EXHIBIT 10.2
EXHIBIT B
TO SECURITIES
PURCHASE
AGREEMENT
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as
of August 13, 1998 by and between THE PANDA PROJECT, INC., a
Florida corporation (the "Company"), and the undersigned
investors (together with their affiliates and any assignee or
transferee of all of their rights hereunder, the "Investors").
WHEREAS:
A. In connection with the Securities Purchase Agreement
by and among the parties hereto of even date herewith (the
"Securities Purchase Agreement"), the Company has agreed, upon
the terms and subject to the conditions contained therein, to
issue and sell to the Initial Investors (i) shares of the
Company's common stock, par value $.01 per share (the "Common
Stock" or "Common Shares"), for an aggregate purchase price of
Four Million U.S. Dollars ($4,000,000) (the "Initial Purchase"),
and to receive in connection with each closing warrants (the
"Warrants") to acquire additional shares of Common Stock (the
"Warrant Shares"), upon the terms and subject to the limitations
and conditions set forth in the Warrants dated of even date
herewith; and
B. To induce the Initial Investors to execute and
deliver the Securities Purchase Agreement, the Company has agreed
to provide certain registration rights under the Securities Act
of 1933, as amended, and the rules and regulations thereunder, or
any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws.
NOW, THEREFORE, 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:
1. DEFINITIONS.
a. As used in this Agreement, the following terms
shall have the following meanings:
(i) "Investors" means the Initial Investors
and any transferee or assignee who agrees to become bound by the
provisions of this Agreement in accordance with Section 9 hereof.
(ii) "register," "registered," and
"registration" refer to a registration effected by preparing and
filing a Registration Statement or Statements in compliance with
the 1933 Act and pursuant to Rule 415 under the 1933 Act or any
successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of
effectiveness of such Registration Statement by the United States
Securities and Exchange Commission (the "SEC").
(iii) "Registrable Securities" means the
Common Shares and the Warrant Shares (including any Warrant
Shares issuable under the anti-dilution provisions of the
Warrants and including without limitation Common Shares issued
pursuant to the Fill-Up provisions of Article II of the
Securities Purchase Agreement) and any shares of capital stock
issued or issuable, from time to time (with any adjustments), as
a distribution on or in exchange for or otherwise with respect to
any of the foregoing. As to any particular securities, such
Securities shall cease to be Registrable Securities when they
have been sold pursuant to an effective registration statement or
in compliance with Rule 144 or are eligible to be sold by the
investor holding such securities pursuant to Rule 144(k) under
the 1933 Act (or any similar rule then in force).
(iv) "Registration Statement" means a
registration statement of the Company under the 0000 Xxx.
b. Capitalized terms used herein and not otherwise
defined herein shall have the respective meanings set forth in
the Securities Purchase Agreement.
2. REGISTRATION.
a. Mandatory Registration. The Company shall
prepare, and, on or prior to the date which is ten (10) business
days after the date of the Closing of the Purchase under the
Securities Purchase Agreement (the "Closing Date"), file with the
SEC a Registration Statement on Form S-3 and pursuant to Rule 415
(or, if Form S-3 is not then available, on Form S-1 (at the time
provided for in Section 2(e)), to effect a registration of all of
the Registrable Securities covering the resale of the Registrable
Securities issued or issuable pursuant to the Securities Purchase
Agreement, which Registration Statement, to the extent allowable
under the 1933 Act and the Rules promulgated thereunder
(including Rule 416), shall state that such Registration
Statement also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon the Fill-Up
provisions of the Securities Purchase Agreement and upon exercise
of the Warrants (i) to prevent dilution resulting from stock
splits, stock dividends or similar transactions or (ii) by reason
of changes in the Exercise Price of the Warrants in accordance
with the terms thereof. The number of shares of Common Stock
initially included in such Registration Statement shall be no
less than (x) the number of Common Shares issued in the Purchase,
plus (y) the number of Common Shares that are then issuable upon
exercise of all of the outstanding Warrants (based on the
Exercise Price of the Warrants in effect at that time).
b. Underwritten Offering. If any offering pursuant
to a Registration Statement pursuant to Section 2(a) hereof
involves an underwritten offering, the Investors who hold a
majority in interest of the Registrable Securities subject to
such underwritten offering, with the consent of the Investors,
shall have the right to select one legal counsel and an
investment banker or bankers and manager or managers to
administer the offering, which investment banker or bankers or
manager or managers shall be reasonably satisfactory to the
Company.
c. Payments by the Company. The Company shall use
commercially reasonable efforts to (A) obtain effectiveness of
the Registration Statement as soon as practicable, (B) exclusive
of Allowed Delays, maintain the effectiveness of such
Registration Statement and the ability of the Investors to sell
Registrable Securities pursuant thereto, and (C) maintain the
listing of the Common Stock for quotation on the Nasdaq, NYSE or
AMEX and trading thereon after the Registration Statement has
been declared effective. If (i) the Registration Statement(s)
covering the Registrable Securities required to be filed by the
Company pursuant to Section 2(a) hereof is not declared effective
by the SEC within ninety (90) days after the Closing Date or
(ii), after the Registration Statement has been declared
effective by the SEC, sales cannot be made pursuant to the
Registration Statement, or (iii) the Common Stock is not listed
or included for quotation on any one or more of the Nasdaq
National Market or the Nasdaq Small Cap Market (collectively
"Nasdaq"), the New York Stock Exchange (the "NYSE") or the
American Stock Exchange (the "AMEX") after being so listed or
included for quotation and after effectiveness of the
Registration Statement, then the Company will make payments to
the Investors in such amounts and at such times as shall be
determined pursuant to this Section 2(c) as partial relief for
the damages to the Investors by reason of any such delay in or
reduction of their ability to sell the Registrable Securities
(which remedy shall not be exclusive of any other remedies
available at law or in equity but shall be included as part of an
award of damages in any such forum). The Company shall pay to
the holders of the Registrable Securities an amount equal to the
purchase price paid for the Common Shares issued in the Closing
(the "Purchase Price") multiplied by two hundredths (.020) (or,
solely for the first month of any period of delay in the initial
effectiveness of the Registration Statement after the end of such
90-day period, one hundredth (.010), and thereafter three
hundredths (.030)) times the sum of: (i) the number of months
(prorated for partial months) after the end of such 90-day period
and prior to the date the Registration Statement is declared
effective by the SEC; provided, however, that there shall be
excluded from such period any delays which are solely
attributable to changes required by the Investors in the
Registration Statement with respect to information relating to
the Investors, including, without limitation, changes to the plan
of distribution, or to the failure of the Investors to conduct
their review of the Registration Statement pursuant to Section
3(h) below in a reasonably prompt manner; (ii) exclusive of
Allowed Delays (as defined below), the number of months (prorated
for partial months) that sales cannot be made pursuant to the
Registration Statement after the Registration Statement has been
declared effective (including, without limitation, when sales
cannot be made by reason of the Company's failure to properly
supplement or amend the prospectus included therein in accordance
with the terms of this Agreement or when such prospectus
otherwise contains a material misstatement or omission) and (iii)
exclusive of Allowed Delays the number of months (prorated for
partial months) that the Common Stock is not listed or included
for quotation on the Nasdaq, NYSE or AMEX or that trading thereon
is halted after the Registration Statement has been declared
effective. For example, if the Registration Statement becomes
effective one (1) month after the end of such 90-day period, the
Company would pay $10,000 for each $1,000,000 of Purchase Price.
If thereafter, sales could not be made pursuant to the
Registration Statement for an additional period of one (1) month
(exclusive of Allowed Delays), the Company would pay an
additional $20,000 for each $1,000,000 of Purchase Price.
Payments of cash pursuant hereto shall be made within five (5)
days after the end of each period that gives rise to such
obligation, provided that, if any such period extends for more
than thirty (30) days, interim payments shall be made for each
such thirty (30) day period.
If at any time during the Registration Period (as defined in
Section 3(a) below), counsel to the Company should determine in
good faith that the filing of the Registration Statement or the
compliance by the Company with its disclosure obligations in
connection with the Registration Statement may require the
disclosure of information which the Board of Directors of the
Company has identified as material and which the Board of
Directors has determined that the Company has a bona fide
business purpose for preserving as confidential, the Company
shall promptly, (i) notify the Investors in writing of the
existence of (but in no event, without the prior written consent
of an Investor, shall the Company disclose to such investor any
of the facts or circumstances regarding) material non-public
information and (ii) advise the Investors in writing to cease all
sales under the Registration Statement until such information is
disclosed to the public or ceases to be material. In such
instance, the Company's obligation to make payments under this
Section 2(c) shall be suspended for a period (an "Allowed Delay")
expiring upon the earlier to occur of (A) the date on which such
material information is disclosed to the public or ceases to be
material or the Company is able to so comply with its disclosure
obligations or (B) 15 trading days after the Company first
notifies the Investor of such good faith determination. There
shall not be more than two (2) Allowed Delays in any twelve (12)
month period nor more than three (3) Allowed Delays in any
twenty-four (24) month period, provided, however, that there may
be one additional Allowed Delay if the delay is the result of
requesting confidential treatment from the SEC for a document
being publicly disclosed.
d. Piggy-Back Registrations. If at any time prior
to the expiration of the Registration Period (as hereinafter
defined) at which time no Registration Statement is then
effective with respect to the Registrable Securities, the Company
shall file with the SEC a Registration Statement relating to an
offering for its own account or the account of others (unless
inclusion therein would require the consent of such other party,
and the Company is unable, despite exercise of good faith
efforts, to obtain such consent) under the 1933 Act of any of its
equity securities (other than on Form S-4 or Form S-8 or their
then equivalents relating to equity securities to be issued
solely in connection with any acquisition of any entity or
business or equity securities issuable in connection with stock
option, stock purchase or other employee benefit plans), the
Company shall send to each Investor who is entitled to
registration rights under this Section 2(d) written notice of
such determination and, if within fifteen (15) days after the
effective date of such notice, such Investor shall so request in
writing, the Company shall include in such Registration Statement
all or any part of the Registrable Securities such Investor
requests to be registered to the extent permissible under
applicable laws, except that if, in connection with any
underwritten public offering for the account of the Company the
managing underwriter(s) thereof shall impose a limitation on the
number of shares of Common Stock which may be included in the
Registration Statement because, in such underwriter(s)' judgment,
marketing or other factors dictate such limitation is necessary
to facilitate public distribution, then the Company shall be
obligated to include in such Registration Statement only such
limited portion of the Registrable Securities with respect to
which such Investor has requested inclusion hereunder as the
underwriter shall permit; provided, however, that the Company
shall not exclude any Registrable Securities unless the Company
has first excluded all outstanding securities, the holders of
which are not entitled to inclusion of such securities in such
Registration Statement; and provided, further, however, that,
after giving effect to the immediately preceding proviso, any
exclusion of Registrable Securities shall be made pro rata with
holders of other securities having the right to include such
securities in the Registration Statement other than holders of
securities not subject to a similar cut-back provision. No right
to registration of Registrable Securities under this Section 2(d)
shall be construed to limit any registration required under
Section 2(a) hereof. If an offering in connection with which an
Investor is entitled to registration under this Section 2(d) is
an underwritten offering, then each Investor whose Registrable
Securities are included in such Registration Statement shall,
unless otherwise agreed by the Company, offer and sell such
Registrable Securities in an underwritten offering using the same
underwriter or underwriters and, subject to the provisions of
this Agreement, on the same terms and conditions as other shares
of Common Stock included in such underwritten offering.
e. Eligibility for Form S-3. The Company
represents and warrants that it meets the registrant eligibility
and transaction requirements for the use of Form S-3 for
registration of the sale by the Investors of the Registrable
Securities and the Company shall file all reports required to be
filed by the Company with the SEC in a timely manner so as to
maintain such eligibility for the use of Form S-3. In the event
that the Company is advised by the SEC that it is not eligible to
use Form S-3 in connection with the registration of the
Registrable Securities, it shall file a Registration Statement
covering the Registrable Securities on Form S-1 or other
available form as promptly as practicable and not more than 20
business days after such advice from the SEC, and the Company
shall use commercially reasonable efforts to obtain eligibility
to use Form S-3 as promptly as practicable thereafter and shall
convert the Form S-1 Registration Statement to a Form S-3
Registration Statement as soon as it is permitted to do so
thereafter.
f. Rule 416. The Company and the Investors each
acknowledge that, absent guidance from the SEC or other
definitive authority to the contrary, an indeterminate number of
Registrable Securities shall be registered pursuant to Rule 416
under the Securities Act so as to include in such Registration
Statement any and all Registrable Securities which may become
issuable as a result of stock splits, stock dividends or similar
transactions (collectively, the "Rule 416 Securities"). In this
regard, the Company agrees to take all steps necessary to ensure
that all Registrable Securities are registered pursuant to Rule
416 under the Securities Act in the Registration Statement and,
absent guidance from the SEC or other definitive authority to the
contrary, the Company shall affirmatively support and not take
any action adverse to the position that the Registration
Statements filed hereunder cover all of the Rule 416 Securities.
If the Company determines that the Registration Statements filed
hereunder do not cover all of the Rule 416 Securities, the
Company shall immediately provide to each Investor written notice
(a "Rule 416 Notice") setting forth the basis for the Company's
position and the authority therefor.
3. OBLIGATIONS OF THE COMPANY.
In connection with the registration of the Registrable
Securities, the Company shall have the following obligations:
a. The Company shall prepare and, on or prior to
the date which is ten (10) business days after the First Closing
Date, file with the SEC, a Registration Statement with respect to
the number of Registrable Securities provided in Section 2(a),
and thereafter use its commercially reasonable efforts to cause
such Registration Statement relating to Registrable Securities to
become effective as soon as possible after such filing, and keep
the Registration Statement effective pursuant to Rule 415 at all
times until such date as is the earlier of (i) the date on which
all of the Registrable Securities have been sold and (ii) the
date on which the Registrable Securities (in the opinion of
counsel to the Investors) may be immediately sold without
restriction (including without limitation as to volume by each
holder thereof) without registration under the 1933 Act (the
"Registration Period"), which Registration Statement (including
any amendments or supplements thereto and prospectuses contained
therein) shall not contain any untrue statement of a material
fact or omit to state a material fact required to be stated
therein, or necessary to make the statements therein not
misleading.
b. The Company shall 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 keep the Registration Statement effective at all times during
the Registration Period, and, during such period, comply with the
provisions of the 1933 Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration
Statement until such time as all of such Registrable Securities
have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in the
Registration Statement. In the event that Rule 416 is determined
by the SEC not to permit the registration of an indeterminate
number of shares, and the number of shares available under a
Registration Statement filed pursuant to this Agreement is
insufficient to cover all of the Registrable Securities issued or
issuable in connection with the Purchase or exercise of the
Warrants, the Company shall amend the Registration Statement, or
file a new Registration Statement (on the short form available
therefore, if applicable), or both, so as to cover all of the
Registrable Securities, in each case, as soon as practicable, but
in any event within twenty (20) business days after the necessity
therefor arises (based on the market price of the Common Stock
and other relevant factors on which the Company reasonably elects
to rely). The Company shall use commercially reasonable efforts
to cause such amendment and/or new Registration Statement to
become effective as soon as practicable following the filing
thereof. The provisions of Section 2(c) above shall be
applicable with respect to such obligation, with the ninety (90)
days running from the day after the date on which the Company
reasonably first determines (or reasonably should have
determined) the need therefor.
c. The Company shall furnish to each Investor whose
Registrable Securities are included in the Registration Statement
and, if requested by such investor, its legal counsel (i)
promptly after the same is prepared and publicly distributed,
filed with the SEC, or received by the Company, one copy of the
Registration Statement and any amendment thereto, each
preliminary prospectus and prospectus and each amendment or
supplement thereto, and, in the case of the Registration
Statement referred to in Section 2(a), each letter written by or
on behalf of the Company to the SEC or the staff of the SEC, and
each item of correspondence from the SEC or the staff of the SEC,
in each case relating to such Registration Statement (other than
any portion of any thereof which contains information for which
the Company has sought confidential treatment), and (ii) such
number of copies of a prospectus, including a preliminary
prospectus, and all amendments and supplements thereto and such
other documents as such Investor may reasonably request in order
to facilitate the disposition of the Registrable Securities owned
by such Investor. The Company will immediately notify each
Investor by facsimile of the effectiveness of the Registration
Statement or any post-effective amendment. The Company will
promptly respond to any and all comments received from the SEC,
with a view towards causing any Registration Statement or any
amendment thereto to be declared effective by the SEC as soon as
practicable and shall promptly file an acceleration request as
soon as practicable following the resolution or clearance of all
SEC comments or, if applicable, following notification by the SEC
that the Registration Statement or any amendment thereto will not
be subject to review.
d. The Company shall use commercially reasonable
efforts to (i) register and qualify the Registrable Securities
covered by the Registration Statement under such other securities
or "blue sky" laws of such jurisdictions in the United States as
the Investors who hold a majority-in-interest of the Registrable
Securities being offered reasonably request, (ii) prepare and
file in those jurisdictions such amendments (including post-
effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness
thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration
Period, and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such
jurisdictions; provided however, that the Company shall not be
required in connection therewith or as a condition thereto to (a)
qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (b)
subject itself to general taxation in any such jurisdiction, (c)
file a general consent to service of process in any such
jurisdiction, (d) provide any undertakings that cause the Company
undue expense or burden, or (e) 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.
e. In the event Investors who hold a two-thirds
majority-in-interest of the Registrable Securities being offered
in an offering registered hereunder select underwriters for the
offering, the Company shall enter into and perform its
obligations under an underwriting agreement (including management
participation in marketing efforts), in usual and customary form,
including, without limitation, customary indemnification and
contribution obligations, with the underwriters of such offering.
f. As promptly as practicable after becoming aware
of such event, the Company shall notify each Investor of the
happening of any event, of which the Company has knowledge, 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 not
misleading, and use commercially reasonable efforts promptly (but
subject to Allowed Delays as set forth in Section 2(c)) to
prepare a supplement or amendment to the Registration Statement
to correct such untrue statement or omission, and deliver such
number of copies of such supplement or amendment to each Investor
as such Investor may reasonably request.
g. The Company shall 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, to obtain the withdrawal of such order at the earliest
possible moment and to notify each Investor who 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.
h. The Company shall permit a single firm of
counsel and a single firm of accountants designated by the
Investors 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 (in light
of the filing deadline) prior to their filing with the SEC, and
not file any document in a form to which such counsel reasonably
objects and will not request acceleration of the Registration
Statement without prior notice to such counsel. The sections of
the Registration Statement covering information with respect to
the Investors, the Investors' beneficial ownership of securities
of the Company or the Investors' intended method of disposition
of Registrable Securities shall conform to the information
provided to the Company by the Investors.
i. The Company shall make generally available to
its security holders as soon as practical, but not later than
ninety (90) days after the close of the period covered thereby,
an earnings statement (in accordance with the provisions of Rule
158 under the 0000 Xxx) covering a twelve-month period beginning
not later than the first day of the Company's fiscal quarter next
following the effective date of the Registration Statement.
j. At the request of any Investor, the Company
shall furnish, on the date that Registrable Securities are
delivered to an underwriter, if any, for sale in connection with
the Registration Statement (i) an opinion, dated as of such date,
from counsel representing the Company for purposes of such
Registration Statement, in form, scope and substance as is
customarily given in an underwritten public offering, addressed
to the underwriters and the Investors and (ii) 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
the Investors.
k. The Company shall make available for inspection
by (i) any Investor, (ii) any underwriter participating in any
disposition pursuant to the Registration Statement, (iii) one
firm of attorneys and one firm of accountants or other agents
retained by the Investors, and (iv) one firm of attorneys
retained by all such underwriters (collectively, the
"Inspectors") all pertinent financial and other records, and
pertinent corporate documents and properties of the Company
(collectively, the "Records"), as shall be reasonably deemed
necessary by each Inspector to enable each Inspector to exercise
its due diligence responsibility, and cause the Company's
officers, directors and employees to supply all information which
any Inspector may reasonably request for purposes of such due
diligence; provided however, that each Inspector shall hold in
confidence and shall not make any disclosure (except to an
Investor) of any Record or other information which the Company
determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (a) the
disclosure of such Records is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (b) the
release of such Records is ordered pursuant to a subpoena or
other order from a court or government body of competent
jurisdiction, or (c) 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. The Company shall
not be required to disclose any confidential information in such
Records to any Inspector until and unless such Inspector shall
have entered into confidentiality agreements (in form and
substance satisfactory to the Company) with the Company with
respect thereto, substantially in the form of this Section 3(k).
Each Investor agrees that it shall, upon learning that disclosure
of such Records is sought in or by a court or governmental body
of competent jurisdiction or through other means, give prompt
notice to the Company and allow the Company, at its expense, to
undertake appropriate action to prevent disclosure of, or to
obtain a protective order for, the Records deemed confidential.
Nothing herein (or in any other confidentiality agreement between
the Company and any Investor) shall be deemed to limit the
Investor's ability to sell Registrable Securities in a manner
which is otherwise consistent with applicable laws and
regulations.
1. The Company shall hold in confidence and not
make any disclosure of information concerning an Investor
provided to the Company 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, or (iv) such information has been made
generally available to the public other than by disclosure in
violation of this or any other agreement. The Company agrees
that it shall, upon learning that disclosure of such information
concerning an Investor is sought in or by a court or governmental
body of competent jurisdiction or through other means, give
prompt notice to such Investor prior to making such disclosure,
and allow the Investor, at its expense, to undertake appropriate
action to prevent disclosure of, or to obtain a protective order
for, such information.
m. The Company shall (i) cause all the Registrable
Securities covered by the 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) secure the designation
and quotation, of all the Registrable Securities covered by the
Registration Statement on the Nasdaq National Market System or,
if not eligible for the Nasdaq National Market System on the
Nasdaq Small Cap and, without limiting the generality of the
foregoing, to arrange for at least two market makers to register
with respect to such Registrable Securities.
n. The Company shall 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.
o. The Company shall cooperate with the Investors
who hold Registrable Securities being offered and the managing
underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Registrable
Securities to be offered pursuant to the Registration Statement
and enable such certificates to be in such denominations or
amounts, as the case may be, as the managing underwriter or
underwriters, if any, or the Investors may reasonably request and
registered in such names as the managing underwriter or
underwriters, if any, or the Investors may request, and, within
three (3) business days after a Registration Statement which
includes Registrable Securities is ordered effective by the SEC,
the Company shall deliver and shall cause legal counsel selected
by the Company to deliver to the transfer agent for the
Registrable Securities (with copies to the Investors whose
Registrable Securities are included in such Registration
Statement) an instruction in the form attached hereto as Exhibit
1 and an opinion from such counsel and a letter from the Company,
which letter has been acknowledged by the Company's transfer
agent as sufficient to permit the issuance of unlegended Common
Shares and Warrant Shares which are not subject to a stop
transfer notation in the form attached hereto as Exhibit 2.
p. The Company shall take all other reasonable
actions necessary to expedite and facilitate disposition by the
Investors of Registrable Securities pursuant to the Registration
Statement.
q. At the reasonable request of any Investor, the
Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to a
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.
r. The Company shall comply with all applicable
laws related to a Registration Statement and offering and sale of
securities and all applicable rules and regulations of
governmental authorities in connection therewith (including
without limitation the Securities Act and the Securities Exchange
Act of 1934, as amended, and the rules and regulations
promulgated by the SEC).
4. OBLIGATIONS OF THE INVESTORS.
In connection with the registration of the Registrable
Securities, the Investors shall each, on a several and not a
joint basis, have the following obligations:
a. It shall be a condition precedent to the
obligations of the Company to complete the registration pursuant
to this Agreement with respect to the Registrable Securities of a
particular Investor that such Investor shall 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 shall be reasonably
required to effect the registration of such Registrable
Securities and shall execute such documents in connection with
such registration as the Company may reasonably request. At
least five (5) business days prior to the first anticipated
filing date of the Registration Statement, the Company shall
notify each Investor of the information the Company requires from
each such Investor.
b. Each Investor, by such Investor's acceptance of
the Registrable Securities, agrees to cooperate with the Company
as reasonably requested by the Company in connection with the
preparation and filing of the Registration Statement hereunder,
unless such Investor has notified the Company in writing of such
Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement.
c. In the event Investors holding a two-thirds
majority-in-interest of the Registrable Securities being
registered (with the approval of a majority-in-interest of the
Investors) determine to engage the services of an underwriter,
each Investor agrees to 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 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 such Investor's Registrable Securities from the
Registration Statement.
d. Each Investor agrees that, upon receipt of any
notice from the Company of the happening of any event of the kind
described in Section 3(f) or 3(g), such Investor will immediately
discontinue disposition of Registrable Securities pursuant to the
Registration Statement covering such Registrable Securities until
such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(f) or 3(g) and, if
so directed by the Company, such Investor shall deliver to the
Company (at the expense of the Company) or destroy (and deliver
to the Company a certificate of destruction) all copies in such
Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such
notice.
e. No Investor may participate in any underwritten
registration hereunder unless such Investor (i) agrees to sell
such Investor's Registrable Securities on the basis provided in
any underwriting arrangements in usual and customary form entered
into by the Company, (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the
terms of such underwriting arrangements, including any lock-up
agreement with respect to any Registrable Securities not being
sold in such underwriting as may reasonably be requested by the
managing underwriter, and (iii) agrees to pay its pro rata share
of all underwriting discounts and commissions and any expenses in
excess of those payable by the Company pursuant to Section 5
below.
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts
and commissions, incurred in connection with registrations,
filings or qualifications pursuant to Sections 2 and 3,
including, without limitation, all registration, listing and
qualification fees, printers and accounting fees, the fees and
disbursements of counsel for the Company shall be borne by the
Company. The Company shall not pay for the Investor's legal fees
or expenses incurred in connection with entering into this
Agreement or in connection with the filing of the Registration
Statement. In addition, and notwithstanding the foregoing, the
Company shall pay all of the Investors' reasonable costs
(including legal fees) incurred in connection with the successful
enforcement of the Investors' rights hereunder.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a
Registration Statement under this Agreement:
a. To the extent permitted by law, the Company will
indemnify, hold harmless and defend (i) each Investor who holds
such Registrable Securities, (ii) the directors, officers,
partners, employees, agents and each person who controls any
Investor within the meaning of the 1933 Act or the Securities
Exchange Act of 1934, as amended (the "1934 Act"), if any, (iii)
any underwriter (as defined in the 0000 Xxx) for the Investors,
and (iv) the directors, officers, partners, employees and each
person who controls any such underwriter within the meaning of
the 1933 Act or the 1934 Act, if any (each, an "Indemnified
Person"), against any joint or several losses, claims, damages,
liabilities or expenses (collectively, 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 may become subject
insofar as such Claims arise out of or are based upon: (i) any
untrue statement or alleged untrue statement of a material fact
in a Registration Statement or the omission or alleged omission
to state therein a material fact required to be stated or
necessary to make the statements therein not misleading; (ii) any
untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in
the final prospectus (as amended or supplemented, if the Company
files any amendment thereof or supplement thereto with the SEC)
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 (iii) any violation or alleged violation by
the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any
rule or regulation thereunder relating to the offer or sale of
the Registrable Securities (the matters in the foregoing clauses
(i) through (iii) being, collectively, "Violations"). Subject to
the restrictions set forth in Section 6(c) with respect to the
number of legal counsel, the Company shall reimburse each
Indemnified Person, promptly as such expenses are incurred and
are due and payable, for any reasonable legal fees or other
reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a) or Section 6(b): (i)
shall not apply to a Claim by an Indemnified Person arising out
of or based upon a Violation which relates solely to information
included in the Registration Statement in reliance upon and in
conformity with information furnished in writing to the Company
by such Indemnified Person expressly for use 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(c) hereof; (ii) shall not
apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld; and
(iii) with respect to any prospectus, shall not inure to the
benefit of any Indemnified Person if the untrue statement or
omission of material fact contained in a preliminary prospectus
or final prospectus or any supplement thereto was corrected on a
timely basis in the prospectus, as then amended or supplemented
as required by Section 3(f), such corrected prospectus was timely
made available by the Company pursuant to Section 3(c) hereof,
and the Indemnified Person was promptly advised in writing not to
use the incorrect or incomplete prospectus prior to the use
giving rise to a Violation and such Indemnified Person,
notwithstanding such advice, used it. Such indemnity shall
remain in full force and effect regardless of any investigation
made by or on behalf of the Indemnified Person and shall survive
the transfer of the Registrable Securities by the Investors
pursuant to Section 9.
b. In connection with any Registration Statement in
which an Investor is participating, each such Investor agrees
severally and not jointly to indemnify, hold harmless and defend,
to the same extent and in the same manner set forth in Section
6(a), 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 1933 Act or the
1934 Act, any underwriter 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
or underwriter within the meaning of the 1933 Act or the 1934 Act
(collectively and together with an Indemnified Person, an
"Indemnified Party"), against any Claim to which any of them may
become subject, under the 1933 Act, the 1934 Act or otherwise,
insofar as such Claim arises out of or is based upon any
Violation by such Investor, in each case to the extent (and only
to the extent) that such Violation relates solely to information
included in the Registration Statement 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; and subject to Section 6(c) such Investor
will reimburse any legal or other expenses (promptly as such
expenses are incurred and are due and payable) reasonably
incurred by them in connection with investigating or defending
any such Claim; provided, however, that the indemnity agreement
contained in this Section 6(b) shall 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 shall
not be unreasonably withheld; and provided, further, that the
Investor's liability hereunder shall be limited in amount to the
net amount of proceeds received by such seller from the sale of
Registrable Securities. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on
behalf of such Indemnified Party and shall survive the transfer
of the Registrable Securities by the Investors pursuant to
Section 9.
c. Promptly after receipt by an Indemnified Person
or Indemnified Party under this Section 6 of notice of the
commencement of any action (including any governmental action),
such Indemnified Person or Indemnified Party shall, if a Claim in
respect thereof is to be made against any indemnifying party
under this Section 6, 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 control of the
defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified
Party, as the case may be; provided however, that such
indemnifying party shall not be entitled to assume such defense
and an Indemnified Person or Indemnified Party shall have the
right to retain its own counsel with the fees and expenses to be
paid by the indemnifying party, if, in the reasonable opinion of
counsel retained by the indemnifying party, the representation by
such counsel of the Indemnified Person or Indemnified Party and
the indemnifying party would be inappropriate due to actual or
potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel
in such proceeding. The indemnifying party shall pay for only
one separate legal counsel for the Indemnified Persons or the
Indemnified Parties, as applicable, and such legal counsel shall
be selected by Investors holding a majority-in-interest of the
Registrable Securities included in the Registration Statement to
which the Claim relates (with approval of the Investors), if the
Investors are entitled to indemnification hereunder, or the
Company, if the Company is entitled to indemnification hereunder,
as applicable. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement
of any such action shall not relieve such indemnifying party of
any liability to the Indemnified Person or Indemnified Party
under this Section 6, except to the extent that the indemnifying
party is actually prejudiced in its ability to defend such
action. The indemnification required by this Section 6 shall 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.
7. CONTRIBUTION.
If the indemnification provided for in Section 6 is for any
reason unavailable to, or insufficient to hold harmless, an
Indemnified Person or Indemnified Party in respect of any losses,
claims, damages or liabilities referred to therein, then each
Indemnifying Person or Indemnified Party under such paragraphs,
in lieu of indemnifying such Indemnified Person or Indemnified
Party thereunder and in order to provide for just and equitable
contribution, shall contribute to the amount paid or payable by
such Indemnified Person or Indemnified Party as a result of such
losses, claims, damages or liabilities in such proportion as is
appropriate to reflect (i) the relative benefits received by the
Indemnifying Person(s) on the one hand and the Indemnified
Person(s) or Indemnified Party(s) on the other from the offering
of the Securities or (ii) if the allocation provided by the
foregoing clause (i) is not permitted by applicable law, not only
such relative benefits but also the relative fault of the
Indemnifying Person(s) on the one hand and the Indemnified
Person(s) or Indemnified Party(s) on the other in connection with
the statements or omissions or alleged statements or omissions
that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof) as well as any other relevant
equitable considerations. The relative fault the parties shall
be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to
information on supplied by the Company on the one hand or such
Indemnified person, as the case may be, on the other, the
parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission, and
any other equitable considerations appropriate in the
circumstances.
The parties agree that it would not be just and equitable if
contribution pursuant to this Section 6 were determined by pro
rata allocation (even if the participants were treated as one
entity for such purpose) or by any other method of allocation
that does not take account of the equitable considerations
referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Person or Indemnifies Party as
a result of the losses, claims, damages, judgments, liabilities
and expenses referred to in the immediately preceding paragraph
shall be deemed to include, subject to the limitations set forth
above, any reasonable legal or other expenses actually incurred
by such Indemnified Person or Indemnified Party in connection
with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 6, in no event
shall an Investor be required to contribute any amount in excess
of the amount by which proceeds received by such Investor from
sales of Registrable Securities, as the case may be, exceeds the
amount of any damages that such Investor has otherwise been
required to pay or has paid by reason or such 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.
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investors the
benefits of Rule 144 promulgated under the 1933 Act or any other
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 ("Rule 144"), the Company agrees, for as
long as there shall be any Registrable Securities held by an
Investor, to:
a. make and keep public information available, as
those terms are understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports
and other documents required of the Company under the 1933 Act
and the 1934 Act so long as the Company remains subject to such
requirements (it being understood that nothing herein shall limit
the Company's obligations under Section 4(c) of the Securities
Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144;
and
c. furnish to each Investor so long as such
Investor owns Registrable Securities, promptly upon request, (i)
a written statement by the Company that it has complied with the
reporting requirements of Rule 144, the 1933 Act and the 1934
Act, (ii) a copy of the most recent annual or quarterly report of
the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably
requested to permit the Investors to sell such securities
pursuant to Rule 144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights under this Agreement shall be automatically
assignable by the Investors to any transferee of all or a portion
of Registrable Securities if: (i) 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, (ii) the Company is, within a
reasonable time after such transfer or assignment, furnished with
written notice of (a) the name and address of such transferee or
assignee, and (b) the securities with respect to which such
registration rights are being transferred or assigned, (iii)
following such transfer or assignment, the further disposition of
such securities by the transferee or assignee is restricted under
the 1933 Act and applicable state securities laws, (iv) at or
before the time the Company receives the written notice
contemplated by clause (ii) of this sentence, the transferee or
assignee agrees in writing with the Company to be bound by all of
the provisions contained herein, (v) such transfer shall have
been made in accordance with the applicable requirements of the
Securities Purchase Agreement, and (vi) such transferee shall be
an "accredited investor" as that term is defined in Rule 501 of
Regulation D promulgated under the 1933 Act and shall have made
appropriate representations to that effect to the Company.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the
observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively),
only with written consent of the Company, the Investors (to the
extent such Investors still own Registrable Securities) and
Investors who hold a two-thirds majority interest of the
Registrable Securities. Any amendment or waiver effected in
accordance with this Section 10 shall be binding upon each
Investor and the Company.
11. MISCELLANEOUS.
a. 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 shall act upon the basis of instructions,
notice or election received from the registered owner of such
Registrable Securities.
b. Any notices required or permitted to be given
under the terms hereof shall 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 shall be effective five days after being placed in
the mail, if mailed by regular U.S. mail, or upon receipt, if
delivered personally or by courier (including a recognized
overnight delivery service) or by facsimile, in each case
addressed to a party. The addresses for such communications
shall be:
If to the Company:
The Panda Project, Inc.
000 Xxxxxx Xxxx
Xxxx Xxxxx, XX 00000
Attn: Chief Executive Officer
Phone: (000) 000-0000
Fax: (000) 000-0000
With a copy to:
Xxxxxx, Xxxx & Xxxxxxxx LLP
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000-0000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
If to the Investors: To the address set forth immediately
below such Investor's name on the signature pages hereto.
c. 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, shall not operate as a waiver
thereof.
d. This Agreement shall be enforced, governed by
and construed in accordance with the laws of New York applicable
to agreements made and to be performed entirely within such
State. In the event that any provision of this Agreement is
invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the
extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any
provision hereof which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any
other provision hereof. The parties hereto hereby submit to the
exclusive jurisdiction of the United States Federal Courts
located in New York with respect to any dispute arising under
this Agreement or the transactions contemplated hereby.
e. This Agreement, the Securities Purchase
Agreement (including all schedules and exhibits thereto), and the
Warrants 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 and therein. This
Agreement, the Securities Purchase Agreement and the Warrants
supersede all prior agreements and understandings among the
parties hereto with respect to the subject matter hereof and
thereof.
f. Subject to the requirements of Section 9 hereof,
this Agreement shall inure to the benefit of and be binding upon
the successors and assigns of each of the parties hereto.
g. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise
affect the meaning hereof.
h. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all
of which shall constitute one and the same agreement. This
Agreement, once executed by a party, may be delivered to the
other party hereto by facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this
Agreement.
i. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates,
instruments and documents, as the other 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.
j. Except as otherwise provided herein, all
consents and other determinations to be made by the Investors
pursuant to this Agreement shall be made by Investors holding a
two-thirds majority of the Registrable Securities, determined as
if all the Warrants then outstanding have been exercised for
Registrable Securities.
k. The language used in this Agreement will be
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.
IN WITNESS WHEREOF, the Company and the undersigned
Investors have caused this Agreement to be duly executed as of
the date first above written.
THE PANDA PROJECT, INC.
By:_____________________________
Name:
Title
[signatures continued onto next page]
