Exhibit 4.3
INVESTORS’ RIGHTS
AGREEMENT
This Investors’ Rights
Agreement (this “Agreement”) is made as of the 2nd day
of December 1997, by and between OMP Acquisition Corporation, a
California corporation (the “Company”), Mandarin
Partners LLC (“Mandarin”) and Zein and Samar Obagi
Family Trust (“Obagi”). Mandarin and Obagi are referred
to collectively as the “Investors”.
RECITALS
WHEREAS, the Company and the
Investors are parties to certain stock purchase agreements of even
date herewith (collectively, the “Purchase
Agreements”);
WHEREAS, in order to induce the
Company to enter into the Purchase Agreements and to induce the
Investors to invest funds in the Company pursuant to the Purchase
Agreements, the Investors and the Company hereby agree that this
Agreement shall govern the rights of the Investors to cause the
Company to register shares of Common Stock issued or issuable to
the Investors and certain other matters as set forth
herein;
NOW, THEREFORE, THE PARTIES HEREBY
AGREE AS FOLLOWS:
1.
Definitions
. For purposes of this
Agreement:
(a)
The term “Act” means the
Securities Act of 1933, as amended.
(b)
The term “Co-Sale Stock”
means any shares of the Company’s capital stock now owned or
subsequently acquired by any Investor.
(c)
The term “Form S-3”
means such form under the Act as in effect on the date hereof or
any registration form under the Act subsequently adopted by the SEC
which permits inclusion or incorporation of substantial information
by reference to other documents filed by the Company with the
SEC.
(d)
The term “Holder” means
any person owning or having the right to acquire Registrable
Securities or any assignee thereof in accordance with Section 8.2
hereof.
(e)
The term “1934 Act”
shall mean the Securities Exchange Act of 1934, as
amended.
(f)
The term “register”,
“registered,” and “registration” refer to a
registration effected by preparing and filing a registration
statement or similar document in compliance with the Act, and the
declaration or ordering of effectiveness of such registration
statement or document.
(g)
The term “Registrable
Securities” means (i) any common stock (“Common
Stock”) of the Company held or hereafter acquired by a Holder
and (ii) any capital stock held or hereafter acquired by a Holder
which capital stock is convertible into Common Stock, excluding in
all cases, however, any Registrable Securities sold by a person in
a transaction in which his rights under Section 2 are not
assigned.
(h)
The number of shares of
“Registrable Securities then outstanding” shall be
determined by the number of shares of Common Stock then outstanding
which are Registrable Securities.
(i)
The term “SEC” shall
mean the Securities and Exchange Commission.
2.
Registration Rights
. The Company covenants and agrees
as follows:
2.1
Request for
Registration .
(a)
If the Company shall receive at any
time at least three (3) months after the effective date of the
first registration statement for a public offering of securities of
the Company (other than a registration statement relating either to
the sale of securities to employees of the Company pursuant to a
stock option, stock purchase or similar plan or a SEC Rule 145
transaction), a written request from the Holders of a majority of
the Registrable Securities then outstanding that the Company file a
registration statement under the Act covering the registration of
at least fifty percent (50%) of the Registrable Securities then
outstanding (or a lesser percent if the anticipated aggregate
offering price, net of underwriting discounts and commissions,
would exceed $7,500,000), then the Company shall:
(i)
within ten (10) days of the receipt
thereof, give written notice of such request to all Holders;
and
(ii)
effect as soon as practicable, and
in any event within sixty (60) days of the receipt of such request,
the registration under the Act of all Registrable Securities which
the Holders request to be registered, subject to the limitations of
subsection 2.1(b), within twenty (20) days of the mailing of such
notice by the Company in accordance with Section 5.7.
(b)
If the Holders initiating the
registration request hereunder (“Initiating Holders”)
intend to distribute the Registrable Securities covered by their
request by means of an underwriting, they shall so advise the
Company as a part of their request made pursuant to subsection
2.1(a) and the Company shall include such information in the
written notice referred to in subsection 2.l(a). The underwriter
will be selected by the Company and shall be reasonably acceptable
to a majority in interest of the Initiating Holders. In such event,
the right of any Holder to include its Registrable Securities in
such registration shall be conditioned upon such Holder’s
participation in such underwriting and the inclusion of such
Holder’s Registrable Securities in the underwriting (unless
otherwise mutually agreed by a majority in interest of
the
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Initiating Holders and such Holder) to the
extent provided herein. All Holders proposing to distribute their
securities through such underwriting shall (together with the
Company as provided in subsection 2.3(e)) enter into an
underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting. Notwithstanding any
other provision of this Section 2.1, if the underwriter advises the
Initiating Holders in writing that marketing factors require a
limitation of the number of shares to be underwritten, then the
Initiating Holders shall so advise all Holders of Registrable
Securities which would otherwise be underwritten pursuant hereto,
and the number of shares of Registrable Securities that may be
included in the underwriting shall be allocated among all Holders
thereof, including the Initiating Holders, in proportion (as nearly
as practicable) to the amount of Registrable Securities of the
Company owned by each Holder; provided, however, that the number of
shares of Registrable Securities to be included in such
underwriting shall not be reduced unless all other securities are
first entirely excluded from the underwriting.
(c)
Notwithstanding the foregoing, if
the Company shall furnish to Holders requesting a registration
statement pursuant to this Section 2.1, a certificate signed by the
Chief Executive Officer of the Company stating that in the good
faith judgment of the Board of Directors of the Company, it would
be seriously detrimental to the Company and its shareholders for
such registration statement to be filed and it is therefore
essential to defer the filing of such registration statement, the
Company shall have the right to defer taking action with respect to
such filing for a period of not more than 120 days after receipt of
the request of the Initiating Holders.
(d)
In addition, the Company shall not
be obligated to effect, or to take any action to effect, any
registration pursuant to this Section 2.1:
(i)
After the Company has effected two
(2) registrations pursuant to this Section 2.1 and such
registrations have been declared or ordered effective;
(ii)
During the period starting with the
date sixty (60) days prior to the Company’s good faith
estimate of the date of filing of, and ending on a date one hundred
eighty (180) days after the effective date of, a registration
subject to Section 2.2 hereof; provided that the Company is
actively employing in good faith all reasonable efforts to cause
such registration statement to become effective; or
(iii)
If the Initiating Holders propose to
dispose of shares of Registrable Securities that may be immediately
registered on Form S-3 pursuant to a request made pursuant to
Section 2.11 below.
2.2
Company Registration
. If (but without any obligation to
do so) the Company proposes to register (including for this purpose
a registration effected by the Company for shareholders other than
the Holders) any of its stock or other securities under the Act in
connection with the public offering of such securities solely for
cash (other than a registration relating solely to the sale of
securities to participants in a Company stock plan, a registration
on any form which does not include substantially the same
information as would be required to be
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included in a registration statement covering
the sale of the Registrable Securities, or a registration in which
the only Common Stock being registered is Common Stock issuable
upon conversion of debt securities which are also being
registered), the Company shall, at such time, promptly give each
Holder written notice of such registration. Upon the written
request of each Holder given within twenty (20) days after mailing
of such notice by the Company in accordance with Section 8.7, the
Company shall, subject to the provisions of Section 2.7, cause to
be registered under the Act all of the Registrable Securities that
each such Holder has requested to be registered.
2.3
Obligations of the
Company . Whenever
required under this Section 2 to effect the registration of any
Registrable Securities, the Company shall, as expeditiously as
reasonably possible:
(a)
Prepare and file with the SEC a
registration statement with respect to such Registrable Securities
and use its best efforts to cause such registration statement to
become effective, and, upon the request of the Holders of a
majority of the Registrable Securities registered thereunder, keep
such registration statement effective for a period of up to one
hundred twenty (120) days or until the distribution contemplated in
the Registration Statement has been completed; provided, however,
that (i) such 120-day period shall be extended for a period of time
equal to the period the Holder refrains from selling any securities
included in such registration at the request of an underwriter of
Common Stock (or other securities) of the Company; and (ii) in the
case of any registration of Registrable Securities on Form S-3
which are intended to be offered on a continuous or delayed basis,
such 120-day period shall be extended, if necessary, to keep the
registration statement effective until all such Registrable
Securities are sold, provided that Rule 415, or any successor rule
under the Act, permits an offering on a continuous or delayed
basis, and provided further that applicable rules under the Act
governing the obligation to file a post-effective amendment permit,
in lieu of filing a post-effective amendment which (I) includes any
prospectus required by Section 10(a)(3) of the Act or (II) reflects
facts or events representing a material or fundamental change in
the information set forth in the registration statement, the
incorporation by reference of information required to be included
in (I) and (II) above to be contained in periodic reports filed
pursuant to Section 13 or 15(d) of the 1934 Act in the registration
statement.
(b)
Prepare and file with the SEC such
amendments and supplements to such registration statement and the
prospectus used in connection with such registration statement as
may be necessary to comply with the provisions of the Act with
respect to the disposition of all securities covered by such
registration statement.
(c)
Furnish to the Holders such numbers
of copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Act, and such other
documents as they may reasonably request in order to facilitate the
disposition of Registrable Securities owned by them.
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(d)
Use its best efforts to register and
qualify the securities covered by such registration statement under
such other securities or Blue Sky laws of such jurisdictions as
shall be reasonably requested by the Holders; provided that the
Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general
consent to service of process in any such states or
jurisdictions.
(e)
In the event of any underwritten
public offering, enter into and perform its obligations under an
underwriting agreement, in usual and customary form, with the
managing underwriter of such offering. Each Holder participating in
such underwriting shall also enter into and perform its obligations
under such an agreement.
(f)
Notify each Holder of Registrable
Securities covered by such registration statement at any time when
a prospectus relating thereto is required to be delivered under the
Act of the happening of any event as a result of which the
prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the
circumstances then existing.
(g)
Cause all such Registrable
Securities registered pursuant hereunder to be listed on each
securities exchange on which similar securities issued by the
Company are then listed.
(h)
Provide a transfer agent and
registrar for all Registrable Securities registered pursuant
hereunder and a CUSIP number for all such Registrable Securities,
in each case not later than the effective date of such
registration.
2.4
Furnish Information
.
(a)
It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this
Section 2 with respect to the Registrable Securities of any selling
Holder that such Holder shall furnish to the Company such
information regarding itself, the Registrable Securities held by
it, and the intended method of disposition of such securities as
shall be required to effect the registration of such Holder’s
Registrable Securities.
(b)
The Company shall have no obligation
with respect to any registration requested pursuant to Section 2.1
or Section 2.11 if, due to the operation of subsection 2.4(a), the
number of shares or the anticipated aggregate offering price of the
Registrable Securities to be included in the registration does not
equal or exceed the number of shares or the anticipated aggregate
offering price required to originally trigger the Company’s
obligation to initiate such registration as specified in subsection
2.1(a) or subsection 2.11(b)(2), whichever is
applicable.
2.5
Expenses of Demand
Registration . All
expenses other than underwriting discounts and commissions incurred
in connection with registrations, filings or qualifications
pursuant to Section 2.1, including (without limitation) all
registration, filing and qualification fees, printers’ and
accounting fees, fees and disbursements of counsel for the
Company
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(including fees and disbursements of counsel for
the Company in its capacity as counsel to the selling Holders
hereunder; if Company counsel does not make itself available for
this purpose, the Company will pay the reasonable fees and
disbursements of one counsel for the selling Holders) shall be
borne by the Company; provided, however, that the Company shall not
be required to pay for any expenses of any registration proceeding
begun pursuant to Section 2.1 if the registration request is
subsequently withdrawn at the request of the Holders of a majority
of the Registrable Securities to be registered (in which case all
Participating Holders shall bear such expenses), unless the Holders
of a majority of the Registrable Securities agree to forfeit their
right to one demand registration pursuant to Section
2.1.
2.6
Expenses of Company
Registration . The
Company shall bear and pay all expenses incurred in connection with
any registration, filing or qualification of Registrable Securities
with respect to the registrations pursuant to Section 2.2 for each
Holder (which right may be assigned as provided in Section 8.2),
including (without limitation) all registration, filing, and
qualification fees, printers and accounting fees relating or
apportionable thereto and the fees and disbursements of counsel for
the Company in its capacity as counsel to the selling Holders
hereunder; if Company counsel does not make itself available for
this purpose, the Company will pay the reasonable fees and
disbursements of one counsel for the selling Holders selected by
them, but excluding underwriting discounts and commissions relating
to Registrable Securities.
2.7
Underwriting
Requirements . In
connection with any offering involving an underwriting of shares of
the Company’s capital stock, the Company shall not be
required under Section 2.2 to include any of the Holders’
securities in such underwriting unless they accept the terms of the
underwriting as agreed upon between the Company and the
underwriters selected by it (or by other persons entitled to select
the underwriters), and then only in such quantity as the
underwriters determine in their sole discretion will not jeopardize
the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by
shareholders to be included in such offering exceeds the amount of
securities sold other than by the Company that the underwriters
determine in their sole discretion is compatible with the success
of the offering, then the Company shall be required to include in
the offering only that number of such securities, including
Registrable Securities, which the underwriters determine in their
sole discretion will not jeopardize the success of the offering
(the securities so included to be apportioned pro rata among the
selling shareholders according to the total amount of securities
entitled to be included therein owned by each selling shareholder
or in such other proportions as shall mutually be agreed to by such
selling shareholders) but in no event shall (i) the amount of
securities of the selling shareholders included in the offering be
reduced below twenty percent (20%) of the total amount of
securities included in such offering, unless such offering is the
initial public offering of the Company’s securities in which
case the selling shareholders may be excluded if the underwriters
make the determination described above and no other
shareholder’s securities are included or (ii) notwithstanding
(i) above, any shares being sold by a shareholder exercising a
demand registration right similar to that granted in Section 2.1 be
excluded from such offering. For purposes of the preceding
parenthetical concerning apportionment, for any selling shareholder
which is a holder of Registrable Securities and which is a
partnership or corporation, the partners, retired partners and
shareholders of such Holder,
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or the estates and family members of any such
partners and retired partners and any trusts for the benefit of any
of the foregoing persons shall be deemed to be a single
“selling shareholder”, and any pro-rata reduction with
respect to such “selling shareholder” shall be based
upon the aggregate amount of shares carrying registration rights
owned by all entities and individuals included in such
“selling shareholder”, as defined in this
sentence.
2.8
Delay of Registration
. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any
such registration as the result of any controversy that might arise
with respect to the interpretation or implementation of this
Section 1.
2.9
Indemnification
. In the event any Registrable
Securities are included in a registration statement under this
Section 2:
(a)
To the extent permitted by law, the
Company will indemnify and hold harmless each Holder, any
underwriter (as defined in the Act) for such Holder and each
person, if any, who controls such Holder or underwriter within the
meaning of the Act or the 1934 Act, against any losses, claims,
damages, or liabilities (joint or several) to which they may become
subject under the Act, the 1934 Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions
in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations (collectively a
“Violation”); (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, (ii)
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, or (iii) any violation or alleged violation
by the Company of the Act, the 1934 Act, any state securities law
or any rule or regulation promulgated under the Act, the 1934 Act
or any state securities law; and the Company will pay to each such
Holder, underwriter or controlling person, as incurred, any legal
or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability,
or action; provided, however, that the indemnity agreement
contained in this subsection 2.9(a) shall not apply to amounts paid
in settlement of any such loss, claim, damage, liability, or action
if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss, claim,
damage, liability, or action to the extent that it arises out of or
is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in
connection with such registration by any such Holder, underwriter
or controlling person.
(b)
To the extent permitted by law, each
selling Holder will indemnify and hold harmless the Company, each
of its directors, each of its officers who has signed the
registration statement, each person, if any, who controls the
Company within the meaning of the Act, any underwriter, any other
Holder selling securities in such registration statement and any
controlling person of any such underwriter or other Holder, against
any losses, claims, damages, or liabilities (joint or several) to
which any of the foregoing persons may become subject, under the
Act, the 1934 Act or other federal or state law, insofar as such
losses, claims, damages, or
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liabilities (or actions in respect thereto)
arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished
by such Holder expressly for use in connection with such
registration; and each such Holder will pay, as incurred, any legal
or other expenses reasonably incurred by any person intended to be
indemnified pursuant to this subsection 2.9(b), in connection with
investigating or defending any such loss, claim, damage, liability,
or action; provided, however, that the indemnity agreement
contained in this subsection 2.9(b) shall not apply to amounts paid
in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder,
which consent shall not be unreasonably withheld; provided, that,
in no event shall any indemnity under this subsection 2.9(b) exceed
the gross proceeds from the offering received by such
Holder.
(c)
Promptly after receipt by an
indemnified party under this Section 2.9 of notice of the
commencement of any action (including any governmental action),
such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 2.9, deliver
to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly
noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified
party (together with all other indemnified parties which may be
represented without conflict by one counsel) shall have the right
to retain one separate counsel, with the fees and expenses to be
paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party
would be inappropriate due to actual or potential differing
interests b
