REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
_________, 2002, is made and entered into by and between Integrated Technology
Group, an entity organized and existing under the laws of the State of Nevada
(the "Company"), and Brighton Opportunity Fund, L.P. a limited partnership
organized under the laws of California.(the "Investor").
WHEREAS, the Company and the Investor have entered into that certain
Stock Purchase Agreement, dated as of the date hereof (the "Stock Purchase
Agreement"), pursuant to which the Company will issue, from time to time, to the
Investor up to $10,000,000 worth of shares of Common Stock par value $0.001 per
share, of the Company (the "Common Stock");
WHEREAS, pursuant to the terms of, and in partial consideration for,
the Investor's agreement to enter into the Stock Purchase Agreement, the Company
has agreed to provide the Investor with certain registration rights with respect
to the shares issued to the Investor and any additional shares of Common Stock
issued or distributed to the Investor by way of a dividend, stock split, or
other distribution in respect of the Shares, or acquired by way of any rights
offering or similar offering made in respect of the shares;
NOW, THEREFORE, in consideration of the premises, the representations,
warranties, covenants and agreements contained herein and in the Stock Purchase
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, intending to be legally bound
hereby, the parties hereto agree as follows (capitalized terms used herein and
not defined herein shall have the respective meanings ascribed to them in the
Stock Purchase Agreement):
ARTICLE I REGISTRATION RIGHTS
Section 1.1 REGISTRATION STATEMENTS.
a. Filing of Registration Statements. The Company shall
register for resale all Registrable Securities issued or issuable to the
Investor pursuant to the Stock Purchase Agreement. Subject to the terms and
conditions of this Agreement, the Company shall effect such registration in the
manner provided in either (i) or (ii) below. The Company shall file with the SEC
either:
(i) a registration statement (the "Initial Registration
Statement") on Form S-3, if use of such form is then available to the Company
pursuant to the rules of the SEC and, if not, such form promulgated by the SEC
for which the Company qualifies, that counsel for the Company shall deem
appropriate and which form shall be available for the sale of the shares of
Common Stock convertible into Common Stock by the Investor through the Secured
Convertible Debenture Purchase Agreement (the "Initial Shares"). The aggregate
number of shares to be registered under the Initial Registration Statement shall
be equal to two hundred percent (200%) of the Initial Shares but in no event
more than 4,000,000 shares. Prior to any subsequent put, the Company shall file
with the SEC a registration statement (the "Subsequent Registration Statement"
and together with the Initial Registration Statement, the "Registration
Statements") on such form promulgated by the SEC for which the Company
qualifies, that counsel for the Company shall deem appropriate and which form
shall be available for the sale of the shares of Common Stock to be purchased by
the Investor. The aggregate number of shares to be registered under the
Subsequent Registration Statement shall be equal to 125% of (X-Y)/Z, where X is
the Maximum Commitment Amount, Y is the Investment Amount of the Initial Shares
the S and Z is 92% of the Minimum Bid Price but in no event more than 4,000,000
shares; or
(ii) a registration statement (the "Combined Registration
Statement") on Form S-3, if use of such form is then available to the Company
pursuant to the rules of the SEC and, if not, on such form promulgated by the
SEC for which the Company qualifies, that counsel for the Company shall deem
appropriate and which form shall be available for the sale of all Put Shares
issued or issuable pursuant to the terms of the Stock Purchase Agreement. The
aggregate number of shares to be registered under the Combined Registration
Statement shall be equal to 125% of A/B, where A is the Maximum Commitment
Amount and B is 92% of the Minimum Bid Price.
b. Effectiveness of the Registration Statements. The Company
shall use its best efforts either: (i) to have the Initial Registration
Statement declared effective by the SEC in no event later than one hundred
twenty (120) calendar days after the Subscription Date and to have the
Subsequent Registration Statement declared effective by the SEC in no event
later than 150 calendar days after the Subscription Date, or (ii) to have the
Combined Registration Statement declared effective by the SEC in no event later
than ninety (90) calendar days after the Subscription Date. The Company shall
ensure that all Registration Statements remain in effect for a period ending 180
days following the earlier of termination of the Commitment Period and
termination of the Investor's obligations pursuant to Section 2.4 of the Stock
Purchase Agreement; provided that such period shall be extended one day for each
day after the applicable Effective Date, that any Registration Statement
covering shares purchased by the Investor is not effective during the period
such Registration Statement is required to be effective pursuant to this
Agreement; and provided further that the Company shall not be required to ensure
that any Registration Statement covering shares purchased by the Investor remain
in effect for such 180 day period if the shares registered thereunder shall have
become freely tradable pursuant to Rule 144(k) of the Securities Act or have
otherwise been sold.
c. Failure to Obtain or Maintain Effectiveness of Registration
Statements. In the event the Company fails for any reason to obtain the
effectiveness of any Registration Statement within the time periods set forth in
Section 1.1(b) (a "Tardy Registration Statement") or in the event that the
Company fails for any reason to maintain the effectiveness of any Registration
Statement (or the underlying prospectus) covering shares held by the Investor(an
"Ineffective Registration Statement" together with a Tardy Registration
Statement, a "Failed Registration Statement") (unless the Registrable Securities
covered by such Registration Statement shall have become freely tradable
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pursuant to Rule 144(k) of the Securities Act or have been otherwise sold), for
a period ending 180 days following the earlier of termination of the Commitment
Period and termination of the Investor's obligations pursuant to Section 2.4 of
the Stock Purchase Agreement (provided that such period shall be extended one
day for each day after the applicable Effective Date, that the Registration
Statement covering shares purchased by the Investor, is not effective during the
period such Registration Statement is required to be effective pursuant to this
Agreement), at any time during any period of such ineffectiveness (an
"Ineffective Period"), then, in either event the Company shall pay to the
Investor in immediately available funds into an account designated by the
Investor an amount equal to two percent (2.0%) of the aggregate Purchase Price
of all of the Registrable Securities under any such Failed Registration
Statement then held by the Investor for each calendar month and for each portion
of a calendar month, pro rata, during an Ineffective Period. Such payments shall
be made on the first Trading Day after the earliest to occur of (i) the
expiration of the applicable Ineffective Period and (ii) the last day of each
calendar month during an Ineffective Period.
d. Restricted Period. While in possession of material
non-public information received from the Company, the Investor shall not dispose
of any Registrable Securities until such information is disclosed to the public
(a "Restricted Period"); provided that, if such Restricted Period exceeds one
hundred twenty (120) days, the liquidated damages described in Section 1.1(c)
hereof shall be increased to three percent (3.0%) until such restricted Period
shall have elapsed.
e. Liquidated Damages. The Company and the Investor hereby
acknowledge and agree that the sums payable under subsections 1.1(c) and 1.1(d)
hereof shall constitute liquidated damages and not penalties. The parties
further acknowledge that (i) the amount of loss or damages likely to be incurred
is incapable or is difficult to estimate precisely, (ii) the amounts specified
in such subsections bear a reasonable proportion and are not plainly or grossly
disproportionate to the probable loss likely to be incurred in connection with
any failure by the Company to obtain or maintain the effectiveness of a
Registration Statement, (iii) one of the reasons for the Company and the
Investor reaching an agreement as to such amounts was the uncertainty and cost
of litigation regarding the question of actual damages, and (iv) the Company and
the Investor are sophisticated business parties and have been represented by
sophisticated and able legal and financial counsel and negotiated this Agreement
at arm's length.
ARTICLE II REGISTRATION PROCEDURES
Section 2.1. FILINGS; INFORMATION. The Company will effect the
registration of the Registrable Securities in accordance with the intended
methods of disposition thereof as furnished to the Company by any proposed
seller of such Registrable Securities. Without limiting the foregoing, the
Company in each such case will do the following as expeditiously as possible,
but in no event later than the deadline, if any, prescribed therefor in this
Agreement:
a. The Company shall (i) prepare and file with the SEC the
Registration Statement(s) covering the shares as described in subsection 1.1(a)
above; (ii) use its best efforts to cause such filed Registration Statement(s)
to become and remain effective (pursuant to Rule 415 under the Securities Act or
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otherwise) for the period prescribed by Section 1.1(b); (iii) prepare and file
with the SEC such amendments and supplements to each Registration Statement and
the prospectus used in connection therewith as may be necessary to keep each
Registration Statement effective for the time period prescribed by Section
1.1(b); and (iv) comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by each Registration Statement
during such period in accordance with the intended methods of disposition by the
Investor set forth in each Registration Statement.
b. The Company shall file all necessary amendments to each
Registration Statement in order to effectuate the purpose of this Agreement and
the Stock Purchase Agreement.
c. Five (5) Trading Days prior to filing each Registration
Statement or prospectus, or any amendment or supplement thereto (excluding
amendments deemed to result from the filing of documents incorporated by
reference therein), the Company shall deliver to the Investor and one firm of
counsel representing the Investor, in accordance with the notice provisions of
Section 4.8, copies of such Registration Statement as proposed to be filed,
together with exhibits thereto, which documents will be subject to review and
comment by the Investor and such counsel, and thereafter deliver to the Investor
and such counsel, in accordance with the notice provisions of Section 4.8, such
number of copies of such Registration Statement, each amendment and supplement
thereto (in each case including all exhibits thereto), the prospectus included
in such Registration Statement (including each preliminary prospectus) and such
other documents or information as the Investor or counsel may reasonably request
in order to facilitate the disposition of the Registrable Securities.
d. The Company shall deliver, in accordance with the notice
provisions of Section 4.8, to each broker as directed by the Investor such
number of conformed copies of such Registration Statement and of each amendment
and supplement thereto (in each case including all exhibits and documents
incorporated by reference), such number of copies of the prospectus contained in
such Registration Statement (including each preliminary prospectus and any
summary prospectus) and any other prospectus filed under Rule 424 promulgated
under the Securities Act relating to the Registrable Securities, and such other
documents, as may be reasonably requested to facilitate the disposition of the
Registrable Securities.
e. After the filing of each Registration Statement, the
Company shall promptly notify the Investor of any stop order issued or
threatened by the SEC in connection therewith and take all commercially
reasonable actions required to prevent the entry of such stop order or to remove
it if entered.
f. The Company shall use its best efforts to (i) register or
qualify the Registrable Securities under such other securities or blue sky laws
of such jurisdictions in the United States as the Investor may reasonably (in
light of its intended plan of distribution) request, and (ii) cause the
Registrable Securities to be registered with or approved by such other
governmental agencies or authorities in the United States as may be necessary by
virtue of the business and operations of the Company and do any and all other
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acts and things that may be reasonably necessary or advisable to enable the
Investor to consummate the disposition of the Registrable Securities; provided,
however, that the Company will not be required to qualify generally to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this paragraph (f), subject itself to taxation in any such jurisdiction,
or consent or subject itself to general service of process in any such
jurisdiction.
g. The Company shall immediately notify the Investor, but in
no event later than two (2) business days by facsimile and by overnight courier,
upon the occurrence of any of the following events in respect of a Registration
Statement or related prospectus in respect of an offering of Registrable
Securities: (i) receipt of any request for additional information by the SEC or
any other federal or state governmental authority during the period of
effectiveness of the Registration Statement for amendments or supplements to the
Registration Statement or related prospectus; (ii) the issuance by the SEC or
any other federal or state governmental authority of any stop order suspending
the effectiveness of a Registration Statement or the initiation of any
proceedings for that purpose; (iii) receipt of any notification with respect to
the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; (iv) the happening of any event
that makes any statement made in such Registration Statement or related
prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any
changes in the Registration Statement, related prospectus or documents so that,
in the case of a Registration Statement, it will not contain any 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, and
that in the case of the related prospectus, it will not contain any 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, in the light of the
circumstances under which they were made, not misleading; (v) the declaration by
the SEC of the effectiveness of a Registration Statement; and (vi) the Company's
reasonable determination that a post-effective amendment to the Registration
Statement would be appropriate, and the Company shall promptly make available to
the Investor any such supplement or amendment to the related prospectus.
h. The Company shall enter into customary agreements and take
such other actions as are reasonably required in order to expedite or facilitate
the disposition of such Registrable Securities (whereupon the Investor may, at
its option, require that any or all of the representations, warranties and
covenants of the Company also be made to and for the benefit of the Investor).
i. The Company shall make available to the Investor (and will
deliver to Investor's counsel), subject to restrictions imposed by the United
States federal government or any agency or instrumentality thereof, copies of
all correspondence between the SEC and the Company, concerning any Registration
Statement, and, except during a Blackout Period, will also make available for
inspection by the Investor and any attorney, accountant or other professional
retained by the Investor (collectively, the "Inspectors"), all financial and
other records, pertinent corporate documents and properties of the
Company(collectively, the "Records") as shall be reasonably necessary to enable
them to exercise their due diligence responsibility, and cause the Company's
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officers and employees to supply all information reasonably requested by any
Inspectors in connection with any Registration Statement. Records that the
Company determines, in good faith, to be confidential and that it notifies the
Inspectors are confidential shall not be disclosed by the Inspectors unless (i)
the disclosure of such Records is necessary to avoid or correct a misstatement
or omission in any Registration Statement or (ii) the disclosure or release of
such Records is requested or required pursuant to oral questions,
interrogatories, requests for information or documents or a subpoena or other
order from a court of competent jurisdiction or other process; provided,
however, that prior to any disclosure or release pursuant to clause (ii), the
Inspectors shall provide the Company with prompt notice of any such request or
requirement so that the Company may seek an appropriate protective order or
waive such Inspectors' obligation not to disclose such Records; and, provided,
further, that if failing the entry of a protective order or the waiver by the
Company permitting the disclosure or release of such Records, the Inspectors,
upon advice of counsel, are compelled to disclose such Records, the Inspectors
may disclose that portion of the Records that counsel has advised the Inspectors
that the Inspectors are compelled to disclose. The Investor agrees that
information obtained by it solely as a result of such inspections (not including
any information obtained from a third party who, insofar as is known to the
Investor after reasonable inquiry, is not prohibited from providing such
information by a contractual, legal or fiduciary obligation to the Company)
shall be deemed confidential and shall not be used by it as the basis for any
market transactions in the securities of the Company or its affiliates unless
and until such information is made generally available to the public. The
Investor further agrees that it will, upon learning that disclosure of such
Records is sought in a court of competent jurisdiction, give notice to the
Company and allow the Company, at its expense, to undertake appropriate action
to prevent disclosure of the Records deemed confidential.
j. To the extent required by law or reasonably necessary to
effect a sale of Registrable Securities in accordance with prevailing business
practices at the time of any sale of Registrable Securities pursuant to a
Registration Statement, the Company shall deliver to the Investor a signed
counterpart, addressed to the Investor, of (1) an opinion or opinions of counsel
to the Company and (2) a comfort letter or comfort letters from the Company's
independent public accountants, each in customary form and covering such matters
of the type customarily covered by opinions of comfort letters, as the case
maybe, as the Investor therefor reasonably requests.
k. The Company shall otherwise comply with all applicable
rules and regulations of the SEC, including, without limitation, compliance with
applicable reporting requirements under the Exchange Act.
l. The Company shall appoint a transfer agent and registrar
for all of the class that includes the Registrable Securities covered by a
Registration Statement not later than the effective date of a Registration
Statement.
m. The Company may require the Investor to furnish promptly in
writing to the Company such information as may be legally required in connection
with any registration including, without limitation, all such information as
maybe requested by the SEC or the National Association of Securities Dealers.
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The Investor agrees to provide such information requested in connection with any
registration within five (5) Trading Days after receiving such written request
and the Company shall not be responsible for any delays in obtaining or
maintaining the effectiveness of a Registration Statement caused by the
Investor's failure to timely provide such information. Each seller of
Registrable Securities shall notify the Company as promptly as practicable of
any inaccuracy or change in information previously furnished by such seller to
the Company or of the occurrence of any event, in either case as a result of
which any prospectus relating to the Registrable Securities contains or would
contain an untrue statement of a material fact regarding such seller or its
intended method of disposition of such Registrable Securities or omits to state
any material fact regarding such seller or such seller's intended method of
disposition of such Registrable Securities 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 promptly furnish to the Company
any additional information required to correct and update any previously
furnished information or required so that such prospectus shall not contain,
with respect to such seller or the disposition of such Registrable Securities,
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, in the light
of the circumstances under which they were made, not misleading.
Section 2.2. REGISTRATION EXPENSES. In connection with each
Registration Statement, the Company shall pay all registration expenses incurred
in connection with the registration thereunder (the "Registration Expenses"),
including, without limitation: (i) all registration, filing, securities exchange
listing and fees required by the National Association of Securities Dealers,
(ii) all registration, filing, qualification and other fees and expenses of
compliance with securities or blue sky laws (including reasonable fees and
disbursements of counsel in connection with blue sky qualifications of the
Registrable Securities required hereby), (iii) all of the Company's word
processing, duplicating, printing, messenger and delivery expenses, (iv) the
Company's internal expenses(including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
(v) the fees and expenses incurred by the Company in connection with the listing
of the Registrable Securities, (vi) reasonable fees and disbursements of counsel
for the Company and customary fees and expenses for independent certified public
accountants retained by the Company (including the expenses of any special
audits or comfort letters or costs associated with the delivery by independent
certified public accountants of such special audit(s) or comfort letter(s)
requested pursuant to Section 2.1(j) hereof), (vii) the fees and expenses of any
special experts retained by the Company in connection with such registration,
(viii) premiums and other costs of policies of insurance purchased at the
discretion of the Company against liabilities arising out of any public offering
of the Registrable Securities being registered, and (ix) any fees and
disbursements of underwriters customarily paid by issuers or sellers of
securities, but excluding underwriting fees, discounts, transfer taxes or
commissions, if any, attributable to the sale of Registrable Securities, which
shall be payable by each holder of Registrable Securities pro rata on the basis
of the number of Registrable Securities of each such holder that are included in
a registration under this Agreement.
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Section 2.3. BLACKOUT PERIOD. Investor agrees by acquisition of
Registrable Securities that, upon receipt of written notice from the Company of
the occurrence of any event of the kind described in Section 2.1(g)(iv), for a
period not to exceed 120 days (a "Blackout Period") the Investor shall forthwith
discontinue the Investor's offer of the Registrable Securities pursuant to the
Registration Statement relating to such Registrable Securities until the
Investor shall have received copies of the supplemented or amended prospectus
contemplated by Section 2.1(g)(iv) and, if so directed by the Company, will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, then in the Investor's possession, of the prospectus
relating to such Registrable Securities at the time of receipt of such notice.
In the event that any Investor uses a prospectus in connection with the offering
and sale of any of the Registrable Securities covered by such prospectus, such
Investor will use only the latest version of such prospectus provided by the
Company to the Investor.
ARTICLE III INDEMNIFICATION AND CONTRIBUTION
Section 3.1. INDEMNIFICATION BY THE COMPANY.
a The Company agrees to indemnify and hold harmless the
Investor, its partners, affiliates, officers, directors, employees and duly
authorized agents, and each Person or entity, if any, who controls the Investor
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, together with the partners, Affiliates, officers, directors,
employees and duly authorized agents of such controlling Person or
entity(collectively, the "Controlling Persons"), from and against any and all
losses, claims, damages, liabilities, costs and expenses (including, without
limitation, any and all reasonable attorneys' fees and disbursements and costs
and expenses of investigating and defending any such claim and any and all
amounts paid in settlement of, any action, suit or proceeding between any of the
indemnified parties and any indemnifying parties or between any indemnified
party and any third party, or otherwise, or any claim asserted) (collectively,
"Damages"), joint or several, and any action or proceeding in respect thereof to
which the Investor, its partners, affiliates, officers, directors, employees and
duly authorized agents, and any Controlling Person, may become subject under the
Securities Act, the Exchange Act or other federal or state statutory law or
regulation, at common law or otherwise, as and when incurred, insofar as such
Damages (or actions or proceedings in respect thereof) (i) arise out of, or are
based upon, any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement, or in any preliminary prospectus, final
prospectus, summary prospectus, documents filed under the Exchange Act and
deemed to be incorporated by reference into any Registration Statement,
application or other document executed by or on behalf other Company or based on
written information furnished by or on behalf of the Company filed in any
jurisdiction in order to qualify the Registrable Securities under the securities
or blue sky laws thereof or filed with the SEC, amendment or supplement relating
to the Registrable Securities or (ii) arise out of, or are based upon, any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
shall reimburse the Investor, its partners, affiliates, officers, directors,
employees and duly authorized agents, and each such Controlling Person, for any
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legal and other expenses reasonably incurred by the Investor, its partners,
affiliates, officers, directors, employees and duly authorized agents, or any
such Controlling Person, as incurred, in investigating or defending or preparing
to defend against any such Damages or actions or proceedings; provided, however,
that the Company shall not be liable to the extent that any such Damages arise
out of the Investor's failure to send or give a copy of the final prospectus or
supplement to the persons asserting an untrue statement or alleged untrue
statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such person if such
statement or omission was corrected in such final prospectus or supplement;
provided, further, that the Company shall not be liable to the extent that any
such Damages arise out of or are based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in such Registration
Statement, or any such preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement in reliance upon and in conformity with
written information furnished to the Company by the Investor or any other person
who participates as a seller or as an underwriter in the offering or sale of
such securities, in either case, in any questionnaire or other request by the
Company, or otherwise specifically stating that it is for use in the preparation
thereof.
b. The Investor agrees to indemnify and hold harmless the
Company, its partners, affiliates, officers, directors, employees and duly
authorized agents, and the Controlling Persons, from and against any and all
Damages, joint or several, and any action or proceeding in respect thereof to
which the Company, its partners, affiliates, officers, directors, employees and
duly authorized agents, and any Controlling Person, may become subject under the
Securities Act, the Exchange Act or other federal or state statutory law or
regulation, at common law or otherwise, as and when incurred, insofar as such
Damages (or actions or proceedings in respect thereof) arise out of, or are
based upon, any untrue statement or alleged untrue statement of a material fact
provided in writing to the Company by the Investor expressly for use in any
Registration Statement, preliminary prospectus, final prospectus or summary
prospectus of the Company filed in any jurisdiction in order to qualify the
Registrable Securities under the securities or blue sky laws thereof or filed
with the SEC and shall reimburse the Company, its partners, affiliates,
officers, directors, employees and duly authorized agents, and each such
Controlling Person, for any legal and other expenses reasonably incurred by the
Company, its partners, affiliates, officers, directors, employees and duly
authorized agents, or any such Controlling Person, as incurred, in investigating
or defending or preparing to defend against any such Damages or actions or
proceedings; provided, however, that the Investor shall not be liable to the
extent that any such Damages arise out of the Company's failure to send or give
a copy of the final prospectus or supplement to the persons asserting an untrue
statement or alleged untrue statement or omission or alleged omission at or
prior to the written confirmation of the sale of Registrable Securities to such
person if such statement or omission was corrected in such final prospectus or
supplement; provided, further, that the Investor shall not be liable to the
extent that any such Damages arise out of or are based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in such
Registration Statement, or any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement made by the Company or any other
person who participates as a seller or as an underwriter in the offering or sale
of such securities.
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Section 3.2. METHOD OF ASSERTING INDEMNIFICATION CLAIMS. All claims for
indemnification by any Indemnified Party (as defined below) under Section 3.1
shall be asserted and resolved as follows:
a. In the event any claim or demand in respect of which any
person claiming indemnification under any provision of Section 3.1 (an
"Indemnified Party") might seek indemnity under Section 3.1 is asserted against
or sought to be collected from such Indemnified Party by a person other than the
Company, the Investor or any affiliate of the Company (a "Third Party
Claim"),the Indemnified Party shall deliver a written notification, enclosing a
copy of all papers served, if any, and specifying the nature of and basis for
such Third Party Claim and for the Indemnified Party's claim for indemnification
that is being asserted under any provision of Section 3.1 against any person
(the "Indemnifying Party"), together with the amount or, if not then reasonably
ascertainable, the estimated amount, determined in good faith, of such Third
Party Claim (a "Claim Notice") with reasonable promptness to the Indemnifying
Party. If the Indemnified Party fails to provide the Claim Notice with
reasonable promptness after the Indemnified Party receives notice of such Third
Party Claim, the Indemnifying Party shall not be obligated to indemnify the
Indemnified Party with respect to such Third Party Claim to the extent that the
Indemnifying Party's ability to defend has been irreparably prejudiced by such
failure of the Indemnified Party. The Indemnifying Party shall notify the
Indemnified Party as soon as practicable within the period ending thirty
(30)calendar days following receipt by the Indemnifying Party of either a Claim
Notice or an Indemnity Notice (as defined below) (the "Dispute Period") whether
the Indemnifying Party disputes its liability or the amount of its liability to
the Indemnified Party under Section 3.1 and whether the Indemnifying Party
desires, at its sole cost and expense, to defend the Indemnified Party against
such Third Party Claim.
(i) If the Indemnifying Party notifies the Indemnified
Party within the Dispute Period that the Indemnifying Party desires to defend
the Indemnified Party with respect to the Third Party Claim pursuant to this
Section 3.2(a), then the Indemnifying Party shall have the right to defend, with
counsel reasonably satisfactory to the Indemnified Party, at the sole cost and
expense of the Indemnifying Party, such Third Party Claim by all appropriate
proceedings, which proceedings shall be vigorously and diligently prosecuted by
the Indemnifying Party to a final conclusion or will be settled at the
discretion of the Indemnifying Party (but only with the consent of the
Indemnified Party in the case of any settlement that provides for any relief
other than the payment of monetary damages or that provides for the payment of
monetary damages as to which the Indemnified Party shall not be indemnified in
full pursuant to Section 3.1). The Indemnifying Party shall have full control of
such defense and proceedings, including any compromise or settlement thereof;
provided, however, that the Indemnified Party may, at the sole cost and expense
of the Indemnified Party, at any time prior to the Indemnifying Party's delivery
of the notice referred to in the first sentence of this clause (i), file any
motion, answer or other pleadings or take any other action that the Indemnified
Party reasonably believes to be necessary or appropriate to protect its
interests; and provided further, that if requested by the Indemnifying Party,
the Indemnified Party will, at the sole cost and expense of the Indemnifying
Party, provide reasonable cooperation to the Indemnifying Party in contesting
any Third Party Claim that the Indemnifying Party elects to contest. The
Indemnified Party may participate in, but not control, any defense or settlement
of any Third Party Claim controlled by the Indemnifying Party pursuant to this
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clause (i), and except as provided in the preceding sentence, the Indemnified
Party shall bear its own costs and expenses with respect to such participation.
Notwithstanding the foregoing, the Indemnified Party may take over the control
of the defense or settlement of a Third Party Claim at any time if it
irrevocably waives its right to indemnity under Section 3.1 with respect to such
Third Party Claim.
(ii) If the Indemnifying Party fails to notify the
Indemnified Party within the Dispute Period that the Indemnifying Party desires
to defend the Third Party Claim pursuant to Section 3.2(a), or if the
Indemnifying Party gives such notice but fails to prosecute vigorously and
diligently or settle the Third Party Claim, or if the Indemnifying Party fails
to give any notice whatsoever within the Dispute Period, then the Indemnified
Party shall have the right to defend, at the sole cost and expense of the
Indemnifying Party, the Third Party Claim by all appropriate proceedings, which
proceedings shall be prosecuted by the Indemnified Party in a reasonable manner
and in good faith or will be settled at the discretion of the Indemnified
Party(with the consent of the Indemnifying Party, which consent will not be
unreasonably withheld). The Indemnified Party will have full control of such
defense and proceedings, including any compromise or settlement thereof;
provided, however, that if requested by the Indemnified Party, the Indemnifying
Party will, at the sole cost and expense of the Indemnifying Party, provide
reasonable cooperation to the Indemnified Party and its counsel in contesting
any Third Party Claim which the Indemnified Party is contesting. Notwithstanding
the foregoing provisions of this clause (ii), if the Indemnifying Party has
notified the Indemnified Party within the Dispute Period that the Indemnifying
Party disputes its liability or the amount of its liability hereunder to the
Indemnified Party with respect to such Third Party Claim and if such dispute is
resolved in favor of the Indemnifying Party in the manner provided in
clause(iii) below, the Indemnifying Party will not be required to bear the costs
and expenses of the Indemnified Party's defense pursuant to this clause (ii) or
of the Indemnifying Party's participation therein at the Indemnified Party's
request, and the Indemnified Party shall reimburse the Indemnifying Party in
full for all reasonable costs and expenses incurred by the Indemnifying Party in
connection with such litigation. The Indemnifying Party may participate in, but
not control, any defense or settlement controlled by the Indemnified Party
pursuant to this clause (ii), and the Indemnifying Party shall bear its own
costs and expenses with respect to such participation. (iii) If the Indemnifying
Party notifies the Indemnified Party that it does not dispute its liability or
the amount of its liability to the Indemnified Party with respect to the Third
Party Claim under Section 3.1 or fails to notify the Indemnified Party within
the Dispute Period whether the Indemnifying Party disputes its liability or the
amount of its liability to the Indemnified Party with respect to such Third
Party Claim, the Damages in the amount specified in the Claim Notice shall be
conclusively deemed a liability of the Indemnifying Party under Section 3.1 and
the Indemnifying Party shall pay the amount of such Damages to the Indemnified
Party on demand. If the Indemnifying Party has timely disputed its liability or
the amount of its liability with respect to such claim, the Indemnifying Party
and the Indemnified Party shall proceed in good faith to negotiate a resolution
of such dispute, and if not resolved through negotiations within the period of
thirty (30) calendar days immediately following the Dispute Period, such dispute
shall be resolved by arbitration in accordance with Section 3.3.
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b. In the event any Indemnified Party should have a claim
under Section 3.1 against the Indemnifying Party that does not involve a Third
Party Claim, the Indemnified Party shall deliver a written notification of a
claim for indemnity under Section 3.1 specifying the nature of and basis for
such claim, together with the amount or, if not then reasonably ascertainable,
the estimated amount, determined in good faith, of such claim (an "Indemnity
Notice") with reasonable promptness to the Indemnifying Party. The failure by
any Indemnified Party to give the Indemnity Notice shall not impair such party's
rights hereunder except to the extent that the Indemnifying Party demonstrates
that it has been irreparably prejudiced thereby. If the Indemnifying Party
notifies the Indemnified Party that it does not dispute the claim or the amount
of the claim described in such Indemnity Notice or fails to notify the
Indemnified Party within the Dispute Period whether the Indemnifying Party
disputes the claim or the amount of the claim described in such Indemnity
Notice, the Damages in the amount specified in the Indemnity Notice will be
conclusively deemed a liability of the Indemnifying Party under Section 3.1 and
the Indemnifying Party shall pay the amount of such Damages to the Indemnified
Party on demand. If the Indemnifying Party has timely disputed its liability or
the amount of its liability with respect to such claim, the Indemnifying Party
and the Indemnified Party shall proceed in good faith to negotiate a resolution
of such dispute, and if not resolved through negotiations within the period of
thirty (30) calendar days immediately following the Dispute Period, such dispute
shall be resolved by arbitration in accordance with Section 3.3.
Section 3.3. ARBITRATION. Any dispute under this Agreement (including,
without limitation, pursuant Section 3.2) or the Warrants shall be submitted to
arbitration and shall be finally and conclusively determined by the decision of
a board of arbitration consisting of three (3) members (the "Board of
Arbitration") selected as hereinafter provided. Each of the Company, on the one
hand, and the Investor and/or any other Indemnified Party, on the other hand,
shall select one (1) member and the third member shall be selected by mutual
agreement of the other members, or if the other members fail to reach agreement
on a third member within twenty (20) days after their selection, such third
member shall thereafter be selected by the American Arbitration Association upon
application made to it for such purpose by the other members. The Board of
Arbitration shall meet on consecutive business days in Los Angeles, California
or such other place as a majority of the members of the Board of Arbitration
determines more appropriate, and shall reach and render a decision in
writing(concurred in by a majority of the members of the Board of Arbitration).
In connection with rendering its decision, the Board of Arbitration shall adopt
and follow such rules and procedures as a majority of the members of the Board
of Arbitration deems necessary or appropriate. To the extent practical,
decisions of the Board of Arbitration shall be rendered no more than thirty (30)
calendar days following commencement of proceedings with respect thereto. The
Board of Arbitration shall cause its written decision to be delivered to the
Company and the Investor and/or any other Indemnified Party. Any decision made
by the Board of Arbitration (either prior to or after the expiration of such
thirty (30) calendar day period) shall be final, binding and conclusive on the
Company and the Investor and/or any other Indemnified Party and entitled to be
enforced to the fullest extent permitted by law and entered in any court of
competent jurisdiction. The non-prevailing party to any arbitration shall bear
the expense of both parties in relation thereto, including but not limited to
the parties' attorneys' fees, if any, and the expenses and fees of the Board of
Arbitration.
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Section 3.4. OTHER INDEMNIFICATION . Indemnification similar to that
specified in the preceding paragraphs of this Article 3 (with appropriate
modifications) shall be given by the Company with respect to any required
registration or other qualification of securities under any federal or state law
or regulation of any governmental authority other than the Securities Act. The
provisions of this Article III shall be in addition to any other rights to
indemnification, contribution or other remedies which an Indemnified Party may
have pursuant to law, equity, contract or otherwise.
Section 3.5. CONTRIBUTION. If the indemnification and reimbursement
obligations provided for in any section of this Article III is unavailable or
insufficient to hold harmless the Indemnified Parties in respect of any Damages
referred to herein, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Damages as between the Company on the one
hand and the Investor or seller on the other, in such proportion as is
appropriate to reflect the relative fault of the Company and of the Investor or
seller in connection with such statements or omissions, as well as other
equitable considerations. The relative fault of the Company on the one hand and
of the Investor or seller on the other shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by such party, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
The Company and the Investor agree that it would not be just and
equitable if contribution pursuant to this Section 3.4 were determined by pro
rata allocation 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 Party as a result of the
Damages referred to in the immediately preceding paragraph shall be deemed to
include, subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such Indemnified Party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 3.4, the Investor or seller shall in no event be required to contribute
any amount in excess of the amount by which the total price at which the
Registrable Securities of the Investor or seller were sold to the public (less
underwriting discounts and commissions) exceeds the amount of any damages which
the Investor or seller has otherwise been required to pay by reason of 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.
ARTICLE IV MISCELLANEOUS
Section 4.1. OUTSTANDING REGISTRATION RIGHTS. The Company represents
and warrants to the Investor that there is not in effect on the date hereof any
other agreement by the Company pursuant to which any holders of securities of
the Company have a right to cause the Company to register or qualify such
securities under the Securities Act or any securities or blue sky laws of any
jurisdiction.
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Section 4.2. TERM. The registration rights provided to the holders of
Registrable Securities hereunder shall terminate at such time as all Registrable
Securities have been issued and have ceased to be Registrable Securities.
Notwithstanding the foregoing, paragraphs (c) and (d) of Section 1.1, Article
III, Section 4.8, and Section 4.9 shall survive the termination of this
Agreement.
Section 4.3. RULE 144. If the Company is required to file reports under
the Exchange Act, the Company will file in a timely manner, information,
documents and reports in compliance with the Securities Act and the Exchange Act
and will, at its expense, promptly take such further action as holders of
Registrable Securities may reasonably request to enable such holders of
Registrable Securities to sell Registrable Securities without registration under
the Securities Act within the limitation of the exemptions provided by (a) Rule
144 under the Securities Act ("Rule 144"), as such Rule may be amended from time
to time, or (b) any similar rule or regulation hereafter adopted by the SEC. If
at any time the Company is not required to file such reports, it will, at its
expense, forthwith upon the written request of any holder of Registrable
Securities who intends to make a sale under Rule 144, make available adequate
current public information with respect to the Company within the meaning of
paragraph (c)(2) of Rule 144 or such other information as necessary to permit
sales pursuant to Rule 144. Upon the request of the Investor, the Company will
deliver to the Investor a written statement, signed by the Company's principal
financial officer, as to whether it has complied with such requirements. This
Section 4.3 shall terminate at the same time as the registration rights as
provided in Section 4.2.
Section 4.4. CERTIFICATE. The Company will, at its expense, forthwith
upon the request of any holder of Registrable Securities, deliver to such holder
a certificate, signed by the Company's principal financial officer, stating
(a)the Company's name, address and telephone number (including area code), (b)
the Company's Internal Revenue Service identification number, (c) the Company's
Commission file number, (d) the number of shares of each class of stock
outstanding as shown by the most recent report or statement published by the
Company, and (e) whether the Company has filed the reports required to be filed
under the Exchange Act for a period of at least ninety (90) days prior to the
date of such certificate and in addition has filed the most recent annual report
required to be filed thereunder.
Section 4.5. AMENDMENT AND MODIFICATION. Any provision of this
Agreement may be waived, provided that such waiver is set forth in a writing
executed by both parties to this Agreement. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of the
holders of a majority of the then outstanding Registrable Securities.
Notwithstanding the foregoing, the waiver of any provision hereof with respect
to a matter that relates exclusively to the rights of holders of Registrable
Securities whose securities are being sold pursuant to a Registration Statement
and does not directly or indirectly affect the rights of other holders of
Registrable Securities may be given by holders of at least a majority of the
Registrable Securities being sold by such holders; provided that the provisions
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of this sentence may not be amended, modified or supplemented except in
accordance with the provisions of the immediately preceding sentence. No course
of dealing between or among any Person having any interest in this Agreement
will be deemed effective to modify, amend or discharge any part of this
Agreement or any rights or obligations of any person under or by reason of this
Agreement.
Section 4.6. SUCCESSORS AND ASSIGNS; ENTIRE AGREEMENT. This Agreement
and all of the provisions hereof shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns. The Investor
may assign its rights under this Agreement to any subsequent holder the
Registrable Securities, provided that the Company shall have the right to
require any holder of Registrable Securities to execute a counterpart of this
Agreement and agree to be bound by the provisions of this Agreement as a
condition to such holder's claim to any rights hereunder. This Agreement,
together with the Stock Purchase Agreement, the Warrants and the exhibits and
schedules to such agreements together set forth the entire agreement and
understanding between the parties as to the subject matter hereof and merges and
supersedes all prior discussions, agreements and understandings of any and every
nature among them.
Section 4.7. SEPARABILITY. In the event that any provision of this
Agreement or the application of any provision hereof is declared to be illegal,
invalid or otherwise unenforceable by a court of competent jurisdiction, the
remainder of this Agreement shall not be affected except to the extent necessary
to delete such illegal, invalid or unenforceable provision unless that provision
held invalid shall substantially impair the benefits of the remaining portions
of this Agreement.
Section 4.8 NOTICES. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and shall be (i) deposited in the mail, registered or certified, return
receipt requested, postage prepaid, (ii) delivered by reputable air courier
service with charges prepaid, or (iii) transmitted by hand delivery, telegram or
facsimile, addressed as set forth below or to such other address as such party
shall have specified most recently by written notice. Any notice or other
communication required or permitted to be given hereunder shall be deemed
effective (a) upon hand delivery or delivery by facsimile, with accurate
confirmation generated by the transmitting facsimile machine, at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the second business day
following the date of mailing by express courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communications shall be:
If to the Company:
with a copy (which shall not constitute notice) to:
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If to the Investor:
with a copy (which shall not constitute notice) to:
Either party hereto may from time to time change its address or
facsimile number for notices under this Section 4.8 by giving at least ten (10)
days' prior written notice of such changed address or facsimile number to the
other party hereto.
Section 4.9. GOVERNING LAW. This Agreement shall be construed under the
laws of the State of California, without giving effect to conflict of law
provisions.
Section 4.10. HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not constitute a part of this Agreement,
nor shall they affect their meaning, construction or effect.
Section 4.11. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original instrument and all
of which together shall constitute one and the same instrument.
Section 4.12. FURTHER ASSURANCES. Each party shall cooperate and take
such action as may be reasonably requested by another party in order to carry
out the provisions and purposes of this Agreement and the transactions
contemplated hereby.
Section 4.13. ABSENCE OF PRESUMPTION. This Agreement shall be construed
without regard to any presumption or rule requiring construction or
interpretation against the party drafting or causing any instrument to be
drafted.
Section 4.14. REMEDIES. In the event of a breach or a threatened breach
by any party to this Agreement of its obligations under this Agreement, any
party injured or to be injured by such breach will be entitled to specific
performance of its rights under this Agreement or to injunctive relief, in
addition to being entitled to exercise all rights provided in this Agreement and
granted by law. The parties agree that the provisions of this Agreement shall be
specifically enforceable, it being agreed by the parties that the remedy at law,
including monetary damages, for breach of any such provision may be inadequate
compensation for any loss.
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IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be executed by the undersigned, there unto duly authorized,
as of the date first set forth above.
INTEGRATED TECHNOLOGY GROUP
By:_________________________________
Name_____________________________
Title______________________________
BRIGHTON OPPORTUNITY FUND, L.P.
By Its General Partner
---------------------------------
Name_____________________________
Title______________________________
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