RESALE REGISTRATION RIGHTS AGREEMENT
between
INHALE THERAPEUTIC SYSTEMS, INC.
and
LEHMAN BROTHERS INC.
DEUTSCHE BANK SECURITIES INC.
and
U.S. BANCORP PIPER JAFFRAY INC.
DATED AS OF OCTOBER 13, 1999
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RESALE REGISTRATION RIGHTS AGREEMENT, dated as of October 13,
1999, between Inhale Therapeutic Systems, Inc., a Delaware corporation (together
with any successor entity, herein referred to as the "Issuer"), and Lehman
Brothers Inc., Deutsche Bank Securities Inc. and U.S. Bancorp Piper Jaffray Inc.
(collectively, the "Initial Purchasers").
Pursuant to the Purchase Agreement, dated October 6, 1999,
between the Issuer and the Initial Purchasers (the "Purchase Agreement"), the
Initial Purchasers have agreed to purchase from the Issuer up to $100,000,000
($109,000,000 if the Initial Purchasers exercise the over-allotment option in
full) in aggregate principal amount of 6 3/4% Convertible Subordinated
Debentures due 2006 (the "Debentures"). The Debentures will be convertible into
fully paid, nonassessable common stock, par value $.0001 per share, of the
Issuer (the "Common Stock") on the terms, and subject to the conditions, set
forth in the Indenture (as defined herein). To induce the Initial Purchasers to
purchase the Debentures, the Issuer has agreed to provide the registration
rights set forth in this Agreement pursuant to Section 3(j) of the Purchase
Agreement.
The parties hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following
capitalized terms shall have the following meanings:
ADVICE: As defined in Section 4(c)(ii) hereof.
AGREEMENT: This Resale Registration Rights Agreement.
BLUE SKY APPLICATION: As defined in Section 6(a) hereof.
BROKER-DEALER: Any broker or dealer registered under the
Exchange Act.
BUSINESS DAY: A day other than a Saturday or Sunday or any
federal holiday in the United States.
CLOSING DATE: The date of this Agreement.
COMMISSION: Securities and Exchange Commission.
COMMON STOCK: As defined in the preamble hereto.
DAMAGES PAYMENT DATE: Each Interest Payment Date. For
purposes of this Agreement, if no Debentures are outstanding, "Damages
Payment Date" shall mean each
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April 13 and October 13.
DEBENTURES: As defined in the preamble hereto.
EFFECTIVENESS PERIOD: As defined in Section 2(a)(iii) hereof.
EFFECTIVENESS TARGET DATE: As defined in Section 2(a)(ii) hereof.
EXCHANGE ACT: Securities Exchange Act of 1934, as amended.
HOLDER: A Person who owns, beneficially or otherwise,
Transfer Restricted Securities.
INDEMNIFIED HOLDER: As defined in Section 6(a) hereof.
INDENTURE: The Indenture, dated as of October 13, 1999, between
the Issuer and Chase Manhattan Bank and Trust Company, National
Association, as trustee (the "Trustee"), pursuant to which the
Debentures are to be issued, as such Indenture is amended, modified or
supplemented from time to time in accordance with the terms thereof.
INITIAL PURCHASERS: As defined in the preamble hereto.
INTEREST PAYMENT DATE: As defined in the Indenture.
ISSUER: As defined in the preamble hereto.
LIQUIDATED DAMAGES: As defined in Section 3(a) hereof.
MAJORITY OF HOLDERS: Holders holding over 50% of the aggregate
principal amount of Debentures outstanding; PROVIDED that, for purpose
of this definition, a holder of shares of Common Stock which constitute
Transfer Restricted Securities and issued upon conversion of the
Debentures shall be deemed to hold an aggregate principal amount of
Debentures (in addition to the principal amount of Debentures held by
such holder) equal to the product of (x) the number of such shares of
Common Stock held by such holder and (y) the prevailing conversion
price, such prevailing conversion price as determined in accordance with
Section 12 of the Indenture.
NASD: National Association of Securities Dealers, Inc.
PERSON: An individual, partnership, corporation,
unincorporated organization,
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trust, joint venture or a government or agency or political subdivision
thereof.
PROSPECTUS: The prospectus included in a Shelf Registration
Statement, as amended or supplemented by any prospectus supplement and
by all other amendments thereto, including post-effective amendments,
and all material incorporated by reference into such Prospectus.
QUESTIONNAIRE DEADLINE: As defined in Section 2(b) hereof.
RECORD HOLDER: With respect to any Damages Payment Date, each Person who
is a Holder on the record date with respect to the Interest Payment Date on
which such Damages Payment Date shall occur. In the case of a Holder of shares
of Common Stock issued upon conversion of the Debentures, "Record Holder" shall
mean each Person who is a Holder of shares of Common Stock which constitute
Transfer Restricted Securities on the March 31 or September 30 immediately
preceding the Damages Payment Date.
REGISTRATION DEFAULT: As defined in Section 3(a) hereof.
SALE NOTICE: As defined in Section 4(e) hereof.
SECURITIES ACT: Securities Act of 1933, as amended.
SHELF FILING DEADLINE: As defined in Section 2(a)(i) hereof.
SHELF REGISTRATION STATEMENT: As defined in Section 2(a)(i)
hereof.
SUSPENSION PERIOD. As defined in Section 4(b)(i) hereof.
TIA: Trust Indenture Act of 1939, as in effect on the date the
Indenture is qualified under the TIA.
TRANSFER RESTRICTED SECURITIES: Each Debenture and each share
of Common Stock issued upon conversion of Debentures until the earlier
of:
(i) the date on which such Debenture or such share of
Common Stock issued upon conversion has been effectively
registered under the Securities Act and disposed of in
accordance with the Shelf Registration Statement;
(ii) the date on which such Debenture or such share
of Common Stock issued upon conversion is transferred in
compliance with Rule 144 under the Securities Act or may be
sold or transferred pursuant to Rule 144 under the Securities
Act (or any other similar provision then in force); or
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(iii) the date on which such Debenture or such share
of Common Stock issued upon conversion ceases to be outstanding
(whether as a result of redemption, repurchase and
cancellation, conversion or otherwise).
UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING: A
registration in which securities of the Issuer are sold to an
underwriter for reoffering to the public.
2. SHELF REGISTRATION.
(a) The Issuer shall:
(i) not later than 90 days after the date hereof (the
"Shelf Filing Deadline"), cause to be filed a registration
statement pursuant to Rule 415 under the Securities Act (the
"Shelf Registration Statement"), which Shelf Registration
Statement shall provide for resales of all Transfer Restricted
Securities held by Holders that have provided the information
required pursuant to the terms of Section 2(b) hereof;
(ii) use its best efforts to cause the Shelf
Registration Statement to be declared effective by the
Commission not later than 180 days after the date hereof (the
"Effectiveness Target Date"); and
(iii) use its best efforts to keep the Shelf
Registration Statement continuously effective, supplemented and
amended as required by the provisions of Section 4(b) hereof to
the extent necessary to ensure that (A) it is available for
resales by the Holders of Transfer Restricted Securities
entitled to the benefit of this Agreement and (B) conforms with
the requirements of this Agreement and the Securities Act and
the rules and regulations of the Commission promulgated
thereunder as announced from time to time for a period (the
"Effectiveness Period") of:
(1) two years following the last date of
original issuance of Debentures; or
(2) such shorter period that will terminate
when (x) all of the Holders of Transfer Restricted
Securities are able to sell all Transfer Restricted
Securities immediately without restriction pursuant
to Rule 144(k) under the Securities Act or any
successor rule thereto, (y) when all Transfer
Restricted Securities have ceased to be outstanding
(whether as
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a result of redemption, repurchase and cancellation,
conversion or otherwise) or (z) all Transfer
Restricted Securities registered under the Shelf
Registration Statement have been sold.
(b) No Holder of Transfer Restricted Securities may include any
of its Transfer Restricted Securities in the Shelf Registration Statement
pursuant to this Agreement unless such Holder furnishes to the Issuer in
writing, prior to or on the 20th Business Days after receipt of a request
therefor (the "Questionnaire Deadline"), such information as the Issuer may
reasonably request for use in connection with the Shelf Registration Statement
or Prospectus or preliminary Prospectus included therein and in any application
to be filed with or under state securities laws. In connection with all such
requests for information from Holders of Transfer Restricted Securities, the
Issuer shall notify such Holders of the requirements set forth in the preceding
sentence. No Holder of Transfer Restricted Securities shall be entitled to
Liquidated Damages pursuant to Section 3 hereof unless such Holder shall have
provided all such reasonably requested information prior to or on the
Questionnaire Deadline. Each Holder as to which the Shelf Registration Statement
is being effected agrees to furnish promptly to the Issuer all information
required to be disclosed in order to make information previously furnished to
the Issuer by such Holder not materially misleading.
3. LIQUIDATED DAMAGES.
(a) If:
(i) the Shelf Registration Statement is not
filed with the Commission prior to or on the Shelf Filing
Deadline;
(ii) the Shelf Registration Statement has not been
declared effective by the Commission prior to or on the
Effective Target Date;
(iii) subject to the provisions of Section 4(b)(i)
hereof, the Shelf Registration Statement is filed and declared
effective but, during the Effectiveness Period, shall
thereafter cease to be effective or fail to be usable for its
intended purpose without being succeeded within five Business
Days by a post-effective amendment to the Shelf Registration
Statement or a report filed with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act that
cures such failure and, in the case of a post-effective
amendment, is itself immediately declared effective; or
(iv) prior to or on the 45th or 60th day, as the case
may be, of any Suspension Period, such suspension has not been
terminated,
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(each such event referred to in foregoing clauses (i) through (iv), a
"Registration Default"), the Issuer hereby agrees to pay liquidated damages
("Liquidated Damages") with respect to the Transfer Restricted Securities from
and including the day following the Registration Default to but excluding the
day on which the Registration Default has been cured:
(A) in respect of the Debentures, to each holder of
Debentures, (x) with respect to the first 90-day period during
which a Registration Default shall have occurred and be
continuing, in an amount per year equal to an additional 0.25%
of the principal amount of the Debentures, and (y) with respect
to the period commencing on the 91st day following the day the
Registration Default shall have occurred and be continuing, in
an amount per year equal to an additional 0.50% of the
principal amount of the Debentures; PROVIDED that in no event
shall Liquidated Damages accrue at a rate per year exceeding
0.50% of the principal amount of the Debentures; and
(B) in respect of any shares of Common Stock, to each
holder of shares of Common Stock issued upon conversion of
Debentures, (x) with respect to the first 90-day period in
which a Registration Default shall have occurred and be
continuing, in an amount per year equal to 0.25% of the
principal amount of the converted Debentures, and (y) with
respect to the period commencing the 91st day following the day
the Registration Default shall have occurred and be continuing,
in an amount per year equal to 0.50% of the principal amount of
the converted Debentures; PROVIDED that in no event shall
Liquidated Damages accrue at a rate per year exceeding 0.50% of
the principal amount of the converted Debentures.
(b) All accrued Liquidated Damages shall be paid in arrears to
Record Holders by the Issuer on each Damages Payment Date by wire transfer of
immediately available funds or by federal funds check. Following the cure of all
Registration Defaults relating to any particular Debenture or share of Common
Stock, the accrual of Liquidated Damages with respect to such Debenture or share
of Common Stock will cease.
All obligations of the Issuer set forth in this Section 3 that
are outstanding with respect to any Transfer Restricted Security at the time
such security ceases to be a Transfer Restricted Security shall survive until
such time as all such obligations with respect to such Transfer Restricted
Security shall have been satisfied in full.
The Liquidated Damages set forth above shall be the exclusive
monetary remedy available to the Holders of Transfer Restricted Securities for
such Registration Default.
4. REGISTRATION PROCEDURES.
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(a) In connection with the Shelf Registration Statement, the
Issuer shall comply with all the provisions of Section 4(b) hereof and shall use
its best efforts to effect such registration to permit the sale of the Transfer
Restricted Securities being sold in accordance with the intended method or
methods of distribution thereof, and pursuant thereto, shall as expeditiously as
possible prepare and file with the Commission a Shelf Registration Statement
relating to the registration on any appropriate form under the Securities Act.
(b) In connection with the Shelf Registration Statement and any
Prospectus required by this Agreement to permit the sale or resale of Transfer
Restricted Securities, the Issuer shall:
(i) Subject to any notice by the Issuer in accordance
with this Section 4(b) of the existence of any fact or event of
the kind described in Section 4(b)(iii)(D), use its best
efforts to keep the Shelf Registration Statement continuously
effective during the Effectiveness Period; upon the occurrence
of any event that would cause any the Shelf Registration
Statement or the Prospectus contained therein (A) to contain a
material misstatement or omission or (B) not be effective and
usable for resale of Transfer Restricted Securities during the
Effectiveness Period, the Issuer shall file promptly an
appropriate amendment to the Shelf Registration Statement or a
report filed with the Commission pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act, in the case of clause
(A), correcting any such misstatement or omission, and, in the
case of either clause (A) or (B), use its best efforts to cause
such amendment to be declared effective and the Shelf
Registration Statement and the related Prospectus to become
usable for their intended purposes as soon as practicable
thereafter. Notwithstanding the foregoing, the Issuer may
suspend the effectiveness of the Shelf Registration Statement
by written notice to the Holders for a period not to exceed an
aggregate of 45 days in any 90-day period (each such period, a
"Suspension Period") if:
(x) an event occurs and is continuing as a
result of which the Shelf Registration Statement
would, in the Issuer's reasonable judgment, contain
an untrue statement of a material fact or omit to
state a material fact required to be stated therein
or necessary to make the statements therein not
misleading; and
(y) the Issuer reasonably determines that
the disclosure of such event at such time would have
a material adverse effect on the business of the
Issuer (and its subsidiaries, if any, taken as a
whole);
PROVIDED that in the event the disclosure relates to a
previously undisclosed
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proposed or pending material business transaction, the
disclosure of which would impede the Issuer's ability to
consummate such transaction, the Issuer may extend a
Suspension Period from 45 days to 60 days; PROVIDED, HOWEVER,
that Suspension Periods shall not exceed an aggregate of 90
days in any 360-day period.
(ii) Prepare and file with the Commission such
amendments and post-effective amendments to the Shelf
Registration Statement as may be necessary to keep the Shelf
Registration Statement effective during the Effectiveness
Period; cause the Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed
pursuant to Rule 424 under the Securities Act, and to comply
fully with the applicable provisions of Rules 424 and 430A
under the Securities Act in a timely manner; and comply with
the provisions of the Securities Act with respect to the
disposition of all securities covered by the Shelf Registration
Statement during the applicable period in accordance with the
intended method or methods of distribution by the sellers
thereof set forth in the Shelf Registration Statement or
supplement to the Prospectus.
(iii) Advise the underwriter(s), if any, and selling
Holders promptly (but in any event within five Business Days)
and, if requested by such Persons, to confirm such advice in
writing:
(A) when the Prospectus or any Prospectus
supplement or post-effective amendment has been
filed, and, with respect to the Shelf Registration
Statement or any post-effective amendment thereto,
when the same has become effective,
(B) of any request by the Commission for
amendments to the Shelf Registration Statement or
amendments or supplements to the Prospectus or for
additional information relating thereto,
(C) of the issuance by the Commission of any
stop order suspending the effectiveness of the Shelf
Registration Statement under the Securities Act or of
the suspension by any state securities commission of
the qualification of the Transfer Restricted
Securities for offering or sale in any jurisdiction,
or the initiation of any proceeding for any of the
preceding purposes, or
(D) of the existence of any fact or the
happening of any event, during the Effectiveness
Period, that makes any statement of a material fact
made in the Shelf Registration Statement, the
Prospectus, any amendment or supplement thereto, or
any document incorporated by
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reference therein untrue, or that requires the
making of any additions to or changes in the Shelf
Registration Statement or the Prospectus in order to
make the statements therein not misleading.
If at any time the Commission shall issue any stop order
suspending the effectiveness of the Shelf Registration
Statement, or any state securities commission or other
regulatory authority shall issue an order suspending the
qualification or exemption from qualification of the Transfer
Restricted Securities under state securities or Blue Sky laws,
the Issuer shall use its reasonable best efforts to obtain the
withdrawal or lifting of such order at the earliest possible
time.
(iv) Furnish to each of the selling Holders and each
of the underwriter(s), if any, before filing with the
Commission, a copy of the Shelf Registration Statement and
copies of any Prospectus included therein or any amendments or
supplements to any the Shelf Registration Statement or
Prospectus (other than documents incorporated by reference
after the initial filing of the Shelf Registration Statement),
which documents will be subject to the review of such holders
and underwriter(s), if any, for a period of at least ten
Business Days, and the Issuer will not file any the Shelf
Registration Statement or Prospectus or any amendment or
supplement to any the Shelf Registration Statement or
Prospectus (other than documents incorporated by reference) to
which a selling Holder of Transfer Restricted Securities
covered by the Shelf Registration Statement or the
underwriter(s), if any, shall reasonably object within five
Business Days after the receipt thereof. A selling Holder or
underwriter, if any, shall be deemed to have reasonably
objected to such filing if the Shelf Registration Statement,
amendment, Prospectus or supplement, as applicable, as proposed
to be filed, contains a material misstatement or omission.
(v) Make available at reasonable times for inspection
by one or more representatives of the selling Holders,
designated in writing by a Majority of Holders whose Transfer
Restricted Securities are included in the Shelf Registration
Statement, any underwriter participating in any distribution
pursuant to the Shelf Registration Statement, and any attorney
or accountant retained by such selling Holders or any of the
underwriter(s), all financial and other records, pertinent
corporate documents and properties of the Issuer as shall be
reasonably necessary to enable them to exercise any applicable
due diligence responsibilities, and cause the Issuer's
officers, directors, managers and employees to supply all
information reasonably requested by any such representative or
representatives of the selling Holders, underwriter, attorney
or accountant in connection with the Shelf Registration
Statement after the filing thereof and before its
effectiveness; PROVIDED, HOWEVER, that any information
designated by the Company as
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confidential at the time of delivery of such information shall
be kept confidential by the recipient thereof.
(vi) If requested by any selling Holders or the
underwriter(s), if any, promptly incorporate in the Shelf
Registration Statement or Prospectus, pursuant to a supplement
or post-effective amendment if necessary, such information as
such selling Holders and underwriter(s), if any, may reasonably
request to have included therein, including, without
limitation: (1) information relating to the "Plan of
Distribution" of the Transfer Restricted Securities, (2)
information with respect to the principal amount of Debentures
or number of shares of Common Stock being sold to such
underwriter(s), (3) the purchase price being paid therefor and
(4) any other terms of the offering of the Transfer Restricted
Securities to be sold in such offering; and make all required
filings of such Prospectus supplement or post-effective
amendment as soon as reasonably practicable after the Issuer is
notified of the matters to be incorporated in such Prospectus
supplement or post-effective amendment.
(vii) Furnish to each selling Holder and each of the
underwriter(s), if any, without charge, at least one copy of
the Shelf Registration Statement, as first filed with the
Commission, and of each amendment thereto (and any documents
incorporated by reference therein or exhibits thereto (or
exhibits incorporated in such exhibits by reference) as such
Person may request).
(viii) Deliver to each selling Holder and each of the
underwriter(s), if any, without charge, as many copies of the
Prospectus (including each preliminary prospectus) and any
amendment or supplement thereto as such Persons reasonably may
request; subject to any notice by the Issuer in accordance with
this Section 4(b) of the existence of any fact or event of the
kind described in Section 4(b)(iii) (D), the Issuer hereby
consents to the use of the Prospectus and any amendment or
supplement thereto by each of the selling Holders and each of
the underwriter(s), if any, in connection with the offering and
the sale of the Transfer Restricted Securities covered by the
Prospectus or any amendment or supplement thereto.
(ix) If an underwriting agreement is entered into and
the registration is an Underwritten Registration, the Issuer
shall:
(A) upon request, furnish to each selling
Holder and each underwriter, if any, in such
substance and scope as they may reasonably request
and as are customarily made by issuers to
underwriters in primary underwritten offerings, upon
the date of closing of any sale of Transfer
Restricted Securities in an Underwritten
Registration:
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(1) a certificate, dated the date of
such closing, signed by the Chief Financial
Officer of the Issuer confirming, as of the
date thereof, the matters set forth in
Section 5(g) of the Purchase Agreement and
such other matters as such parties may
reasonably request;
(2) opinions, each dated the date of
such closing, of counsel to the Issuer
covering such of the matters set forth in
Sections 5(c) and 5(d) of the Purchase
Agreement as are customarily covered in
legal opinions to underwriters in connection
with primary underwritten offerings of
securities; and
(3) customary comfort letters, dated
the date of such closing, from the Issuer's
independent accountants (and from any other
accountants whose report is contained or
incorporated by reference in the Shelf
Registration Statement), in the customary
form and covering matters of the type
customarily covered in comfort letters to
underwriters in connection with primary
underwritten offerings of securities;
(B) set forth in full in the underwriting
agreement, if any, indemnification provisions and
procedures which provide rights no less protective
than those set forth in Section 6 hereof with respect
to all parties to be indemnified; and
(C) deliver such other documents and
certificates as may be reasonably requested by such
parties to evidence compliance with clause (A) above
and with any customary conditions contained in the
underwriting agreement or other agreement entered
into by the selling Holders pursuant to this clause
(ix).
(x) Before any public offering of Transfer Restricted
Securities, cooperate with the selling Holders, the
underwriter(s), if any, and their respective counsel in
connection with the registration and qualification of the
Transfer Restricted Securities under the securities or Blue Sky
laws of such jurisdictions as the selling Holders or
underwriter(s), if any, may reasonably request and do any and
all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Transfer Restricted
Securities covered by the Shelf Registration Statement;
PROVIDED, HOWEVER, that the Issuer shall not be required (A) to
register or qualify as a foreign corporation or a dealer of
securities where it is not now so
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qualified or to take any action that would subject it to the
service of process in any jurisdiction where it is not now so
subject or (B) to subject themselves to taxation in any such
jurisdiction if they are not now so subject.
(xi) Cooperate with the selling Holders and the
underwriter(s), if any, to facilitate the timely preparation
and delivery of certificates representing Transfer Restricted
Securities to be sold and not bearing any restrictive legends
(unless required by applicable securities laws); and enable
such Transfer Restricted Securities to be in such denominations
and registered in such names as the Holders or the
underwriter(s), if any, may request at least two Business Days
before any sale of Transfer Restricted Securities made by such
underwriter(s).
(xii) Use its best efforts to cause the Transfer
Restricted Securities covered by the Shelf Registration
Statement to be registered with or approved by such other U.S.
governmental agencies or authorities as may be necessary to
enable the seller or sellers thereof or the underwriter(s), if
any, to consummate the disposition of such Transfer Restricted
Securities.
(xiii) Subject to Section 4(b)(i) hereof, if any fact
or event contemplated by Section 4(b)(iii)(D) hereof shall
exist or have occurred, use its reasonable best efforts prepare
a supplement or post-effective amendment to the Shelf
Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of
Transfer Restricted Securities, the Prospectus will not contain
an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to
make the statements therein not misleading.
(xiv) Provide CUSIP numbers for all Transfer
Restricted Securities not later than the effective date of the
Shelf Registration Statement and provide the Trustee under the
Indenture with certificates for the Debentures that are in a
form eligible for deposit with The Depository Trust Company.
(xv) Cooperate and assist in any filings required to
be made with the NASD and in the performance of any due
diligence investigation by any underwriter that is required to
be retained in accordance with the rules and regulations of the
NASD.
(xvi) Otherwise use its best efforts to comply with
all applicable rules and regulations of the Commission and all
reporting requirements under the rules and regulations of the
Exchange Act.
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(xvii) Cause the Indenture to be qualified under the
TIA not later than the effective date of the Shelf Registration
Statement required by this Agreement, and, in connection
therewith, cooperate with the trustee and the holders of
Debentures to effect such changes to the Indenture as may be
required for such Indenture to be so qualified in accordance
with the terms of the TIA; and execute and use its best efforts
to cause the trustee thereunder to execute all documents that
may be required to effect such changes and all other forms and
documents required to be filed with the Commission to enable
such Indenture to be so qualified in a timely manner.
(xviii) Cause all Transfer Restricted Securities
covered by the Shelf Registration Statement to be listed or
quoted, as the case may be, on each securities exchange or
automated quotation system on which similar securities issued
by the Issuer are then listed or quoted.
(xix) Provide promptly to each Holder upon written
request each document filed with the Commission pursuant to the
requirements of Section 13 and Section 15 of the Exchange Act
after the effective date of the Shelf Registration Statement.
(xx) If requested by the underwriters, make
appropriate officers of the Issuer available to the
underwriters for meetings with prospective purchasers of the
Transfer Restricted Securities and prepare and present to
potential investors customary "road show" material in a manner
consistent with other new issuances of other securities similar
to the Transfer Restricted Securities.
(c) Each Holder agrees by acquisition of a Transfer Restricted
Security that, upon receipt of any notice from the Issuer of the existence of
any fact of the kind described in Section 4(b)(iii)(D) hereof, such Holder will,
and will use its reasonable best efforts to cause any underwriter(s) in an
Underwritten Offering to, forthwith discontinue disposition of Transfer
Restricted Securities pursuant to the Shelf Registration Statement until:
(i) such Holder has received copies of the
supplemented or amended Prospectus contemplated by Section
4(b)(xiv) hereof; or
(ii) such Holder is advised in writing (the "Advice")
by the Issuer that the use of the Prospectus may be resumed,
and has received copies of any additional or supplemental
filings that are incorporated by reference in the Prospectus.
If so directed by the Issuer, each Holder will deliver to the Issuer (at the
Issuer's expense) all
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copies, other than permanent file copies then in such Holder's possession, of
the Prospectus covering such Transfer Restricted Securities that was current at
the time of receipt of such notice of suspension.
(d) Each Holder who intends to be named as a selling Holder in
the Shelf Registration Statement shall furnish to the Issuer in writing, within
20 Business Days after receipt of a request therefor as set forth in a
questionnaire, such information regarding such Holder and the proposed
distribution by such Holder of its Transfer Restricted Securities as the Issuer
may reasonably request for use in connection with the Shelf Registration
Statement or Prospectus or preliminary Prospectus included therein. (The form of
the questionnaire is attached hereto as Exhibit A.) Holders that do not complete
the questionnaire and deliver it to the Issuer shall not be named as selling
securityholders in the Prospectus or preliminary Prospectus included in the
Shelf Registration Statement and therefore shall not be permitted to sell any
Transfer Restricted Securities pursuant to the Shelf Registration Statement.
Each Holder who intends to be named as a selling Holder in the Shelf
Registration Statement shall promptly furnish to the Issuer in writing such
other information as the Issuer may from time to time reasonably request in
writing.
(e) Upon the effectiveness of the Shelf Registration Statement,
each Holder shall notify the Issuer at least three Business Days prior to any
intended distribution of Transfer Restricted Securities pursuant to the Shelf
Registration Statement (a "Sale Notice"), which notice shall be effective for
five Business Days. Each Holder of this Security, by accepting the same, agrees
to hold any communication by the Company in response to a Sale Notice in
confidence.
5. REGISTRATION EXPENSES.
(a) All expenses incident to the Issuer's performance of or
compliance with this Agreement shall be borne by the Issuer regardless of
whether a Shelf Registration Statement becomes effective, including, without
limitation:
(i) all registration and filing fees and expenses
(including filings made by any Initial Purchasers or Holders
with the NASD);
(ii) all fees and expenses of compliance with federal
securities and state Blue Sky or securities laws;
(iii) all expenses of printing (including printing of
Prospectuses and certificates for the Common Stock to be issued
upon conversion of the Debentures), messenger and delivery
services and telephone;
(iv) all fees and disbursements of counsel to the
Issuer and, subject to
16
Section 5(b) below, the Holders of Transfer Restricted
Securities;
(v) all application and filing fees in connection
with listing (or authorizing for quotation) the Common Stock on
a national securities exchange or automated quotation system
pursuant to the requirements hereof; and
(vi) all fees and disbursements of independent
certified public accountants of the Issuer (including the
expenses of any special audit and comfort letters required by
or incident to such performance).
The Issuer shall bear its internal expenses (including, without
limitation, all salaries and expenses of their officers and employees performing
legal, accounting or other duties), the expenses of any annual audit and the
fees and expenses of any Person, including special experts, retained by the
Issuer.
(b) In connection with the Shelf Registration Statement
required by this Agreement, the Issuer shall reimburse the Initial Purchasers
and the Holders of Transfer Restricted Securities being registered pursuant to
the Shelf Registration Statement, as applicable, for the reasonable fees and
disbursements of not more than one counsel, which shall be Simpson Thacher &
Bartlett, or such other counsel as may be chosen by a Majority of Holders for
whose benefit the Shelf Registration Statement is being prepared.
6. INDEMNIFICATION AND CONTRIBUTION.
(a) The Issuer shall indemnify and hold harmless each Holder,
such Holder's officers and employees and each person, if any, who controls such
Holder within the meaning of the Securities Act (each, an "Indemnified Holder"),
from and against any loss, claim, damage or liability, joint or several, or any
action in respect thereof (including, but not limited to, any loss, claim,
damage, liability or action relating to resales of the Transfer Restricted
Securities), to which such Indemnified Holder may become subject, insofar as any
such loss, claim, damage, liability or action arises out of, or is based upon:
(i) any untrue statement or alleged untrue statement of a
material fact contained in (A) the Shelf Registration Statement or
Prospectus or any amendment or supplement thereto or (B) any blue sky
application or other document or any amendment or supplement thereto
prepared or executed by the Issuer (or based upon written information
furnished by or on behalf of the Issuer expressly for use in such blue
sky application or other document or amendment on supplement) filed in
any jurisdiction specifically for the purpose of qualifying any or all
of the Transfer Restricted Securities under the securities law of any
state or other jurisdiction (such application or document being
hereinafter called a "Blue Sky Application"); or
17
(ii) the omission or alleged omission to state therein any
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading,
and shall reimburse each Indemnified Holder promptly upon demand for any legal
or other expenses reasonably incurred by such Indemnified Holder in connection
with investigating or defending or preparing to defend against any such loss,
claim, damage, liability or action as such expenses are incurred; PROVIDED,
HOWEVER, that the Issuer shall not be liable in any such case to the extent that
any such loss, claim, damage, liability or action arises out of, or is based
upon, any untrue statement or alleged untrue statement or omission or alleged
omission made in the Shelf Registration Statement or Prospectus or amendment or
supplement thereto or Blue Sky Application in reliance upon and in conformity
with written information furnished to the Issuer by or on behalf of any Holder
(or its related Indemnified Holder) specifically for use therein. The foregoing
indemnity agreement is in addition to any liability which the Issuer may
otherwise have to any Indemnified Holder.
(b) Each Holder, severally and not jointly, shall indemnify and
hold harmless the Issuer, its officers and employees and each person, if any,
who controls the Issuer within the meaning of the Securities Act, from and
against any loss, claim, damage or liability, joint or several, or any action in
respect thereof, to which the Issuer or any such officer, employee or
controlling person may become subject, insofar as any such loss, claim, damage
or liability or action arises out of, or is based upon:
(i) any untrue statement or alleged untrue statement of any
material fact contained in the Shelf Registration Statement or
Prospectus or any amendment or supplement thereto or any Blue Sky
Application; or
(ii) the omission or the alleged omission to state therein any
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,
but in each case only to the extent that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Issuer by or on behalf of
such Holder (or its related Indemnified Holder) specifically for use therein,
and shall reimburse the Issuer and any such officer, employee or controlling
person promptly upon demand for any legal or other expenses reasonably incurred
by the Issuer or any such officer, employee or controlling person in connection
with investigating or defending or preparing to defend against any such loss,
claim, damage, liability or action as such expenses are incurred. The foregoing
indemnity agreement is in addition to any liability which any Holder may
otherwise have to the Issuer and any such
18
officer, employee or controlling person.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 6, notify the indemnifying party in
writing of the claim or the commencement of that action; PROVIDED, HOWEVER, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have under this Section 6 except to the extent it has
been materially prejudiced by such failure and, PROVIDED, FURTHER, that the
failure to notify the indemnifying party shall not relieve it from any liability
which it may have to an indemnified party otherwise than under this Section 6.
If any such claim or action shall be brought against an indemnified party, and
it shall notify the indemnifying party thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it wishes, jointly with
any other similarly notified indemnifying party, to assume the defense thereof
with counsel satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 6 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; PROVIDED, HOWEVER, that a
Majority of Holders shall have the right to employ a single counsel to represent
jointly a Majority of Holders and their respective officers, employees and
controlling persons who may be subject to liability arising out of any claim in
respect of which indemnity may be sought by a Majority of Holders against the
Issuer under this Section 7, if a Majority of Holders shall have reasonably
concluded that there may be one or more legal defenses available to them and
their respective officers, employees and controlling persons that are different
from or additional to those available to the Issuer and its officers, employees
and controlling persons, the fees and expenses of a single separate counsel
shall be paid by the Issuer. No indemnifying party shall:
(i) without the prior written consent of the indemnified
parties (which consent shall not be unreasonably withheld) settle or
compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in respect of
which indemnification or contribution may be sought hereunder (whether
or not the indemnified parties are actual or potential parties to such
claim or action) unless such settlement, compromise or consent includes
an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding, or
(ii) be liable for any settlement of any such action effected
without its written consent (which consent shall not be unreasonably
withheld), but if settled with its written consent or if there be a
final judgment for the plaintiff in any such action, the indemnifying
party agrees to indemnify and hold harmless any indemnified party from
and against any loss of liability by reason of such settlement or
judgment.
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(d) If the indemnification provided for in this Section 6 shall
for any reason be unavailable or insufficient to hold harmless an indemnified
party under Section 6(a) or 6(b) in respect of any loss, claim, damage or
liability (or action in respect thereof) referred to therein, each indemnifying
party shall, in lieu of indemnifying such indemnified party, contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability (or action in respect thereof):
(i) in such proportion as is appropriate to reflect the
relative benefits received by the Issuer from the offering and sale of
the Transfer Restricted Securities on the one hand and a Holder with
respect to the sale by such Holder of the Transfer Restricted Securities
on the other, or
(ii) if the allocation provided by clause (6)(d)(i) is not
permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause 6(d)(i) but
also the relative fault of the Issuer on the one hand and the Holders on
the other in connection with the statements or omissions or alleged
statements or alleged omissions that resulted in such loss, claim,
damage or liability (or action in respect thereof), as well as any other
relevant equitable considerations.
The relative benefits received by the Issuer on the one hand and a Holder on the
other with respect to such offering and such sale shall be deemed to be in the
same proportion as the total net proceeds from the offering of the Debentures
purchased under the Purchase Agreement (before deducting expenses) received by
the Issuer as set forth in the table on the cover of the Offering Memorandum,
dated October 6, 1999, on the one hand, bear to the total proceeds received by
such Holder with respect to its sale if Transfer Restricted Securities on the
other. The relative fault of the parties shall be determined by reference to
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Issuer on the one hand or the Holders on the other, the intent
of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Issuer and
each Holder agree that it would not be just and equitable if the amount of
contribution pursuant to this Section 6(d) were determined by PRO RATA
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the first sentence of this paragraph
(d). The amount paid or payable by an indemnified party as a result of the loss,
claim, damage or liability, or action in respect thereof, referred to above in
this Section 6 shall be deemed to include, for purposes of this Section 7, any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending or preparing to defend any such
action or claim. Notwithstanding the provisions of this Section 6, no Holder
shall be required to contribute any amount in excess of the amount by which the
total price at which the Transfer Restricted Securities purchased by it were
resold exceeds the amount of any damages which such
20
Holder has otherwise been required to pay by reason of any untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Holders' obligations to contribute as provided
in this Section 6(d) are several and not joint.
7. RULE 144A. In the event the Issuer is not subject to Section
13 or 15(d) of the Exchange Act, the Issuer hereby agrees with each Holder, for
so long as any Transfer Restricted Securities remain outstanding, to make
available to any Holder or beneficial owner of Transfer Restricted Securities in
connection with any sale thereof and any prospective purchaser of such Transfer
Restricted Securities from such Holder or beneficial owner, the information
required by Rule 144A(d)(4) under the Securities Act in order to permit resales
of such Transfer Restricted Securities pursuant to Rule 144A.
8. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Holder may
participate in any Underwritten Registration hereunder unless such Holder:
(i) agrees to sell such Holder's Transfer Restricted Securities
on the basis provided in any underwriting arrangements approved by the
Persons entitled hereunder to approve such arrangements and
(ii) completes and executes all reasonable questionnaires,
powers of attorney, indemnities, underwriting agreements, lock-up
letters and other documents required under the terms of such
underwriting arrangements.
9. SELECTION OF UNDERWRITERS. The Holders of Transfer
Restricted Securities covered by the Shelf Registration Statement who desire to
do so may sell such Transfer Restricted Securities in an Underwritten Offering.
In any such Underwritten Offering, the investment banker or investment bankers
and manager or managers that will administer the offering will be selected by a
Majority of Holders whose Transfer Restricted Securities are included in such
offering; PROVIDED, that such investment bankers and managers must be reasonably
satisfactory to the Issuer.
10. MISCELLANEOUS.
(a) REMEDIES. The Issuer acknowledges and agrees that any
failure by the Issuer to comply with its obligations under Section 2 hereof may
result in material irreparable injury to the Initial Purchasers or the Holders
for which there is no adequate remedy at law, that it will not be possible to
measure damages for such injuries precisely and that, in the event of any such
failure, the Initial Purchasers or any Holder may obtain such relief as may be
required to specifically enforce the Issuer's obligations under Section 2
hereof. The Issuer further agrees to
21
waive the defense in any action for specific performance that a remedy at law
would be adequate.
(b) ADJUSTMENTS AFFECTING TRANSFER RESTRICTED SECURITIES. The
Issuer shall not, directly or indirectly, take any action with respect to the
Transfer Restricted Securities as a class that would adversely affect the
ability of the Holders of Transfer Restricted Securities to include such
Transfer Restricted Securities in a registration undertaken pursuant to this
Agreement.
(c) NO INCONSISTENT AGREEMENTS. The Issuer will not, on or
after the date of this Agreement, enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the Holders in this
Agreement or otherwise conflicts with the provisions hereof. In addition, the
Issuer shall not grant to any of its security holders (other than the holders of
Transfer Restricted Securities in such capacity) the right to include any of its
securities in the Shelf Registration Statement provided for in this Agreement
other than the Transfer Restricted Securities. Other than the Stock Purchase
Agreement, dated January 18, 1995, between the Issuer and Pfizer, Inc. and the
Stock Purchase Agreement, dated March 1, 1996, as amended, between the Issuer
and Baxter Healthcare Corporation, the Issuer has not previously entered into
any agreement (which has not expired or been terminated) granting any
registration rights with respect to its securities to any Person which rights
conflict with the provisions hereof.
(d) AMENDMENTS AND WAIVERS. This Agreement may not be amended,
modified or supplemented, and waivers or consents to or departures from the
provisions hereof may not be given, unless the Issuer has obtained the written
consent of a Majority of Holders.
(e) NOTICES. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, first-class
mail (registered or certified, return receipt requested), telex, telecopier, or
air courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the
records of the registrar under the Indenture or the transfer
agent of the Common Stock, as the case may be; and
(ii) if to the Issuer:
Inhale Therapeutic Systems, Inc.
150 Industrial Road
San Carlos, California 94070
Attention: Stephen L. Hurst, Esq.
With a copy to:
Cooley Godward LLP
22
3000 Sand Hill Road
Building #3, suite 230
Menlo Park, California 94025
Attention: Marc P. Tanoury, Esq.
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; five
Business Days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt acknowledged, if telecopied; and on
the next Business Day, if timely delivered to an air courier guaranteeing
overnight delivery.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
as
