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Steven A. Bourne
Controller and Acting Chief Financial
Officer
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Exhibits Index
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<TABLE>
<CAPTION>
Exhibit
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<S> <C>
4.1 Registration Rights Agreement
10.1 Securities Purchase Agreement
99.1 Press Release dated April 12, 2000
</TABLE>
<PAGE>
EXHIBIT 4.1
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT, dated as of April 7, 2000 (this
"Agreement"), is made by and among Aksys, Ltd., a Delaware corporation, with
headquarters located at Two Marriott Drive, Lincolnshire, IL 60069 (the
"Company"), and the investors named on the signature pages hereto (the "Initial
Investors").
RECITALS:
A. In connection with the Securities Purchase Agreement dated April 7,
2000 between the Initial Investors and the Company (the "Purchase Agreement"),
the Company has agreed, upon the terms and subject to the conditions of the
Purchase Agreement, to issue and sell to the Initial Investors 1,516,697 shares
of the Company's Common Stock (the "Common Shares" or the "Securities").
B. In order to induce the Initial Investors to execute and deliver the
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act and applicable state securities laws with
respect to the Common Shares.
In consideration of the premises and the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Company and the Initial Investors hereby agree as
follows:
ARTICLE 1
DEFINITIONS
Capitalized terms used and not otherwise defined herein have the respective
meanings given them set forth in the Purchase Agreement. In addition, as used
in this Agreement, the following terms have the following meanings:
1.1 "Common Shares" means the Securities sold pursuant to the Purchase
Agreement.
1.2 "Investors" means the Initial Investors and any of their transferees
or assignees who receive or acquire Registrable Securities and who are entitled
to the benefit of this Agreement under Article IX hereof.
1.3 "Registrable Securities" means the Securities sold pursuant to the
Purchase Agreement and any shares of capital stock issued or issuable from time
to time (with any adjustments) in exchange for or otherwise with respect to the
Securities; provided that Securities will cease to be Registrable Securities at
such time as they have been sold under the Registration Statement or pursuant to
Rule 144.
1.4 "Registration Period" means the period between the date of this
Agreement and the earliest of (i) the second anniversary of the date of this
Agreement, (ii) the date on which all of the Registrable Securities have been
sold by the Investors under the Registration Statement or pursuant to Rule 144
or (iii) the date on which all the Registrable Securities (in the opinion of the
<PAGE>
Investors' counsel) may be immediately sold by the Investors without
registration and without restriction as to the number of Registrable Securities
to be sold, pursuant to Rule 144 or otherwise.
1.5 "Registration Statement" means a Registration Statement of the Company
filed under the Securities Act.
1.6 The terms "register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
statements in compliance with the Securities Act and pursuant to Rule 415 and
the declaration or ordering of effectiveness of such Registration Statement by
the SEC.
1.7 "Rule 415" means Rule 415 under the Securities Act, or any successor
rule providing for offering securities on a continuous basis, and applicable
rules and regulations thereunder.
ARTICLE 2
REGISTRATION
2.1 Mandatory Registration. The Company will use its best efforts to file
with the SEC a Registration Statement on Form S-3 registering the Registrable
Securities and no other securities for resale within 30 days after the Closing
Date of the purchase of the Common Shares under the Purchase Agreement. If Form
S-3 is not available at that time, then the Company will file a Registration
Statement on such form as is then available to effect a registration of the
Registrable Securities, subject to the consent of the Initial Investors, which
consent will not be unreasonably withheld.
2.2 Effectiveness of the Registration Statement. The Company will use its
best efforts to cause the Registration Statement to be declared effective by the
SEC as soon as practicable after filing, and in any event no later than the 90th
day after the Closing Date (the "Required Effective Date"). However, so long as
the Company filed the Registration Statement within 30 days after the Closing
Date, (a) if the SEC takes the position that registration of the resale of the
Registrable Securities by the Investors is not available under applicable laws,
rules and regulation and that the Company must register the offering of the
Registrable Securities as a primary offering by the Company, or (b) if the
Registration Statement receives SEC review, then the Required Effective Date
will be the 120th day after the Closing Date. In the case of an SEC response
described in clause (a), the Company will, within 40 business days after the
date the Company receives such SEC response, file a Registration Statement as a
primary offering. The Company's best efforts will include, but not be limited
to, promptly responding to all comments received from the staff of the SEC. If
the Company receives notification from the SEC that the Registration Statement
will receive no action or review from the SEC, then the Company will request
that the Registration Statement become effective within five business days after
such SEC notification. Until such time as the Registration Statement becomes
effective, the Company shall not grant any registration rights or other rights
to register securities under the Securities Act unless such rights are
subordinate to the rights of the Investors herein.
<PAGE>
2.3 Payments by the Company. If (i) at any time after effectiveness of
the Registration Statement, sales cannot be made thereunder during the
Registration Period for any reason, other than by reason of the operation of
Section 3.6, for a period of more than 10 consecutive business days, or 30
business days in the aggregate, during any 12-month period or (ii) the Common
Stock is not listed or included for quotation on Nasdaq, Nasdaq SmallCap, the
NYSE or AMEX for more than an aggregate of 10 business days in any 12-month
period, then the Company will thereafter make cash payments to each Investor as
partial compensation for such delay. The amount of the cash payment made to
each Investor will be equal to 1% of the purchase price paid for the Common
Shares purchased by the Investor and not previously sold by the Investor for
each 30 business days that sales cannot be made under the effective Registration
Statement or the Common Stock is not listed or included for quotation on Nasdaq,
Nasdaq SmallCap, the NYSE or AMEX (but in no event to exceed 8% in the
aggregate). These payments will be prorated on a daily basis during the 30
business day period and will be paid to each Investor in cash within five
business days following the end of each month as to which payment is due
hereunder.
2.4 Effect of Late Registration. If the Registration Statement has not
been declared effective by the Required Effective Date, then the Company will
make cash payments to each Investor as partial compensation for such delay (the
"Late Registration Payments"). The Late Registration Payments will be equal to
1% of the purchase price paid for the Common Shares purchased by such Investor
and not previously sold by such Investor for each 30 business days after the
Required Effective Date (but in no event to exceed 8% in the aggregate). The
Late Registration Payments will be prorated on a daily basis during the 30
business day period and will be paid to the Initial Investors in cash within
five business days after the earlier of (i) the end of the 30 business days
following the Required Effective Date or (ii) the effective date of the
Registration Statement.
2.5 Piggyback Registrations.
(a) If, at any time prior to the expiration of the Registration
Period, a Registration Statement is not effective with respect to all of the
Registrable Securities and the Company decides to register any of its securities
for its own account or for the account of others, then the Company will promptly
give the Investors written notice thereof and will use its best efforts to
include in such registration all or any part of the Registrable Securities
requested by such Investors to be included therein (excluding any Registrable
Securities previously included in a Registration Statement); provided that
nothing in this Section 2.5 shall relieve the Company of its obligations under
Sections 2.1, 2.2 and 2.3. This requirement does not apply to Company
registrations on Form S-4 or S-8 or their equivalents relating to equity
securities to be issued solely in connection with an acquisition of any entity
or business or equity securities issuable in connection with stock option or
other employee benefit plans or to registration statements that would otherwise
not permit the registration of resales of previously issued securities. Each
Investor must give its request for registration under this paragraph to the
Company in writing within 15 days after receipt from the Company of notice of
such pending registration. If the registration for which the Company gives
notice is a public offering involving an underwriting, the Company will so
advise the Investors as part of the above-described written notice. In that
event, if the managing underwriter(s) of the public offering impose a limitation
on the number of shares of Common Stock that may be included in the Registration
Statement because, in such
<PAGE>
underwriter(s)' judgment, such limitation would be necessary to effect an
orderly public distribution, then, subject to the next sentence, the Company
will be obligated to include only such limited portion, if any, of the
Registrable Securities with respect to which such Investors have requested
inclusion hereunder. Any exclusion of Registrable Securities will be made pro
rata among all holders of Registrable Securities seeking to include shares of
Common Stock in proportion to the number of shares of Common Stock sought to be
included by those holders.
(b) No right to registration of Registrable Securities under this
Section 2.5 limits in any way the registration required under Section 2.1 above.
The Company shall not be required to afford the Investors the opportunity to
exercise registration rights under this Section 2.5 for more than two
registrations (provided, however, that any Investor that has had any Registrable
Securities excluded from any Registration Statement in accordance with this
Section 2.5 may include in any additional Registration Statement filed by the
Company the Registrable Securities so excluded).
2.6 Eligibility to use Form S-3. The Company represents and warrants
that, as of the date of this Agreement, it meets the requirements for the use of
Form S-3 for registration of the resale by the Investors of the Registrable
Securities. The Company will file all reports required to be filed by the
Company with the SEC in a timely manner so as to preserve its eligibility for
the use of Form S-3.
ARTICLE 3
ADDITIONAL OBLIGATIONS OF THE COMPANY
3.1 Continued Effectiveness of Registration Statement. Subject to the
limitations set forth in Section 3.6, the Company will use its best efforts to
keep the Registration Statement covering the Registrable Securities effective
under Rule 415 at all times during the Registration Period. In the event that
the number of shares available under a Registration Statement filed pursuant to
this Agreement is insufficient to cover all of the Registrable Securities
issued, the Company will (if permitted) amend the Registration Statement or file
a new Registration Statement (on the short form available therefor, if
applicable), or both, so as to cover all of the Registrable Securities. The
Company will file such amendment or new Registration Statement as soon as
practicable, but in no event later than 30 business days after the necessity
therefor arises. The Company will use its best efforts to cause such amendment
or new Registration Statement to become effective as soon as is practicable
after the filing thereof.
3.2 Accuracy of Registration Statement. Assuming the accuracy of
information furnished by or on behalf of the Investors, any Registration
Statement (including any amendments or supplements thereto and prospectuses
contained therein) filed by the Company covering Registrable Securities will not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading. The Company
will prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to the Registration Statement and the prospectus
used in connection with the Registration Statement as may be necessary to permit
sales pursuant to the Registration Statement at all times during the
Registration Period (but subject to Section 3.6), and, during such period, will
comply with the provisions of the Securities Act with respect to the disposition
of all Registrable
<PAGE>
Securities of the Company covered by the Registration Statement until the
termination of the Registration Period, or if earlier, until such time as all of
such Registrable Securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof as set forth in
the Registration Statement.
3.3 Furnishing Documentation. The Company will furnish to each Investor
whose Registrable Securities are included in a Registration Statement, or to its
legal counsel, (a) promptly after each document is filed with the SEC, one copy
of any Registration Statement filed pursuant to this Agreement and any
amendments thereto, each preliminary prospectus (if any) and final prospectus
and each amendment or supplement thereto; and (b) a number of copies of a
prospectus, including a preliminary prospectus (if any), and all amendments and
supplements thereto, and such other documents as the Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by the Investor. The Company will promptly notify by facsimile each
Investor whose Registrable Securities are included in any Registration Statement
of the effectiveness of the Registration Statement and any post-effective
amendment.
3.4 Additional Obligations. The Company will use its best efforts to (a)
register and qualify the Registrable Securities covered by a Registration
Statement under such other securities or blue sky laws of such jurisdictions as
each Investor who holds (or has the right to hold) Registrable Securities being
offered reasonably requests, (b) prepare and file in those jurisdictions any
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain their
effectiveness during the Registration Period, (c) take any other actions
necessary to maintain such registrations and qualifications in effect at all
times during the Registration Period, and (d) take any other actions reasonably
necessary or advisable to qualify the Registrable Securities for sale in such
jurisdictions. Notwithstanding the foregoing, the Company is not required, in
connection such obligations, to (i) qualify to do business in any jurisdiction
where it would not otherwise be required to qualify but for this Section 3.4,
(ii) subject itself to general taxation in any such jurisdiction, (iii) file a
general consent to service of process in any such jurisdiction, (iv) provide any
undertakings that cause material expense or burden to the Company, or (v) make
any change in its charter or bylaws, which in each case the Board of Directors
of the Company determines to be contrary to the best interests of the Company
and its stockholders.
3.5 Underwritten Offerings. If the Investors who hold a majority in
interest of the Registrable Securities being offered in an offering pursuant to
a Registration Statement or any amendment or supplement thereto under this
Agreement select underwriters reasonably acceptable to the Company for such
offering, the Company will enter into and perform its obligations under an
underwriting agreement in usual and customary form including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering.
3.6 Suspension of resale Rights.
(a) The Company will notify (by telephone and also by facsimile and
reputable overnight courier) each Investor who holds Registrable Securities
being sold pursuant to a Registration Statement of the happening of any event of
which the Company has knowledge
<PAGE>
as a result of which the prospectus included in the Registration Statement as
then in effect includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The Company will make such notification as promptly as
practicable after the Company becomes aware of the event (but in no event,
without the prior written consent of the Investor, will the Company disclose to
any Investor any of the facts or circumstances regarding the event), will
promptly prepare a supplement or amendment to the Registration Statement to
correct such untrue statement or omission, and will deliver a number of copies
of such supplement or amendment to each Investor as such Investor may reasonably
request.
(b) Notwithstanding the obligations under Section 3.6(a), if in the
good faith judgment of the Company, following consultation with legal counsel,
it would be detrimental to the Company and its stockholders for resales of
Registrable Securities to be made pursuant to the Registration Statement due to
(i) the existence of a material development or potential material development
involving the Company which the Company would be obligated to disclose in the
Registration Statement, which disclosure would be premature or otherwise
inadvisable at such time or would have a Material Adverse Effect upon the
Company and its stockholders, or (ii) in the good faith judgment of the
Company's Board of Directors, it would adversely affect or require premature
disclosure of the filing of a Company-initiated registration of any class of its
equity securities, the Company will have the right to suspend the use of the
Registration Statement for a period of not more than ninety days, provided,
however, that the Company may so defer or suspend the use of the Registration
Statement no more than two times in any eighteen-month period, and provided,
further, that, after deferring or suspending the use of the Registration
Statement, the Company may not again defer or suspend the use of the
Registration Statement until a period of thirty days has elapsed after
resumption of the use of the Registration Statement.
(c) Subject to the Company's rights under this Section 3, the Company
will use its best efforts to prevent the issuance of any stop order or other
suspension of effectiveness of a Registration Statement and, if such an order is
issued, will use its best efforts to obtain the withdrawal of such order at the
earliest possible time and the Company will promptly notify each Investor that
holds Registrable Securities being sold (or, in the event of an underwritten
offering, the managing underwriters) of the issuance of such order and the
resolution thereof.
(d) Notwithstanding anything to the contrary contained herein or in
the Purchase Agreement, if the use of the Registration Statement is suspended by
the Company, the Company will promptly give notice of the suspension to all
Investors whose securities are covered by the Registration Statement, and will
promptly notify each such Investor as soon as the use of the Registration
Statement may be resumed.
3.7 Review by the Investors. The Company will permit a single firm of
legal counsel, designated by the Investors who hold a majority in interest of
the Registrable Securities being sold pursuant to a Registration Statement, to
review the Registration Statement and all amendments and supplements thereto (as
well as all requests for acceleration or effectiveness thereof) a reasonable
period of time prior to their filing with the SEC, and will not file any
document in a form to which such counsel reasonably objects, unless otherwise
required by law
<PAGE>
in the opinion of the Company's counsel; provided that the time periods set
forth in Section 2.2 shall be tolled to the extent that such legal counsel does
not deliver its final comments relating to such Registration Statement to the
Company within 3 business days after receipt of such Registration Statement. The
sections of any such Registration Statement including information with respect
to the Investors, the Investors' beneficial ownership of securities of the
Company or the Investors' intended method of disposition of Registrable
Securities must conform to the information provided to the Company by each of
the Investors.
3.8 Comfort Letter; Legal Opinion. At the request of the Investors who
hold a majority in interest of the Registrable Securities being sold in an
underwritten offering, and on the date that Registrable Securities are delivered
to an underwriter for sale in connection with the Registration Statement, the
Company will furnish to the Investors and the underwriters (i) a letter, dated
such date, from the Company's independent certified public accountants, in form
and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, addressed to the
underwriters; and (ii) an opinion, dated such date, from counsel representing
the Company for purposes of the Registration Statement, in form and substance as
is customarily given in an underwritten public offering, addressed to the
underwriters and Investors.
3.9 Due Diligence; Confidentiality.
(a) The Company will make available upon reasonable advance notice
during normal business hours for inspection by any Investor whose Registrable
Securities are being sold pursuant to a Registration Statement, any underwriter
participating in any disposition pursuant to the Registration Statement, and any
attorney, accountant or other agent retained by any such Investor or underwriter
(collectively, the "Inspectors"), all pertinent financial and other records,
pertinent corporate documents and properties of the Company (collectively, the
"Records"), as each Inspector reasonably deems necessary to enable the Inspector
to exercise its due diligence responsibility. The Company will cause its
officers, directors and employees to supply all information that any Inspector
may reasonably request for purposes of performing such due diligence.
(b) Each Inspector will hold in confidence, and will not make any
disclosure (except to an Investor) of, any Records or other information that the
Company determines in good faith to be confidential, and of which determination
the Inspectors are so notified, unless (i) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration
Statement, (ii) the release of such Records is ordered pursuant to a subpoena or
other order from a court or government body of competent jurisdiction, (iii) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement (to the
knowledge of the relevant Inspector), (iv) the Records or other information was
developed independently by an Inspector without breach of this Agreement, (v)
the information was known to the Inspector before receipt of such information
from the Company, or (vi) the information was disclosed to the Inspector by a
third party not under an obligation of confidentiality. The Company is not
required to disclose any confidential information in the Records to any
Inspector unless and until such Inspector has entered into a confidentiality
agreement (in form and substance satisfactory to the Company) with the Company
with respect thereto, substantially in the form of this Section 3.9. Nothing
<PAGE>
herein will be deemed to limit the Investor's ability to sell Registrable
Securities in a manner that is otherwise consistent with applicable laws and
regulations.
(c) The Company will hold in confidence, and will not make any
disclosure of, information concerning an Investor provided to the Company under
this Agreement unless (i) disclosure of such information is necessary to comply
with federal or state securities laws, (ii) the disclosure of such information
is necessary to avoid or correct a misstatement or omission in any Registration
Statement, (iii) the release of such information is ordered pursuant to a
subpoena or other order from a court or governmental body of competent
jurisdiction, (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
agreement, (v) the information was disclosed to the Company by a third party not
under an obligation of confidentiality or (vi) such Investor consents to the
form and content of any such disclosure. If the Company learns that disclosure
of such information concerning an Investor is sought in or by a court or
governmental body of competent jurisdiction or through other means, the Company
will give prompt notice to such Investor prior to making such disclosure and
allow such Investor, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.
3.10 Listing. The Company will use best efforts to (i) cause all of the
Registrable Securities covered by each Registration Statement to be listed on
each national securities exchange on which securities of the same class or
series issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange, or
(ii) to the extent the securities of the same class or series are not then
listed on a national securities exchange, secure the designation and quotation
of all of the Registrable Securities covered by each Registration Statement on
Nasdaq.
3.11 Transfer Agent; Registrar. The Company will provide a transfer agent
and registrar, which may be a single entity, for the Registrable Securities not
later than the effective date of the Registration Statement.
3.12 Share Certificates. The Company will cooperate with the Investors
who hold Registrable Securities being sold and with the managing underwriter(s),
if any, to facilitate the timely preparation and delivery of certificates (not
bearing any restrictive legends) representing Registrable Securities to be
offered pursuant to a Registration Statement and will enable such certificates
to be in such denominations or amounts as the case may be, and registered in
such names as the Investors or the managing underwriter(s), if any, may
reasonably request, all in accordance with Article V of the Purchase Agreement.
3.13 Plan of Distribution. At the request of the Investors holding a
majority in interest of the Registrable Securities registered pursuant to a
Registration Statement, the Company will promptly prepare and file with the SEC
such amendments (including post-effective amendments) and supplements to the
Registration Statement, and the prospectus used in connection with the
Registration Statement, as may be necessary in order to change the plan of
distribution set forth in such Registration Statement.
3.14 Securities Laws Compliance. The Company will comply with all
applicable laws related to any Registration Statement relating to the sale of
Registrable Securities and to offering
<PAGE>
and sale of securities and with all applicable rules and regulations of
governmental authorities in connection therewith (including, without limitation,
the Securities Act, the Exchange Act and the rules and regulations promulgated
by the SEC).
3.15 Further Assurances. The Company will take all other reasonable
actions as any Investor or the underwriters, if any, may reasonably request to
expedite and facilitate disposition by such Investor of the Registrable
Securities pursuant to the Registration Statement.
3.16 No Additional Selling Shareholders. The Company will not, and will
not agree to, allow the holders of any securities of the Company to include any
of their securities in any Registration Statement under Section 2.1 hereof, or
any amendment or supplement thereto under Section 3.2 hereof, without the
consent of the holders of a majority in interest of the Registrable Securities.
ARTICLE 4
OBLIGATIONS OF THE INVESTORS
4.1 Investor Information. As a condition to the obligations of the
Company to complete any registration pursuant to this Agreement with respect to
the Registrable Securities of each Investor, such Investor will furnish to the
Company such information regarding itself, the Registrable Securities held by it
and the intended method of disposition of the Registrable Securities held by it
as is reasonably required by the Company to effect the registration of the
Registrable Securities. At least 10 business days prior to the first
anticipated filing date of a Registration Statement for any registration under
this Agreement, the Company will notify each Investor of the information the
Company requires from that Investor if the Investor elects to have any of its
Registrable Securities included in the Registration Statement. If, by three
business days prior to the filing date, the Company has not received the
requested information from an Investor, then the Company may file the
Registration Statement without including Registrable Securities of that
Investor.
4.2 Further Assurances. Each Investor will cooperate with the Company, as
reasonably requested by the Company, in connection with the preparation and
filing of any Registration Statement hereunder, unless such Investor has
notified the Company in writing of such Investor's irrevocable election to
exclude all of such Investor's Registrable Securities from such Registration
Statement.
4.3 Suspension of Sales. Upon receipt of any notice from the Company
under Section 3.6, each Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until (i) it receives copies of a supplemented or amended
prospectus contemplated by Section 3.6(a) or (2) the Company advises the
Investor that a suspension of sales under Section 3.6(b) has terminated. If so
directed by the Company, each Investor will deliver to the Company (at the
expense of the Company) or destroy (and deliver to the Company a certificate of
destruction) all copies in the Investor's possession (other than a limited
number of file copies) of the prospectus covering such Registrable Securities
that is current at the time of receipt of such notice.
<PAGE>
4.4 Underwritten Offerings.
(a) If Investors holding a majority in interest of the Registrable
Securities being registered (with the approval of the Initial Investors)
determine to engage the services of an underwriter, each Investor will enter
into and perform such Investor's obligations under an underwriting agreement, in
usual and customary form, including, without limitation, customary
indemnification and contribution obligations, with the managing underwriter of
such offering, and will take such other actions as are reasonably required in
order to expedite or facilitate the disposition of the Registrable Securities,
unless such Investor has notified the Company in writing of such Investor's
election to exclude all of its Registrable Securities from such Registration
Statement.
(b) Without limiting any Investor's rights under Section 2.1 hereof,
no Investor may participate in any underwritten distribution hereunder unless
such Investor (a) agrees to sell such Investor's Registrable Securities on the
basis provided in any underwriting arrangements approved by the Investors
entitled hereunder to approve such arrangements, (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements, and (c) agrees to pay its pro rata share of all underwriting
discounts and commissions and other fees and expenses of investment bankers and
any manager or managers of such underwriting, and legal expenses of the
underwriter, applicable with respect to its Registrable Securities, in each case
to the extent not payable by the Company under the terms of this Agreement.
ARTICLE 5
EXPENSES OF REGISTRATION
The Company will bear all reasonable expenses, other than underwriting
discounts and commissions, and transfer taxes, if any, incurred in connection
with registrations, filings or qualifications pursuant to Articles II and III of
this Agreement, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees, the fees and disbursements of
counsel for the Company, and the reasonable fees and disbursements of one firm
of legal counsel selected by the Initial Investors pursuant to Section 3.7
hereof (not to exceed $5,000). The Investors shall reimburse the Company for
any out-of-pocket expenses the Company incurs in an underwritten offering
initiated by the Investors.
ARTICLE 6
INDEMNIFICATION
In the event that any Registrable Securities are included in a Registration
Statement under this Agreement:
6.1 To the extent permitted by law, the Company will indemnify and hold
harmless each Investor that holds such Registrable Securities, any underwriter
(as defined in the Securities Act) for the Investors, any directors or officers
of such Investor or such underwriter and any person who controls such Investor
or such underwriter within the meaning of the Securities Act or the Exchange Act
(each, an "Indemnified Person") against any losses, claims, damages,
<PAGE>
expenses or liabilities (joint or several) (including in settlement of
litigation) (collectively, and together with actions, proceedings or inquiries
by any regulatory or self-regulatory organization, whether commenced or
threatened in respect thereof, "Claims") to which any of them become subject
under the Securities Act, the Exchange Act or otherwise, insofar as such Claims
arise out of or are based upon any of the following statements, omissions or
violations in a Registration Statement filed pursuant to this Agreement, any
post-effective amendment thereof or any prospectus included therein: (a) any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement or any post-effective amendment thereof or the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, (b) any
untrue statement or alleged untrue statement of a material fact contained in the
prospectus (as it may be amended or supplemented) or the omission or alleged
omission to state therein any material fact necessary to make the statements
made therein, in light of the circumstances under which the statements therein
were made, not misleading, or (c) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act or any other law, including
without limitation any state securities law or any rule or regulation thereunder
(the matters in the foregoing clauses (a) through (c) being, collectively,
"Violations"). Subject to the restrictions set forth in Section 6.3 with respect
to the number of legal counsel, the Company will reimburse the Investors and
each such underwriter or controlling person and each such other Indemnified
Person, promptly as such expenses are incurred and are due and payable, for any
legal fees or other reasonable expenses incurred by them in connection with
investigating or defending any Claim. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this Section 6.1
with respect to any Indemnified Person: (i) does not apply to the extent such
Claim arises out of or is based upon a Violation that occurs in reliance upon
and in conformity with information furnished in writing to the Company by such
Indemnified Person expressly for use in connection with the preparation of the
Registration Statement or any such amendment thereof or supplement thereto, if
such prospectus was timely made available by the Company pursuant to Section 3.3
hereof; (ii) does not apply to a Claim arising out of or based on any failure by
such Indemnified Person to comply with prospectus delivery requirements (or the
Securities Act, the Exchange Act or any other law or legal requirement
applicable to them) or any covenant or agreement contained in the Purchase
Agreement or this Agreement; and (iii) does not apply to amounts paid in
settlement of any Claim if such settlement is made without the prior written
consent of the Company, which consent will not be unreasonably withheld. This
indemnity obligation will remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Persons and will survive
the transfer of the Registrable Securities by the Investors under Article IX of
this Agreement.
6.2 In connection with any Registration Statement in which an Investor is
participating, each such Investor will indemnify and hold harmless, severally
and not jointly, to the same extent and in the same manner set forth in Section
6.1 above, the Company, each of its directors, each of its officers who signs
the Registration Statement, each person, if any, who controls the Company within
the meaning of the Securities Act or the Exchange Act, and any other stockholder
selling securities pursuant to the Registration Statement or any of its
directors or officers or any person who controls such stockholder within the
meaning of the Securities Act or the Exchange Act (each an "Indemnified Person")
against any Claim to which any of them may become subject under the Securities
Act, the Exchange Act or otherwise, insofar as such Claim arises out of or is
based upon any of the following: (a) any matter of the type referred to
<PAGE>
clause (a) or (b) in Section 6.1 above in each case to the extent (and only to
the extent) that such violation occurs in reliance upon and in conformity with
written information furnished to the Company by such Investor expressly for use
in connection with such Registration Statement or (b) any failure by such
Investor to comply with prospectus delivery requirements (or the Securities Act,
the Exchange Act or any other law or legal requirement applicable to sales by
such Investor under the Registration Statement) or any covenant or agreement
contained in the Purchase Agreement or this Agreement with respect to sales
under the Registration Statement. Subject to the restrictions set forth in
Section 6.3, such Investor will promptly reimburse any legal or other expenses
(promptly as such expenses are incurred and due and payable) reasonably incurred
by them in connection with investigating or defending any such Claim. However,
the indemnity agreement contained in this Section 6.2 does not apply to amounts
paid in settlement of any Claim if such settlement is effected without the prior
written consent of such Investor, which consent will not be unreasonably
withheld, and no Investor will be liable under this Agreement (including this
Section 6.2 and Article VII) for the amount of any Claim that exceeds the net
proceeds actually received by such Investor as a result of the sale of
Registrable Securities pursuant to such Registration Statement. This indemnity
will remain in full force and effect regardless of any investigation made by or
on behalf of an Indemnified Party and will survive the transfer of the
Registrable Securities by the Investors under Article IX of this Agreement.
6.3 Promptly after receipt by an Indemnified Person under this Article VI
of notice of the commencement of any action (including any governmental action),
such Indemnified Person will, if a Claim in respect thereof is to be made
against any indemnifying party under this Article VI, deliver to the
indemnifying party a written notice of the commencement thereof. The
indemnifying party may participate in, and, to the extent the indemnifying party
so desires, jointly with any other indemnifying party similarly given notice,
assume control of the defense thereof with counsel mutually satisfactory to the
indemnifying parties and the Indemnified Person. In that case, the indemnifying
party will diligently pursue such defense. If, in the reasonable opinion of
counsel retained by the indemnifying party, the representation by such counsel
of the Indemnified Person and the indemnifying party would be inappropriate due
to actual or potential conflicts of interest between the Indemnified Person and
any other party represented by such counsel in such proceeding or the actual or
potential defendants in, or targets of, any such action including the
Indemnified Person and such Indemnified Person reasonably determines that there
may be legal defenses available to such Indemnified Person that are different
from or in addition to those available to the indemnifying party, then the
Indemnified Person is entitled to assume such defense and may retain its own
counsel, with the fees and expenses to be paid by the indemnifying party
(subject to the restrictions on settlement under Section 6.1 or 6.2, as
applicable). The Company will pay for only one separate legal counsel for the
Investors collectively, and such legal counsel will be selected by the Investors
holding a majority in interest of the Registrable Securities. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action does not relieve an indemnifying party of any
liability to an Indemnified Person under this Article VI, except to the extent
that the indemnifying party is prejudiced in its ability to defend such action.
The indemnification required by this Article VI will be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as such expense, loss, damage or liability is incurred and is due and
payable.
<PAGE>
ARTICLE 7
CONTRIBUTION
To the extent that any indemnification provided for herein is prohibited or
limited by law, the indemnifying party will make the maximum contribution with
respect to any amounts for which it would otherwise be liable under Article VI
to the fullest extent permitted by law. However, (a) no contribution will be
made under circumstances where the maker would not have been liable for
indemnification under the fault standards set forth in Article VI, (b) no seller
of Registrable Securities guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) will be entitled to contribution
from any seller of Registrable Securities who was not guilty of such fraudulent
misrepresentation, and (c) contribution (together with any indemnification or
other obligations under this Agreement) by any seller of Registrable Securities
will be limited in amount to the net amount of proceeds received by such seller
from the sale of such Registrable Securities.
ARTICLE 8
EXCHANGE ACT REPORTING
In order to make available to the Investors the benefits of Rule 144 or any
similar rule or regulation of the SEC that may at any time permit the Investors
to sell securities of the Company to the public without registration, the
Company will:
(a) File with the SEC in a timely manner, and make and keep available,
all reports and other documents required of the Company under the Securities Act
and the Exchange Act so long as the Company remains subject to such requirements
(it being understood that nothing herein limits the Company's obligations under
Section 4.3 of the Purchase Agreement) and the filing and availability of such
reports and other documents is required for the applicable provisions of Rule
144; and
(b) Furnish to each Investor, so long as such Investor holds
Registrable Securities, promptly upon the Investor's request, (i) a written
statement by the Company that it has complied with the reporting requirements of
the Securities Act and the Exchange Act, (ii) a copy of the most recent annual
or quarterly report of the Company and such other reports and documents filed by
the Company with the SEC and (iii) such other information as may be reasonably
requested to permit the Investors to sell such securities pursuant to Rule 144
without registration.
ARTICLE 9
ASSIGNMENT OF REGISTRATION RIGHTS
The rights of the Investors hereunder, including the right to have the
Company register Registrable Securities pursuant to this Agreement, will be
automatically assigned by the Investors to transferees or assignees of all or
any portion of the Registrable Securities, but only if (a) the Investor agrees
in writing with the transferee or assignee to assign such rights, and a copy of
such agreement is furnished to the Company within a reasonable time after such
assignment, (b) the Company is, within a reasonable time after such transfer or
assignment, furnished with written notice of the name and address of such
transferee or assignee and the securities with
<PAGE>
respect to which such registration rights are being transferred or assigned, (c)
such transfer or assignment was not made under the Registration Statement or
Rule 144, (d) at or before the time the Company received the written notice
contemplated by clause (b) of this sentence, the transferee or assignee agrees
in writing with the Company to be bound by all of the provisions contained
herein, (e) such transfer is made in accordance with the applicable requirements
of the Purchase Agreement and (f) the transferee is an "accredited investor" as
that term is defined in Rule 501 of Regulation D. Any transferee or assignee of
an Investor under Article IX shall be deemed an "Investor" for all purposes of
this Agreement, and shall be entitled to all rights of, and subject to all
obligations (including indemnification obligations) of, an Investor hereunder.
ARTICLE 10
AMENDMENT OF REGISTRATION RIGHTS
This Agreement may be amended and the obligations hereunder may be waived
(either generally or in a particular instance, and either retroactively or
prospectively) only with the written consent of the Company and of the Investors
who then hold a majority in interest of the Registrable Securities (but not
including any Investor who is not affected by such amendment or waiver). Any
amendment or waiver effected in accordance with this Article X is binding upon
each Investor and the Company. Notwithstanding the foregoing, no amendment or
waiver will retroactively affect any Investor without its consent, or will
prospectively adversely affect any Investor who no longer owns any Registrable
Securities without its consent. Neither Article VI nor Article VII hereof may
be amended or waived in a manner adverse to an Investor without its consent.
ARTICLE 11
MISCELLANEOUS
11.1 Conflicting Instructions. A person or entity is deemed to be a holder
of Registrable Securities whenever such person or entity owns of record such
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more persons or entities with respect to the
same Registrable Securities, the Company will act upon the basis of
instructions, notice or election received from the registered owner of such
Registrable Securities.
11.2 Notices. Any notices required or permitted to be given under the
terms of this Agreement will be given as set forth in the Purchase Agreement.
11.3 Waiver. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, does not operate as a waiver thereof.
11.4 Governing Law. This Agreement will be governed by and interpreted in
accordance with the laws of the State of Delaware without regard to the
principles of conflict of laws. The parties hereto hereby submit to the
exclusive jurisdiction of the United States federal and state courts located in
the State of Delaware with respect to any dispute arising under this Agreement,
the agreements entered into in connection herewith or the transactions
contemplated hereby or thereby.
<PAGE>
11.5 Severability. If any provision of this Agreement is invalid or
unenforceable under any applicable statute or rule of law, then such provision
will be deemed modified in order to conform with such statute or rule of law.
Any provision hereof that may prove invalid or unenforceable under any law will
not affect the validity or enforceability of any other provision hereof.
11.6 Entire Agreement. This Agreement and the Purchase Agreement
(including all schedules and exhibits thereto) constitute the entire agreement
among the parties hereto with respect to the subject matter hereof and thereof.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein or therein. This Agreement supersedes all
prior agreements and understandings among the parties hereto with respect to the
subject matter hereof.
11.7 Successors and Assigns. Subject to the requirements of Article IX
hereof, this Agreement inures to the benefit of and is binding upon the
successors and assigns of each of the parties hereto. Notwithstanding anything
to the contrary herein, including, without limitation, Article IX, the rights of
an Investor hereunder are assignable to and exercisable by a bona fide pledgee
of the Registrable Securities in connection with an Investor's margin or
brokerage accounts.
11.8 Use of Pronouns. All pronouns refer to the masculine, feminine or
neuter, singular or plural, as the context may require.
11.9 Headings. The headings of this Agreement are for convenience of
reference only, are not part of this Agreement and do not affect its
interpretation.
11.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which is deemed an original but all of which constitute
one and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by facsimile transmission, and facsimile
signatures are binding on the parties hereto.
11.11 Further Assurances. Each party will do and perform, or cause to be
done and performed, all such further acts and things, and will execute and
deliver all other agreements, certificates, instruments and documents, as
another party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
11.12 Consents. All consents and other determinations to be made by the
Investors pursuant to this Agreement will be made by the Initial Investors or
the Investors holding a majority in interest of the Registrable Securities.
11.13 No Strict Construction. The language used in this Agreement is
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.
<PAGE>
IN WITNESS WHEREOF, the undersigned Investors and the Company have caused
this Agreement to be duly executed as of the date first above written.
COMPANY:
AKSYS, LTD.
By: /s/ William C. Dow
------------------
Title: President and CEO
INVESTORS:
/s/ Safeco Resource Series Trust
--------------------------------
/s/ Safeco Common Stock Trust
-----------------------------
/s/ Narragansett I, LP
----------------------
/s/ Narragansett Offshore, Ltd.
-------------------------------
/s/ Western United Life Assurance Co.
-------------------------------------
/s/ Special Situations Cayman Fund, LP
--------------------------------------
/s/ Special Situations Private Equity Fund, LP
----------------------------------------------
/s/ Special Situations Fund III, LP
-----------------------------------
<PAGE>
EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of April 7,
2000 is made by and among AKSYS, LTD., a Delaware corporation, with headquarters
located at Two Marriott Drive, Lincolnshire, IL 60069 (the "Company"), and the
investors named on the signature pages hereto, together with their permitted
transferees (the "Investors").
RECITALS:
A. The Company and the Investors are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Section 4(2) of the Securities Act and Rule 506 under Regulation D.
B. The Investors desire, upon the terms and conditions stated in this
Agreement, to purchase shares of the Company's Common Stock, for an aggregate
purchase price of $11,754,402. The purchase price per share of the Common Stock
is $7.75.
C. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
under which the Company has agreed to provide certain registration rights under
the Securities Act and the rules and regulations promulgated thereunder.
D. The capitalized terms used herein and not otherwise defined have the
meanings given them in Article 9 hereof.
In consideration of the premises and the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Company and the Investors hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE OF SECURITIES
1.1 Purchase and Sale of Securities. At the Closing, subject to the terms
of this Agreement and the satisfaction or waiver of the conditions set forth in
Articles VI and VII hereof, the Company will issue and sell to each Investor,
and each Investor will (on a several and not a joint basis) purchase from the
Company, the number of Securities set forth beneath such Investor's name on the
signature pages hereof.
1.2 Payment. Each Investor will pay the purchase price for the number of
Securities set forth beneath its name on the signature pages hereof, by wire
transfer of immediately available funds in accordance with the Company's written
wire instructions, and the Company will deliver to each Investor certificates
representing the Securities so purchased by such Investor and the Company will
deliver such certificates against delivery of the purchase price as described
above.
<PAGE>
1.3 Closing Date. Subject to the satisfaction or waiver of the conditions
set forth in Articles VI and VII hereof, the Closing will take place at 10:00
a.m. Central Time on April 11, 2000, or at another date or time agreed upon by
the parties to this Agreement (the "Closing Date"). The Closing will be held at
the offices of the Company or at such other place as the parties agree.
ARTICLE 2
INVESTOR'S REPRESENTATIONS AND WARRANTIES
Each Investor represents and warrants to the Company, severally and solely
with respect to itself and its purchase hereunder and not with respect to any
other Investor, that:
2.1 Investment Purpose. The Investor is purchasing the Securities for its
own account and not with a present view toward the public sale or distribution
thereof; provided, however, that by making the representation herein, the
Investor reserves the right to dispose of the Securities in accordance with or
pursuant to a registration statement or an exemption under the Securities Act.
2.2 Accredited Investor Status. The Investor is an "accredited investor"
as defined in Rule 501(a) of Regulation D. The Investor has delivered an
Investor Questionnaire in the form of Exhibit A to the Company and to U.S.
Bancorp Piper Jaffray Inc., certifying that the Investor is such an accredited
investor.
2.3 Reliance on Exemptions. The Investor understands that the Securities
are being offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying upon the truth and accuracy of, and the Investor's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of the Investor set forth herein in order to determine the
availability of such exemptions and the eligibility of the Investor to acquire
the Securities.
2.4 Information. The Investor and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company, and materials relating to the offer and sale of the Securities,
that have been requested by the Investor or its advisors, if any. The Investor
and its advisors, if any, have been afforded the opportunity to ask questions of
the Company. Neither such inquiries nor any other due diligence investigation
conducted by Investor or any of its advisors or representatives modify, amend or
affect the Investor's right to rely on the Company's representations and
warranties contained in Article III below. The Investor acknowledges and
understands that its investment in the Securities involves a significant degree
of risk, including the risks reflected in the SEC Documents.
2.5 Governmental Review. The Investor understands that no United States
federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Securities or an
investment therein.
2.6 Transfer or Resale. The Investor understands that:
<PAGE>
(a) except as provided in the Registration Rights Agreement, the
Securities have not been and are not being registered under the Securities Act
or any applicable state securities laws and, consequently, the Investor may have
to bear the risk of owning the Securities for an indefinite period of time
because the Securities may not be transferred unless (i) the resale of the
Securities is registered pursuant to an effective registration statement under
the Securities Act; (ii) the Investor has delivered to the Company an opinion of
counsel (in form, substance and scope customary for opinions of counsel in
comparable transactions) to the effect that the Securities to be sold or
transferred may be sold or transferred pursuant to an exemption from such
registration; (iii) the Securities are sold or transferred pursuant to Rule 144
or (iv) the Securities are sold or transferred to an affiliate (as defined in
Rule 144) of the Investor;
(b) any sale of the Securities made in reliance on Rule 144 may be
made only in accordance with the terms of Rule 144 (including volume limitations
and manner of sale restrictions, if applicable) and, if Rule 144 is not
applicable, the seller (or the person through whom the sale is made) may be
deemed to be an underwriter (as that term is defined in the Securities Act)
under the Securities Act or the rules and regulations of the SEC thereunder; and
(c) except as set forth in the Registration Rights Agreement, neither
the Company nor any other person is under any obligation to register the
Securities under the Securities Act or any state securities laws or to comply
with the terms and conditions of any exemption thereunder.
2.7 Legends. The Investor understands that until (a) the Securities may
be sold by the Investor under Rule 144(k) or (b) such time as the resale of the
Securities have been effected under the Securities Act as contemplated by the
Registration Rights Agreement, the certificates representing the Securities will
bear a restrictive legend in substantially the following form (and a stop-
transfer order may be placed against transfer of the certificates for such
Securities):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED IN RELIANCE
UPON AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"). THE SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED OR ASSIGNED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
The legend set forth above will be removed and the Company will issue a
certificate without the legend to the holder of any certificate upon which it is
stamped, in accordance with the terms of Article V hereof.
2.8 Authorization; Enforcement. This Agreement and the Registration
Rights Agreement have been duly and validly authorized, executed and delivered
on behalf of the Investor and are valid and binding agreements of the Investor
enforceable against Investor in accordance with their terms, subject to the
effect of any applicable bankruptcy, insolvency,
<PAGE>
reorganization, moratorium or similar laws affecting the rights of creditors
generally and the application of general principles of equity.
2.9 Residency. The Investor is a resident of the jurisdiction set forth
immediately below such Investor's name on the signature pages hereto.
2.10 Acknowledgments Regarding Placement Agent. Purchaser acknowledges
that U.S. Bancorp Piper Jaffray Inc. is acting as placement agent (the
"Placement Agent") for the Securities being offered hereby and will be
compensated by the Company for acting in such capacity. Purchaser further
acknowledge that the Placement Agent has acted solely as placement agent in
connection with the offering of the Securities by the Company, that certain of
the information and data provided to Purchaser in connection with the
transactions contemplated hereby have not been subjected to independent
verification by the Placement Agent, and that the Placement Agent makes no
representation or warranty with respect to the accuracy or completeness of such
information, data or other related disclosure material. Purchaser further
acknowledges that in making its decision to enter into this Agreement and
purchase the Securities it has relied on its own examination of the Company and
the terms of, and consequences, of holding the Securities. Purchaser further
acknowledges that the provisions of this Section 2.10 are also for the benefit
of, and may also be enforced by, the Placement Agent.
2.11 No Public Offering. Investor has not received any information
relating to the Securities by means of any advertisement, article, notice or
other communication published in any newspaper, magazine or similar media or
broadcast over television or radio or pursuant to a meeting or seminar whose
attendees were invited by general solicitation or advertising.
2.12 No Conflicts; No Violation.
(a) To the Investor's knowledge, the execution, delivery and
performance of this Agreement by the Investor will not (i) conflict with or
result in a violation of any provision of its charter documents, or (ii) result
in a violation of any law, rule, regulation, order, judgment or decree
applicable to the Investor.
(b) The Investor is not required to obtain any consent, authorization
or order of, or make any filing or registration with, any court or governmental
agency or any regulatory or self regulatory agency in order for it to execute,
deliver or perform any of its obligations under this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investors that:
3.1 Organization and Qualification. The Company is duly incorporated,
validly existing and in good standing under the laws of the jurisdiction in
which it is incorporated, with full corporate power and authority to own, lease,
use and operate its properties and to carry on its business as and where now
owned, leased, used, operated and conducted. The Company is duly
<PAGE>
qualified to do business and is in good standing in every jurisdiction in which
the nature of the business conducted by it makes such qualification necessary,
except where the failure to be so qualified or in good standing in each such
jurisdiction would not have a Material Adverse Effect.
3.2 Authorization; Enforcement. (a) The Company has all requisite
corporate power and authority to enter into and to perform its obligations under
this Agreement and the Registration Rights Agreement, to consummate the
transactions contemplated hereby and thereby and to issue the Securities in
accordance with the terms hereof; (b) the execution, delivery and performance of
this Agreement and the Registration Rights Agreement by the Company and the
consummation by it of the transactions contemplated hereby and thereby
(including without limitation the issuance of the Securities) have been duly
authorized by the Company's Board of Directors and no further consent or
authorization of the Company, its Board or Directors, or its shareholders is
required; (c) this Agreement and the Registration Rights Agreement have been
duly executed by the Company; and (d) each of this Agreement and the
Registration Rights Agreement constitutes a legal, valid and binding obligation
of the Company enforceable against the Company in accordance with its terms,
subject to the effect of any applicable bankruptcy, insolvency, reorganization,
or moratorium or similar laws affecting the rights of creditors generally and
the application of general principles of equity.
3.3 Capitalization. As of the date hereof, the authorized capital stock
of the Company consists of (a) 50,000,000 shares of Common Stock, par value $.01
per share, of which 15,252,337 shares are issued and outstanding and 1,851,583
shares are reserved for issuance under the Company's stock option plans; (b)
1,000,000 shares of preferred stock, par value $.01 per share, 50,000 of which
have been designated Junior Participating Preferred Stock, Series A, none of
which are issued and outstanding. All of such outstanding shares of capital
stock are duly authorized, validly issued, fully paid and nonassessable. No
shares of capital stock of the Company, including the Securities issuable
pursuant to this Agreement, are subject to preemptive rights or any other
similar rights of the stockholders of the Company or any liens or encumbrances
imposed through the actions or failure to act of the Company. Except as
disclosed in Schedule 3.3 and except for the transactions contemplated hereby,
(i) there are no outstanding options, warrants, scrip, rights to subscribe for,
puts, calls, rights of first refusal, agreements, understandings, claims or
other commitments or rights of any character whatsoever that could require the
Company to issue additional shares of capital stock of the Company; (ii) there
are no agreements or arrangements (other than the Registration Rights Agreement)
under which the Company is obligated to register the sale of any of its
securities under the Securities Act and (iii) there are no anti-dilution or
price adjustment provisions contained in any security issued by the Company (or
in any agreement providing rights to security holders) that will be triggered by
the issuance of the Securities. The Company has furnished to the Investors true
and correct copies of the Company's Certificate of Incorporation, as amended, as
in effect on the date hereof, the Company's By-laws as in effect on the date
hereof and the terms of all securities (other than employee stock options)
convertible into or exercisable for Common Stock of the Company and the material
rights of the holders thereof in respect thereto.
3.4 Issuance of Securities. The Securities are duly authorized and, upon
issuance in accordance with the terms of this Agreement, will be validly issued,
fully paid and non-assessable, free from all taxes, liens, claims, encumbrances
and charges with respect to the issue
<PAGE>
thereof, and will not be subject to preemptive rights or other similar rights of
stockholders of the Company.
3.5 No Conflicts; No Violation.
(a) The execution, delivery and performance of this Agreement and the
Registration Rights Agreement by the Company and the consummation by the Company
of the transactions contemplated hereby and thereby (including, without
limitation, the issuance of the Securities) will not (i) conflict with or result
in a violation of any provision of the Certificate of Incorporation or By-laws
or (ii) violate or conflict with, or result in a breach of any provision of, or
constitute a default (or an event which with notice or lapse of time or both
could become a default) under, or give to others any rights of termination,
amendment (including without limitation, the triggering of any anti-dilution
provision), acceleration or cancellation of, any agreement, indenture, patent,
patent license, or instrument to which the Company is a party, or (iii) result
in a violation of any law, rule, regulation, order, judgment or decree
(including U.S. federal and state securities laws and regulations and
regulations of any self-regulatory organizations to which the Company or its
securities are subject), applicable to the Company or by which any property or
asset of the Company is bound or affected (except in the case of clauses (i),
(ii) and (iii) for such conflicts, breaches, defaults, terminations, amendments,
accelerations, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect).
(b) The Company is not in violation of its Certificate of
Incorporation or By-laws and the Company is not in default (and no event has
occurred which with notice or lapse of time or both could put the Company in
default) under any agreement, indenture or instrument to which the Company is a
party or by which any property or assets of the Company is bound or affected,
except for defaults as would not, individually or in the aggregate, have a
Material Adverse Effect.
(c) The Company is not conducting its business in violation of any
law, ordinance or regulation of any governmental entity, except where the
failure to so comply would, individually or in the aggregate, have a Material
Adverse Effect.
(d) Except as specifically contemplated by this Agreement and as
required under the Securities Act and any applicable state securities laws or
any listing agreement with any securities exchange or automated quotation
system, the Company is not required to obtain any consent, authorization or
order of, or make any filing or registration with, any court or governmental
agency or any regulatory or self regulatory agency in order for it to execute,
deliver or perform any of its obligations under this Agreement or the
Registration Rights Agreement, in each case in accordance with the terms hereof
or thereof, or to issue and sell the Securities in accordance with the terms
hereof. Except as set forth in Schedule 3.5, all consents, authorizations,
orders, filings and registrations which the Company is required to obtain
pursuant to the preceding sentence have been obtained or effected on or prior to
the date hereof. The Company is not in violation of the listing requirements of
Nasdaq.
<PAGE>
3.6 SEC Documents, Financial Statements. Since December 31, 1998, the
Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Exchange Act (all of the foregoing filed prior to the date
hereof and all exhibits included therein and financial statements and schedules
thereto and documents (other than exhibits) incorporated by reference therein,
being hereinafter referred to herein as the "SEC Documents"). The Company has
delivered to each Investor, or each Investor has had access to, true and
complete copies of the SEC Documents, except for such exhibits and incorporated
documents. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Exchange Act or the Securities
Act, as the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to the SEC Documents, and none of the SEC Documents, at
the time they were filed with the SEC, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Documents have been prepared in
accordance with U.S. generally accepted accounting principles, consistently
applied, during the periods involved (except (i) as may be otherwise indicated
in such financial statements or the notes thereto, or (ii) in the case of
unaudited interim statements, to the extent they may not include footnotes or
may be condensed or summary statements) and fairly present in all material
respects the financial position of the Company as of the dates thereof and the
results of its operations and cash flows for the periods then ended (subject, in
the case of unaudited statements, to normal year-end audit adjustments). Except
as set forth in the financial statements included in the SEC Documents, the
Company has no liabilities, contingent or otherwise, other than (A) liabilities
incurred in the ordinary course of business subsequent to December 31, 1999, and
(B) liabilities of the type not required under generally accepted accounting
principles to be reflected in such financial statements or (C) other liabilities
which would not, individually or in the aggregate, have Material Adverse Effect.
3.7 Absence of Certain Changes. Since December 31, 1999, there has been
no material adverse change in the assets, liabilities, business, properties,
operations, financial condition or results of operations of the Company, taken
as a whole.
3.8 Absence of Litigation. There is no action, suit, claim, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the
Company, threatened against or affecting the Company or any of its officers or
directors acting as such that could, individually or in the aggregate, have a
Material Adverse Effect.
3.9 Intellectual Property Rights. The Company owns or possesses the
licenses or rights to use all patents, patent applications, patent rights,
inventions, know-how, trade secrets, trademarks, trademark applications, service
marks, service names, trade names and copyrights necessary to enable it to
conduct its business as now operated (the "Intellectual Property"), except where
the failure to possess such licenses or rights to use would not have,
individually or in the aggregate, a Marital Adverse Effect. There is no claim
or action or proceeding pending or, to the Company's knowledge, threatened that
challenges the right of the Company with respect to any Intellectual Property.
<PAGE>
3.10 Tax Status. The Company has made or filed all federal, state and
foreign income and all other tax returns, reports and declarations required by
any jurisdiction to which it is subject (unless and only to the extent that the
Company has set aside on its books provisions reasonably adequate for the
payment of all unpaid and unreported taxes) and has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith. To the knowledge of the Company, there are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Company know of no basis for any such
claim. The Company has not executed a waiver with respect to the statute of
limitations relating to the assessment or collection of any foreign, federal,
state or local tax. To the Company's knowledge, none of the Company's tax
returns is presently being audited by any taxing authority.
3.11 Environmental Laws. The Company (i) is in compliance with all
applicable foreign federal, state and local laws and regulations relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants ("Environmental Laws"), (ii)
has received all permits, licenses or other approvals required of it under
applicable Environmental Laws to conduct its business as presently conducted and
(iii) is in compliance with all terms and conditions of any such permit, license
or approval, except where, in each of the three foregoing clauses, the failure
to so comply would not have, individually or in the aggregate, a Material
Adverse Effect.
3.12 No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales in any security or solicited any offers to
buy any security under circumstances within the prior six months that would
require registration under the Securities Act of the issuance of the Securities
to the Investors. The issuance of the Securities to the Investors will not be
integrated with any other issuance of the Company's securities (past, current or
future) for purposes of the Securities Act.
3.13 No Brokers. The Company has taken no action which would give rise to
any claim by any person for brokerage commissions, finder's fees or similar
payments relating to this Agreement or the transactions contemplated hereby,
except for dealings with U.S. Bancorp Piper Jaffray Inc., whose commissions and
fees will be paid for by the Company.
3.14 Insurance. The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as management
of the Company believes to be prudent and customary in the businesses in which
the Company is engaged.
3.15 Employment Matters. The Company is in compliance with all federal,
state, local and foreign laws and regulations respecting employment and
employment practices, terms and conditions of employment and wages and hours
except where failure to be in compliance would not have a Material Adverse
Effect.
3.16 Investment Company Status. The Company is not and upon consummation
of the sale of the Securities will not be an "investment company," a company
controlled by an
<PAGE>
"investment company" or an "affiliated person" of, or "promoter" or "principal
underwriter" for, an "investment company" as such terms are defined in the
Investment Company Act of 1940, as amended.
ARTICLE 4
COVENANTS
4.1 Best Efforts. Each party will use its best efforts to satisfy in a
timely fashion each of the conditions to be satisfied by it under Articles VI
and VII of this Agreement.
4.2 Form D; Blue Sky Laws. The Company will file a Notice of Sale of
Securities on Form D with respect to the Securities, as required under
Regulation D, and to provide a copy thereof to each Investor promptly after such
filing. The Company will take such action as it reasonably determines to be
necessary to qualify the Securities for sale to the Investors under this
Agreement under applicable securities (or "blue sky") laws of the states of the
United States (or to obtain an exemption from such qualification), and will
provide evidence of any such action so taken to the Investors on or prior to the
date of the Closing. The Company will file with the SEC a Current Report on
Form 8-K disclosing this Agreement and the transactions contemplated hereby
within 10 business days after the Closing Date.
4.3 Reporting Status; Eligibility to Use Form S-3. The Company's Common
Stock is registered under Section 12 of the Exchange Act. Throughout the
Registration Period (as defined in the Registration Rights Agreement), the
Company will timely file all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC under the reporting
requirements of the Exchange Act, and the Company will not terminate its status
as an issuer required to file reports under the Exchange Act even if the
Exchange Act or the rules and regulations thereunder would permit such
termination. The Company currently meets, and will use its reasonable best
efforts to continue to meet, the "registrant eligibility" requirements for a
secondary offering set forth in the general instructions to Form S-3 to enable
the registration of the Registrable Securities as defined in the Registration
Rights Agreement.
4.4 Expenses. The Company and each Investor is liable for, and will pay,
its own expenses incurred in connection with the negotiation, preparation,
execution and delivery of this Agreement and the other agreements to be executed
in connection herewith, including, without limitation, attorneys' and
consultants' fees and expenses.
4.5 Financial Information. The financial statements of the Company will
be prepared in accordance with United States generally accepted accounting
principles, and will fairly present in all material respects the consolidated
financial position of the Company and results of its operations and cash flows
as of, and for the periods covered by, such financial statements (subject, in
the case of unaudited statements, to normal year-end audit adjustments).
4.6 Listing. On or before the tenth business day after the date of this
Agreement, the Company will secure the listing of the Securities upon each
national securities exchange or automated quotation system, if any, upon which
shares of Common Stock are then listed (subject to official notice of issuance)
and, so long as any Investor owns any of the Securities, will
<PAGE>
maintain such listing of the Securities. The Company will use its best efforts
to obtain and, so long as any Investor owns any of the Securities, maintain the
listing and trading of its Common Stock on Nasdaq, the American Stock Exchange
or the New York Stock Exchange and will comply in all respects with the
Company's reporting, filing and other obligations under the bylaws or rules of
the National Association of Securities Dealers, Inc. and such exchanges, as
applicable. Until an Investor transfers, assigns or sells all of the Securities
owned by it, the Company will promptly provide to each Investor copies of any
notices it receives regarding the continued eligibility of the Securities for
listing on Nasdaq or other principal exchange or quotation system on which the
Securities are listed.
4.7 Compliance with Law. As long as an Investor owns any of the
Securities, the Company will use commercially reasonable efforts to conduct its
business in compliance with all applicable laws, rules and regulations of the
jurisdictions in which it is conducting business, including, without limitation,
all applicable local, state and federal environmental laws and regulations, the
failure to comply with which would have a Material Adverse Effect.
4.8 No Integration. The Company will not make any offers or sales of any
security (other than the Securities) under circumstances that would cause the
offering of the Securities to be integrated with any other offering of
securities by the Company (i) for the purpose of any stockholder approval
provision applicable to the Company or its securities or (ii) for purposes of
any registration requirement under the Securities Act.
4.9 Sales by Investors. Each Investor will sell any Securities sold by it
in compliance with applicable prospectus delivery requirements, if any, or
otherwise in compliance with the requirements for an exemption from registration
under the Securities Act and the rules and regulations promulgated thereunder.
No Investor will make any sale, transfer or other disposition of the Securities
in violation of federal or state securities laws.
4.10 Investor Questionnaire. Each Investor will execute a questionnaire
prepared by the Company, certifying the information required to be included in
any registration statement filed in satisfaction of the Company's obligations
under the Registration Rights Agreement.
ARTICLE 5
TRANSFER AGENT INSTRUCTIONS; REMOVAL OF LEGENDS
5.1 Issuance of Certificates. The Company will instruct its transfer
agent to issue certificates, registered in the name of each Investor or its
nominee, for the Securities. All such certificates will bear the restrictive
legend described in Section 2.7, except as otherwise specified in this Article
V. In addition, the Company will issue irrevocable Transfer Agent Instructions
to the transfer agent in the form of Exhibit B hereto. The Company will not
give to its transfer agent any instruction with respect to the Securities other
than as described in this Article V and stop transfer instructions to give
effect to Section 2.7 hereof (prior to registration of the Securities under the
Securities Act). Nothing in this Section will affect in any way the Investors'
obligations and agreement set forth in Section 2.7 hereof to comply with all
applicable prospectus delivery requirements, if any, upon resale of the
Securities.
<PAGE>
5.2 Unrestricted Securities. If, unless otherwise required by applicable
state securities laws, (a) the Securities represented by a certificate have been
sold under an effective registration statement filed under the Securities Act,
(b) a holder of Securities provides the Company and the Transfer Agent with an
opinion of counsel, in form, substance and scope customary for opinions of
counsel in comparable transactions, which counsel and opinion shall be
reasonably satisfactory to the Company, to the effect that a public sale or
transfer of such Securities may be made without registration under the
Securities Act and such sale either has occurred or may occur without
restriction on the timing or manner of such sale or transfer or (c) the
Securities represented by a certificate can be sold without restriction as to
the number of securities sold under Rule 144(k), the Company will permit the
transfer of the Securities, and the Transfer Agent will issue one or more
certificates, free from any restrictive legend, in such name and in such
denominations as specified by such holder in accordance with the Transfer Agent
Instructions. Notwithstanding anything herein to the contrary, the Securities
may be pledged as collateral in connection with a bona fide margin account or
other lending arrangement; provided that such pledge will not alter the
provisions of this Article V with respect to the removal of restrictive legends.
5.3 Enforcement of Provision. The Company acknowledges that a breach by
it of its obligations hereunder will cause irreparable harm to the Investor by
vitiating the intent and purpose of the transaction contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations under this Article V will be inadequate and agrees, in the event of
a breach or threatened breach by the Company of the provisions of this Section,
that the Investor will be entitled, in addition to all other available remedies,
to an injunction restraining any breach and requiring immediate transfer,
without the necessity of showing economic loss and without any bond or other
security being required.
ARTICLE 6
CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL
The obligation of the Company to issue and sell the Securities to each
Investor at the Closing is subject to the satisfaction by such Investor, on or
before the Closing Date, of each of the following conditions. These conditions
are for the Company's sole benefit and may be waived by the Company at any time
in its sole discretion:
6.1 The Investor will have executed this Agreement and the Registration
Rights Agreement and the Accredited Investor Questionnaire and will have
delivered those agreements and questionnaire to the Company.
6.2 The Investor will have delivered the purchase price for the Securities
to the Company in accordance with this Agreement.
6.3 The representations and warranties of the Investor must be true and
correct as of the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date, which
representations and warranties must be correct as of such date), and the
Investor will have performed and complied in all material respects with the
covenants
<PAGE>
and conditions required by this Agreement to be performed or complied with by
the Investor at or prior to the Closing.
6.4 No statute, rule, regulation, executive order, decree, ruling or
injunction will have been enacted, entered, promulgated or endorsed by or in any
court or governmental authority of competent jurisdiction or any self-regulatory
organization having authority over the matters contemplated hereby which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
ARTICLE 7
CONDITIONS TO THE INVESTOR'S OBLIGATION TO PURCHASE
The obligation of each Investor hereunder to purchase the Securities from
the Company at the Closing is subject to the satisfaction, on or before the
Closing Date, of each of the following conditions. These conditions are for
each Investor's respective benefit and may be waived by such Investor at any
time in its sole discretion:
7.1 The Company will have executed this Agreement and the Registration
Rights Agreement and will have delivered those Agreements to the Investor.
7.2 The Company will have delivered to the Investors duly executed
certificates, against payment therefor, representing the Securities in the
amounts specified in Section 1.1 hereof.
7.3 The representations and warranties of the Company must be true and
correct in all material respects as of the Closing as though made at that time
(except for representations and warranties that speak as of a specific date,
which representations and warranties must be true and correct as of such date)
and the Company must have performed and complied in all material respects with
the covenants and conditions required by this Agreement to be performed or
complied with by the Company at or prior to the Closing. The Investor must have
received a certificate or certificates dated as of the Closing Date and executed
by the Chief Executive Officer or the Chief Financial Officer of the Company
certifying as to the matters in contained in this Section 7.3 and as to such
other matters as may be reasonably requested by such Investor, including, but
not limited to, the Company's Certificate of Incorporation, By-laws, Board of
Directors' resolutions relating to the transactions contemplated hereby and the
incumbency and signatures of each of the officers of the Company who may execute
on behalf of the Company any document delivered at the Closing.
7.4 No litigation, statute, rule, regulation, executive order, decree,
ruling or injunction will have been enacted, entered, promulgated or endorsed by
or in any court or governmental authority of competent jurisdiction or any self-
regulatory organization having authority over the matters contemplated hereby
which prohibits the consummation of any of the transactions contemplated by this
Agreement.
7.5 Trading and listing of the Common Stock on Nasdaq must not have been
suspended by the SEC or Nasdaq.
<PAGE>
7.6 The Investors will have received an opinion of the Company's counsel,
dated as of the Closing Date, in form, scope and substance reasonably
satisfactory to the Investors and in substantially the form attached hereto as
Exhibit C.
7.7 The Irrevocable Transfer Agent Instructions, in substantially the form
attached hereto as Exhibit B will have been delivered to the Company's transfer
agent and acknowledged in writing by such transfer agent.
ARTICLE 8
INDEMNIFICATION
In consideration of each Investor's execution and delivery of this
Agreement and its acquisition of the Securities hereunder, and in addition to
all of the Company's other obligations under this Agreement and the Registration
Rights Agreement, the Company will defend, protect, indemnify and hold harmless
each Investor and each other holder of the Securities to whom rights are
assigned under Section 10.7 of this Agreement and all of their stockholders,
officers, directors, employees and direct or indirect investors and any of the
foregoing person's agents or other representatives (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the "Indemnitees") from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (regardless of
whether any such Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys' fees and disbursements
(the "Indemnified Liabilities"), incurred by an Indemnitee as a result of, or
arising out of, or relating to (a) any breach of any representation or warranty
made by the Company herein or in any other certificate, instrument or document
contemplated hereby or thereby, (b) any breach of any covenant, agreement or
obligation of the Company contained herein or in any other certificate,
instrument or document contemplated hereby or thereby or (c) any cause of
action, suit or claim brought or made against such Indemnitee and arising out of
or resulting from the execution, delivery, performance, breach or enforcement of
this Agreement or the Registration Rights Agreement by the Company. To the
extent that the foregoing undertaking by the Company is unenforceable for any
reason, the Company will make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities that is permissible under
applicable law. Notwithstanding the foregoing the indemnification agreement
contained in this Article VIII does not apply to amounts paid in settlement of
Indemnified Liabilities if such settlement is made without the prior written
consent of the Company, which consent will not be unreasonably withheld. The
Company may participate in, and assume and control, the defense of any claim
with counsel mutually satisfactory to the Company and the Indemnities. If, in
the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnitee and the indemnifying party is
inappropriate due to actual or potential conflicts of interest between the
Indemnitee and any other party represented by such counsel in such proceeding or
the actual or potential defendants in, or targets of, any such action including
the Indemnitee, and any such Indemnitee reasonably determines that there may be
legal defenses available to such Indemnitee that are different from or in
addition to those available to the indemnifying party, then the Indemnitee is
entitled to assume such defense and may retain its own counsel, with the
reasonable, out-of-
<PAGE>
pocket fees and expenses to be paid by the indemnifying party. The Company will
pay for only one separate legal counsel for the Indemnitees collectively, and
such legal counsel will be selected by the Indemnitees holding a majority in
interest of the Securities held by all Indemnitees.
The indemnification provisions set forth above shall not be available to
any Indemnitee to the extent (i) that such Indemnitee is in material breach of
any provision of this Agreement or the Registration Rights Agreement or (ii) the
Indemnified Liabilities are covered under the indemnification provisions set
forth in Article VI of the Registration Rights Agreement, in which case the
Registration Agreement shall control the terms of any indemnification obligation
of the Company relating to such Indemnified Liabilities.
ARTICLE 9
DEFINITIONS
9.1 "Closing" means the closing of the purchase and sale of the
Securities under this Agreement.
9.2 "Closing Date" has the meaning set forth in Section 1.3.
9.3 "Common Stock" means the common stock, par value $0.01 per share, of
the Company.
9.4 "Company" means Aksys, Ltd.
9.5 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
9.6 "Indemnified Liabilities" has the meaning set forth in Article VIII.
9.7 "Indemnitees" has the meaning set forth in Article VIII.
9.8 "Intellectual Property" has the meaning set forth in Section 3.9.
9.9 "Investors" means the investors whose names are set forth on the
signature pages of this Agreement, and their permitted transferees.
9.10 "Knowledge" means the actual knowledge without independent
investigation.
9.11 "Material Adverse Effect" means a material adverse effect on (a) the
assets, liabilities, financial condition or results of operation of the
Company's business, taken as a whole or (b) the ability of the Company to
perform its obligations pursuant to the transactions contemplated by this
Agreement or under the agreements or instruments to be entered into or filed in
connection herewith.
9.12 "Nasdaq" means the Nasdaq National Market System.
9.13 "Placement Agent" has the meaning set forth in Section 2.10.
<PAGE>
9.14 "Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date of this Agreement by and among the parties to
this Agreement, in the form attached hereto as Exhibit D.
9.15 "Regulation D" means Regulation D as promulgated under by the SEC
under the Securities Act.
9.16 "Rule 144" and "Rule 144(k)" mean Rule 144 and Rule 144(k),
respectively, promulgated under the Securities Act, or any successor rule.
9.17 "SEC" means the United States Securities and Exchange Commission.
9.18 "SEC Documents" has the meaning set forth in Section 3.6.
9.19 "Securities" means the Common Stock sold pursuant to this agreement.
9.20 "Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations thereunder, or any similar successor statute.
ARTICLE 10
GOVERNING LAW; MISCELLANEOUS
10.1 Governing Law; Jurisdiction. This Agreement will be governed by and
interpreted in accordance with the laws of the State of Delaware without regard
to the principles of conflict of laws. The parties hereto hereby submit to the
exclusive jurisdiction of the United States federal and state courts located in
the State of Delaware with respect to any dispute arising under this Agreement,
the agreements entered into in connection herewith or the transactions
contemplated hereby or thereby.
10.2 Counterparts; Signatures by Facsimile. This Agreement may be
executed in two or more counterparts, all of which are considered one and the
same agreement and will become effective when counterparts have been signed by
each party and delivered to the other parties. This Agreement, once executed by
a party, may be delivered to the other parties hereto by facsimile transmission
of a copy of this Agreement bearing the signature of the party so delivering
this Agreement.
10.3 Headings. The headings of this Agreement are for convenience of
reference only, are not part of this Agreement and do not affect its
interpretation.
10.4 Severability. If any provision of this Agreement is invalid or
unenforceable under any applicable statute or rule of law, then such provision
will be deemed modified in order to conform with such statute or rule of law.
Any provision hereof that may prove invalid or unenforceable under any law will
not affect the validity or enforceability of any other provision hereof.
10.5 Entire Agreement; Amendments. This Agreement and the Registration
Rights Agreement (including all schedules and exhibits thereto) constitute the
entire agreement among
<PAGE>
the parties hereto with respect to the subject matter hereof and thereof. There
are no restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein or therein. This Agreement supersedes all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof. No provision of this Agreement may be waived or amended
other than by an instrument in writing signed by the party to be charged with
enforcement.
10.6 Notices. Any notices required or permitted to be given under the
terms of this Agreement must be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier (including a recognized
overnight delivery service) or by facsimile and will be effective five days
after being placed in the mail, if mailed by regular U.S. mail, or upon receipt,
if delivered personally, by courier (including a recognized overnight delivery
service) or by facsimile, in each case addressed to a party. The addresses for
such communications are:
If to the Company: Aksys, Ltd.
Two Marriott Drive
Lincolnshire, IL 60069
Attention: President
(847) 229-2080
With a copy to: Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attention: Keith S. Crow
(312) 861-2200
If to an Investor: To the address set forth immediately below such
Investor's name on the signature pages hereto.
Each party will provide written notice to the other parties of any change
in its address.
10.7 Successors and Assigns. This Agreement is binding upon and inures to
the benefit of the parties and their successors and permitted assigns. The
Company will not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Investors, and no Investor may assign
this Agreement or any rights or obligations hereunder without the prior written
consent of the Company. Notwithstanding the foregoing, an Investor may assign
all or part of its rights and obligations hereunder to any of its "affiliates,"
as that term is defined under the Securities Act, without the consent of the
Company so long as the affiliate is an accredited investor (within the meaning
of Regulation D under the Securities Act) and agrees in writing to be bound by
this Agreement. This provision does not limit the Investor's right to transfer
the Securities pursuant to the terms of this Agreement or to assign the
Investor's rights hereunder to any such transferee pursuant to the terms of this
Agreement. Notwithstanding the foregoing, any transferee who purchases the
Securities in a public sale shall not have any rights under this Agreement.
<PAGE>
10.8 Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
10.9 Survival. The representations and warranties of the Company and the
agreements and covenants set forth herein will survive for two (2) years
following the Closing hereunder. The Company makes no representations or
warranties in any oral or written information provided to Investors, other than
the representations and warranties included herein.
10.10 Further Assurances. Each party will do and perform, or cause to be
done and performed, all such further acts and things, and will execute and
deliver all other agreements, certificates, instruments and documents, as
another party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
10.11 No Strict Construction. The language used in this Agreement is
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.
10.12 Equitable Relief. The Company recognizes that, if it fails to
perform or discharge any of its obligations under this Agreement, any remedy at
law may prove to be inadequate relief to the Investors. The Company therefore
agrees that the Investors are entitled to temporary and permanent injunctive
relief in any such case without the necessity of proving actual damages.
***************************
<PAGE>
IN WITNESS WHEREOF, the undersigned Investors and the Company have caused
this Agreement to be duly executed as of the date first above written.
COMPANY:
AKSYS, LTD.
By: /s/ William C. Dow
------------------
Title: President and CEO
-----------------
INVESTORS:
/s/ Safeco Resource Series Trust
--------------------------------
/s/ Safeco Common Stock Trust
-----------------------------
/s/ Narragansett I, LP
----------------------
/s/ Narragansett Offshore, Ltd.
-------------------------------
/s/ Western United Life Assurance Co.
-------------------------------------
/s/ Special Situations Cayman Fund, LP
--------------------------------------
/s/ Special Situations Private Equity Fund, LP
----------------------------------------------
/s/Special Situations Fund III, LP
----------------------------------
<PAGE>
EXHIBIT 99.1
[AKSYS, LTD. LETTERHEAD]
Aksys Raises $11.75 Million in Private Placement
Lincolnshire, IL -- April 12, 2000 -- Aksys, Ltd. (NASDAQ: AKSY), a pioneer in
innovative dialysis systems, announced today that it received gross proceeds of
$11.75 million from the sale of 1.52 million shares of common stock to four
institutional investors. U.S. Bancorp Piper Jaffray served as placement agent to
Aksys in connection with the financing.
"Now that the clinical trial is well under way, we are focusing on pre-
commercialization activities for our PHD(TM)(TM) Personal Hemodialysis System,"
stated William Dow, President and CEO. "With these proceeds, we can move forward
as we prepare to bring our product to market. Specifically, we intend to use
these funds to begin building a sales and marketing staff, and gearing up for
manufacturing the PHD System. This financing will enable us to establish a
platform for the launch of the PHD System." It is the Company's expectation that
additional funds will be required to support full commercialization.
The common stock sold to the investors has not been registered under the
Securities Act of 1933. Accordingly, these shares may not be offered or sold in
the United States, except pursuant to an effective registration statement or an
applicable exemption from the registration requirements of the Securities Act.
Aksys has agreed to prepare and file a registration statement covering the
resale of these shares by the investors.
Aksys, Ltd. is developing hemodialysis products and services for patients
suffering from kidney failure. The Company's lead product in development, the
PHD System, is a next generation hemodialysis system designed to improve
clinical outcomes of patients and reduce mortality, morbidity and the associated
high cost of patient care. Further information is available on Aksys website:
www.aksys.com.
This press release contains forward-looking statements that involve a number of
risks and uncertainties. The Company's actual results could differ materially
from the results identified or implied in any forward-looking statement and
these statements are based on the Company's views as of the date they are made
with respect to future events. Factors that could cause such a difference
include, but are not limited to, risks related to the failure to meet
development and manufacturing milestones on a timely basis, changes in GMP
requirements, changing market conditions, additional capital requirements, and
risks related to the regulatory approval process. Regulatory risks include the
timing, scope and results of the Company's clinical trial, and whether and when
the Company will obtain clearance from the FDA of a 510(k) pre-market
notification and what additional clinical and other data the Company might have
to obtain in connection with seeking such clearance.
###
