REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made
and entered into as of September 30, 2003, by and among Avitar, Inc., a Delaware
corporation (the "Company"), and Gryphon Master Fund, L.P., a Bermuda limited
partnership (the "Purchaser").
WHEREAS, upon the terms and subject to the conditions of the
Securities Purchase Agreement, dated as of the date hereof (the "Purchase
Agreement"), the Company has agreed to issue and sell shares of its Preferred
Stock and Warrants to purchase shares of its Common Stock to the Purchaser; and
WHEREAS, to induce the Purchaser to execute and deliver the
Purchase Agreement and to purchase the Shares and the Warrants, the Company has
agreed to provide certain registration rights under the Securities Act of 1933,
as amended (the "Securities Act"), with respect to the Conversion Shares and the
Warrant Shares (each as respectively defined in the Purchase Agreement).
NOW, THEREFORE, in consideration of the representations,
warranties and agreements contained herein and other good and valuable
consideration, the receipt and legal adequacy of which are hereby acknowledged
by the parties, the Company and the Purchaser hereby agree as follows:
1. Definitions.
Capitalized terms used but not otherwise defined herein shall
have the meanings given such terms in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
"Affiliate" means, with respect to any Person, any other
Person that directly or indirectly controls or is controlled by or under common
control with such Person. For the purposes of this definition, "control," when
used with respect to any Person, means the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms "affiliated," "controlling" and "controlled" have
meanings correlative to the foregoing.
"AMEX" shall mean the American Stock Exchange.
"Blackout Period" shall have the meaning set forth in Section
3(m).
"Board" shall have the meaning set forth in Section 3(m).
"Business Day" means any day except Saturday, Sunday and any
day which is a legal holiday or a day on which banking institutions in the state
of Massachusetts generally are authorized or required by law or other government
actions to close.
"Commission" means the Securities and Exchange Commission.
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"Common Shares" shall have the meaning set forth in the
definition of "Registrable Securities."
"Common Stock" means the Company's Common Stock, $.01 par
value.
"Effectiveness Date" means with respect to the Registration
Statement the earlier of (i) the 90th day following the First Closing Date,
before which the Company will use its best efforts to cause the Registration
Statement to become effective, and (ii) the date which is within five (5)
Business Days of the date on which the Commission informs the Company that the
Commission (a) will not review the Registration Statement or (b) that the
Company may request the acceleration of the effectiveness of the Registration
Statement.
"Effectiveness Period" shall have the meaning set forth in
Section 2.
"Event" shall have the meaning set forth in Section 8(d).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Filing Date" means the date that the Registration Statement
is required to be filed which date shall be within thirty (30) days from the
First Closing Date.
"Holder" means, collectively, each holder from time to time of
Registrable Securities including, without limitation, the Purchaser and its
assignees. To the extent this Agreement refers to an election, consent, waiver,
request or approval of or by a Holder, such reference shall mean an election,
consent, waiver, request or approval by the holders of a majority in interest of
the then-outstanding Registrable Securities (on an as converted basis).
"Indemnified Party" shall have the meaning set forth in
Section 6(c).
"Indemnifying Party" shall have the meaning set forth in
Section 6(c).
"Liquidated Damages" shall have the meaning set forth in
Section 8(d).
"Losses" shall have the meaning set forth in Section 6(a).
"Person" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"Preferred Stock" means the Company's 6% Convertible Preferred
Stock, $0.001 par value.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference in such Prospectus.
"Registrable Securities" means the shares of Common Stock
issued and issuable pursuant to the conversion of the Preferred Stock and the
exercise of the Warrants, as the case may be, and upon any stock split, stock
dividend, recapitalization or similar event with respect to such shares of
Common Stock and any other securities issued in exchange of or replacement of
such shares of Common Stock (collectively, the "Common Shares"); until in the
case of any of the Common Shares (a) a Registration Statement covering such
Common Share has been declared effective by the Commission and continues to be
effective during the Effectiveness Period, or (b) such Common Share is sold in
compliance with Rule 144 or may be sold pursuant to Rule 144(k), after which
time such Common Share shall not be a Registrable Security.
"Registration Statement" means the registration statement,
including the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference in such
registration statement, for the Shares, the Conversion Shares, the Warrants and
the Warrant Shares required to be filed by the Company with the Commission
pursuant to this Agreement.
"Rule 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 158" means Rule 158 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
"Special Counsel" means any special counsel to Holder, for
which Holder will be reimbursed by the Company pursuant to Section 5 of this
Agreement and Section 8.1 of the Purchase Agreement.
2. Registration. On or prior to the Filing Date, the Company shall prepare and
file with the Commission a Registration Statement covering the resale of the
Registrable Securities for an offering to be made on a continuous basis pursuant
to Rule 415. The Registration Statement shall be on Form S-3 (except if the
Company is not then eligible to register for resale the Registrable Securities
on Form S-3, in which case such registration shall be on another appropriate
form in accordance with the Securities Act and the rules promulgated thereunder)
and shall contain (except if otherwise directed by the Purchaser) the "Plan of
Distribution" attached hereto as Exhibit B. The Company hereby represents and
warrants that it is currently eligible to use Form S-3 to register the resale of
the Registrable Securities. The Company shall (i) not permit any securities
other than the Registrable Securities to be included in the Registration
Statement, (ii) use its best efforts to cause the Registration Statement to be
declared effective under the Securities Act (including filing with the
Commission a request for acceleration of effectiveness in accordance with Rule
12dl-2 promulgated under the Exchange Act within five (5) Business Days of the
date that the Company is notified (orally or in writing, whichever is earlier)
by the Commission that a Registration Statement will not be "reviewed," or not
be subject to further review) as soon as possible after the filing thereof, but
in any event prior to the Effectiveness Date, and (iii) keep such Registration
Statement continuously effective under the Securities Act for a period of two
years from the Second Closing Date (the "Effectiveness Period").
3. Registration Procedures; Company's Obligations.
In connection with the registration of the Registrable
Securities, the Company shall:
(a) Prepare and file with the Commission on or prior to the Filing Date, a
Registration Statement on Form S-3 (or if the Company is not then eligible to
register for resale the Registrable Securities on Form S-3 such registration
shall be on another appropriate form in accordance with the Securities Act and
the Rules promulgated thereunder) in accordance with the method or methods of
distribution thereof as specified by the Holder (except if otherwise directed by
the Holder), and use its best efforts to cause the Registration Statement to
become effective and remain effective as provided herein; provided, however,
that not less than three (3) Business Days prior to the filing of the
Registration Statement or any related Prospectus or any amendment or supplement
thereto (including any document that would be incorporated therein by reference,
but after effectiveness, excluding any document that would be incorporated
therein by reference), the Company shall (i) furnish to the Holder and any
Special Counsel, copies of all such documents proposed to be filed, which
documents (other than those incorporated by reference) will be subject to the
timely review of and comment by such Special Counsel, and (ii) at the request of
the Holder cause its officers and directors, counsel and independent certified
public accountants to respond to such inquiries as shall be necessary, in the
reasonable opinion of such Special Counsel, to conduct a reasonable
investigation within the meaning of the Securities Act. The Company shall not
file the Registration Statement or any such Prospectus or any amendments or
supplements thereto to which the Holder or any Special Counsel shall reasonably
object in writing within three (3) Business Days of their receipt thereof.
(b) (i) Prepare and file with the Commission such amendments, including
post-effective amendments, to the Registration Statement as may be necessary to
keep the Registration Statement continuously effective as to the applicable
Registrable Securities for the Effectiveness Period in order to register for
resale under the Securities Act all of the Registrable Securities; (ii) cause
the related Prospectus to be amended or supplemented by any required Prospectus
supplement, and as so supplemented or amended to be filed pursuant to Rule 424
(or any similar provisions then in force) promulgated under the Securities Act;
(iii) respond promptly to any comments received from the Commission with respect
to the Registration Statement or any amendment thereto and promptly provide the
Holder true and complete copies of all correspondence from and to the Commission
relating to the Registration Statement; and (iv) comply in all material respects
with the provisions of the Securities Act and the Exchange Act with respect to
the disposition of all Registrable Securities covered by the Registration
Statement during the applicable period in accordance with the intended methods
of disposition by the Holder set forth in the Registration Statement as so
amended or in such Prospectus as so supplemented.
(c) Notify the Holder of Registrable Securities to be sold and any Special
Counsel promptly (and, in the case of (i)(A) below, not less than three (3)
Business Days prior to such filing and, in the case of (i)(B) or (i)(C) below,
no later than the first Business Day following the date on which the
Registration Statement becomes effective) and (if requested by any such Person)
confirm such notice in writing no later than three (3) Business Days following
the day (i)(A) when a Prospectus or any Prospectus supplement or post-effective
amendment to the Registration Statement is proposed to be filed, (B) when the
Commission notifies the Company whether there will be a "review" of such
Registration Statement and whenever the Commission comments in writing on such
Registration Statement, and (C) with respect to the Registration Statement or
any post-effective amendment, when the same has become effective; (ii) of any
request by the Commission or any other Federal or state governmental authority
for amendments or supplements to the Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement covering any or
all of the Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) of the receipt by the Company 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; and (v) of the occurrence of any
event that makes any statement made in the Registration Statement or Prospectus
or any document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires any revisions to the
Registration Statement, Prospectus or other documents so that, in the case of
the Registration Statement or the Prospectus, as the case may be, 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.
The Company shall promptly furnish to the Special Counsel,
without charge, (i) any correspondence from the Commission or the Commission's
staff to the Company or its representatives relating to any Registration
Statement, and (ii) promptly after the same is prepared and filed with the
Commission, a copy of any written response to the correspondence received from
the Commission.
(d) Use its best efforts to avoid the issuance of, or, if issued, obtain the
withdrawal of, (i) any order suspending the effectiveness of the Registration
Statement, or (ii) any suspension of the qualification (or exemption from
qualification) of any of the Registrable Securities for sale in any U.S.
jurisdiction, at the earliest practicable moment.
(e) If requested by the Holder, (i) promptly incorporate in a Prospectus
supplement or post-effective amendment to the Registration Statement such
information as the Company reasonably agrees should be included therein, and
(ii) make all required filings of such Prospectus supplement or such
post-effective amendment as soon as practicable after the Company has received
notification of the matters to be incorporated in such Prospectus supplement or
post-effective amendment.
(f) Furnish to the Holder and any Special Counsel, without charge, at least one
conformed copy of each Registration Statement and each amendment thereto,
including financial statements and schedules, all documents incorporated or
deemed to be incorporated therein by reference, and all exhibits to the extent
requested by such Person (including those previously furnished or incorporated
by reference) promptly after the filing of such documents with the Commission.
(g) Promptly deliver to the Holder and any Special Counsel, without charge, as
many copies of the Registration Statement, Prospectus or Prospectuses (including
each form of prospectus) and each amendment or supplement thereto as such
Persons may reasonably request; and the Company hereby consents to the use of
such Prospectus and each amendment or supplement thereto by the selling Holder
in connection with the offering and sale of the Registrable Securities covered
by such Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities, use its best efforts
to register or qualify or cooperate with the selling Holder and any Special
Counsel in connection with the registration or qualification (or exemption from
such registration or qualification) of such Registrable Securities for offer and
sale under the securities or Blue Sky laws of such jurisdictions within the
United States as the Holder reasonably requests in writing, to keep each such
registration or qualification (or exemption therefrom) effective during the
Effectiveness Period and to do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the Registrable
Securities covered by a Registration Statement; provided, however, that the
Company shall not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any action that would
subject it to general service of process in any such jurisdiction where it is
not then so subject or subject the Company to any tax in any such jurisdiction
where it is not then so subject.
(i) Cooperate with the Holder to facilitate the timely preparation and delivery
of certificates representing Registrable Securities to be sold pursuant to a
Registration Statement and to enable such Registrable Securities to be in such
denominations and registered in such names as the Holder may request at least
two (2) Business Days prior to any sale of Registrable Securities.
(j) Upon the occurrence of any event contemplated by Section 3(c)(v), promptly
prepare a supplement or amendment, including a post-effective amendment, to the
Registration Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, and file any
other required document so that, as thereafter delivered, neither the
Registration Statement nor such Prospectus will contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(k) Use its best efforts to cause all Registrable Securities relating to such
Registration Statement to be listed on the AMEX and any other securities
exchange, quotation system, market or over-the-counter bulletin board, if any,
on which the same securities issued by the Company are then listed as and when
required pursuant to the Purchase Agreement.
(l) Comply in all material respects with all applicable rules and regulations of
the Commission and make generally available to its security holders earning
statements satisfying the provisions of Section 11(a) of the Securities Act and
Rule 158 not later than forty-five (45) days after the end of any twelve (12)
month period (or ninety (90) days after the end of any twelve (12) month period
if such period is a fiscal year) commencing on the first day of the first fiscal
quarter of the Company after the effective date of the Registration Statement,
which statement shall conform to the requirements of Rule 158.
(m) If (i) there is material non-public information regarding the Company which
the Company's Board of Directors (the "Board") reasonably determines not to be
in the Company's best interest to disclose and which the Company is not
otherwise required to disclose, or (ii) there is a significant business
opportunity (including, but not limited to, the acquisition or disposition of
assets (other than in the ordinary course of business) or any merger,
consolidation, tender offer or other similar transaction) available to the
Company which the Board reasonably determines not to be in the Company's best
interest to disclose and which the Company would be required to disclose under
the Registration Statement, then the Company may suspend effectiveness of a
Registration Statement and suspend the sale of Registrable Securities under a
Registration Statement one (1) time every three (3) months or three (3) times in
any twelve month period, provided that the Company may not suspend its
obligation for more than thirty (30) days in the aggregate in any twelve month
period if suspension is for any of the reasons listed above or sixty (60) days
in the aggregate in any twelve month period for any other reason (each, a
"Blackout Period"); provided, however, that no such suspension shall be
permitted for more than twenty (20) consecutive days, arising out of the same
set of facts, circumstances or transactions.
(n) Within two (2) Business Days after the Registration Statement which includes
the Registrable Securities is ordered effective by the Commission, the Company
shall deliver, and shall cause legal counsel for the Company to deliver, to the
transfer agent for such Registrable Securities (with copies to the Holder whose
Registrable Securities are included in such Registration Statement) confirmation
that the Registration Statement has been declared effective by the Commission in
the form attached hereto as Exhibit C.
(o) Use its best efforts to prevent all Affiliates of the Company from selling
or otherwise disposing of any Common Stock prior to the Effectiveness Date.
4. Registration Procedures; Holder's Obligations
In connection with the registration of the Registrable
Securities, the Holder shall:
(a) If the Registration Statement refers to the Holder by name or otherwise as
the holder of any securities of the Company, have the right to require (if such
reference to the Holder by name or otherwise is not required by the Securities
Act or any similar federal statute then in force) the deletion of the reference
to the Holder in any amendment or supplement to the Registration Statement filed
or prepared subsequent to the time that such reference ceases to be required.
(b) (i) not sell any Registrable Securities under the Registration Statement
until it has received copies of the Prospectus as then amended or supplemented
as contemplated in Section 3(g) and notice from the Company that such
Registration Statement and any post-effective amendments thereto have become
effective as contemplated by Section 3(c), (ii) comply with the prospectus
delivery requirements of the Securities Act as applicable to it in connection
with sales of Registrable Securities pursuant to the Registration Statement, and
(iii) furnish to the Company information regarding such Holder and the
distribution of such Registrable Securities as is required by law to be
disclosed in the Registration Statement, and the Company may exclude from such
registration the Registrable Securities of the Holder if it fails to furnish
such information within a reasonable time prior to the filing of each
Registration Statement, supplemented Prospectus and/or amended Registration
Statement.
(c) upon receipt of a notice from the Company of the occurrence of any event of
the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or 3(m),
forthwith discontinue disposition of such Registrable Securities under the
Registration Statement until the Holder's receipt of the copies of the
supplemented Prospectus and/or amended Registration Statement contemplated by
Section 3(j), or until it is advised in writing by the Company that the use of
the applicable Prospectus may be resumed, and, in either case, has received
copies of any additional or supplemental filings that are incorporated or deemed
to be incorporated by reference in such Prospectus or Registration Statement.
5. Registration Expenses
All reasonable fees and expenses incident to the performance
of or compliance with this Agreement by the Company shall be borne by the
Company whether or not the Registration Statement is filed or becomes effective
and whether or not any Registrable Securities are sold pursuant to the
Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, the following: (i) all registration
and filing fees (including, without limitation, fees and expenses (A) with
respect to filings required to be made with the AMEX and each other securities
exchange or market on which Registrable Securities are required hereunder to be
listed, (B) with respect to filings required to be made with the Commission, and
(C) in compliance with state securities or Blue Sky laws); (ii) printing
expenses (including, without limitation, expenses of printing certificates for
Registrable Securities and of printing prospectuses if the printing of
prospectuses is requested by the holders of a majority of the Registrable
Securities included in the Registration Statement); (iii) messenger, telephone
and delivery expenses; (iv) fees and disbursements of counsel for the Company;
and (v) fees and expenses of all other Persons retained by the Company in
connection with the consummation of the transactions contemplated by this
Agreement, including, without limitation, the Company's independent public
accountants (including the expenses of any comfort letters or costs associated
with the delivery by independent public accountants of a comfort letter or
comfort letters). In addition, the Company shall be responsible for all of its
internal expenses incurred in connection with the consummation of the
transactions contemplated by this Agreement (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit, and the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder.
6. Indemnification
(a) Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless the Purchaser, its
permitted assignees, officers, directors, agents, brokers (including brokers who
offer and sell Registrable Securities as principal as a result of a pledge or
any failure to perform under a margin call of Common Stock), investment advisors
and employees, each Person who controls any the Purchaser or permitted assignee
(within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) and the officers, directors, agents and employees of each such
controlling Person, and the respective successors, assigns, estate and personal
representatives of each of the foregoing, to the fullest extent permitted by
applicable law, from and against any and all claims, losses, damages,
liabilities, penalties, judgments, costs (including, without limitation, costs
of investigation) and expenses (including, without limitation, reasonable
attorneys' fees and expenses) (collectively, "Losses"), as incurred, arising out
of or relating to any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any Prospectus, as supplemented or
amended, if applicable, or arising out of or relating to any omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in the light of the circumstances under which they were
made) not misleading, except (i) to the extent, but only to the extent, that
such untrue statements or omissions are based solely upon information regarding
the Holder furnished in writing to the Company by the Holder expressly for use
therein, which information was reviewed and expressly approved by the Holder or
Special Counsel expressly for use in the Registration Statement, such Prospectus
or such form of Prospectus or in any amendment or supplement thereto, or (ii) as
a result of the failure of the Holder to deliver a Prospectus, as amended or
supplemented, to the Purchaser in connection with an offer or sale. The Company
shall notify the Holder promptly of the institution, threat or assertion of any
Proceeding of which the Company is aware in connection with the transactions
contemplated by this Agreement. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of an Indemnified
Party (as defined in Section 6(c) hereof) and shall survive the transfer of the
Registrable Securities by the Holder.
(b) Indemnification by the Purchaser. The Purchaser shall indemnify and hold
harmless the Company, its directors, officers, agents and employees, each Person
who controls the Company (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers, agents or
employees of such controlling Persons, and the respective successors, assigns,
estate and personal representatives of each of the foregoing, to the fullest
extent permitted by applicable law, from and against any and all Losses, as
incurred, arising out of or relating to any untrue or alleged untrue statement
of a material fact contained in the Registration Statement, any Prospectus, as
supplemented or amended, if applicable, or arising out of or relating to any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any Prospectus or form
of prospectus or supplement thereto, in the light of the circumstances under
which they were made) not misleading, to the extent, but only to the extent,
that (i) such untrue statement or omission is contained in or omitted from any
information so furnished in writing by the Holder or the Special Counsel to the
Company specifically for inclusion in the Registration Statement or such
Prospectus, and (ii) such information was reasonably relied upon by the Company
for use in the Registration Statement, such Prospectus or such form of
prospectus or, to the extent that such information relates to the Holder or the
Holder's proposed method of distribution of Registrable Securities, was reviewed
and expressly approved in writing by the Holder expressly for use in the
Registration Statement, such Prospectus or such form of Prospectus Supplement.
Notwithstanding anything to the contrary contained herein, the Holder shall be
liable under this Section 6(b) for only that amount as does not exceed the net
proceeds to the Holder as a result of the sale of Registrable Securities
pursuant to such Registration Statement.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall be brought
or asserted against any Person entitled to indemnity pursuant to Section 6(a) or
6(b) hereunder (an "Indemnified Party"), such Indemnified Party promptly shall
notify the Person from whom indemnity is sought (the "Indemnifying Party) in
writing, and the Indemnifying Party shall assume the defense thereof, including
the employment of counsel reasonably satisfactory to the Indemnified Party and
the payment of all fees and expenses incurred in connection with defense
thereof; provided, that the failure of any Indemnified Party to give such notice
shall not relieve the Indemnifying Party of its obligations or liabilities
pursuant to this Agreement, except (and only) to the extent that it shall be
finally determined by a court of competent jurisdiction (which determination is
not subject to appeal or further review) that such failure shall have materially
and adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (i) the Indemnifying Party has agreed in
writing to pay such fees and expenses; or (ii) the Indemnifying Party shall have
failed promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding; or
(iii) the named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that a conflict of interest
is likely to exist if the same counsel were to represent such Indemnified Party
and the Indemnifying Party (in which case, if such Indemnified Party notifies
the Indemnifying Party in writing that it elects to employ separate counsel at
the expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld, conditioned or delayed. No
Indemnifying Party shall, without the prior written consent of the Indemnified
Party, which consent shall not unreasonably be withheld, conditioned or delayed,
effect any settlement of any pending Proceeding in respect of which any
Indemnified Party is a party, unless such settlement includes an unconditional
release of such Indemnified Party from all liability on claims that are the
subject matter of such Proceeding.
All reasonable fees and expenses of the Indemnified Party
(including reasonable fees and expenses to the extent incurred in connection
with investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten (10) Business Days of written notice thereof to the
Indemnifying Party (regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; provided, that
the Indemnifying Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to indemnification
hereunder or pursuant to applicable law).
(d) Contribution. If a claim for indemnification under Section 6(a) or 6(b) is
unavailable to an Indemnified Party because of a failure or refusal of a
governmental authority to enforce such indemnification in accordance with its
terms (by reason of public policy or otherwise), then each 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 Losses, in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party and Indemnified Party in connection with the actions, statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party and Indemnified
Party shall be determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission of a material fact, has been taken
or made by, or relates to information supplied by, such Indemnifying Party or
Indemnified Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action, statement or
omission. The amount paid or payable by a party as a result of any Losses shall
be deemed to include, subject to the limitations set forth in Section 6(c), any
reasonable attorneys' or other reasonable fees or expenses incurred by such
party in connection with any Proceeding to the extent such party would have been
indemnified for such fees or expenses if the indemnification provided for under
Section 6(a) or 6(b) was available to such party in accordance with its terms.
Notwithstanding anything to the contrary contained herein, the Holder shall be
liable or required to contribute under this Section 6(d) for only that amount as
does not exceed the net proceeds to the Holder as a result of the sale of
Registrable Securities pursuant to the Registration Statement.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 6(d) were determined by pro
rata allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties may have
to the Indemnified Parties.
7. Rule 144.
As long as the Holder owns Registrable Securities, the Company
covenants to timely file (or obtain extensions in respect thereof and file
within the applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to Section 13(a) or 15(d) of the Exchange
Act and to promptly furnish the Holder with true and complete copies of all such
filings. As long as the Holder owns Registrable Securities, if the Company is
not required to file reports pursuant to Section 13(a) or 15(d) of the Exchange
Act, it will prepare and furnish to the Holder and make publicly available in
accordance with Rule 144(c) promulgated under the Securities Act annual and
quarterly financial statements, together with a discussion and analysis of such
financial statements in form and substance substantially similar to those that
would otherwise be required to be included in reports required by Section 13(a)
or 15(d) of the Exchange Act, as well as any other information required thereby,
in the time period that such filings would have been required to have been made
under the Exchange Act. The Company further covenants that it will take such
further action as the Holder may reasonably request, all to the extent required
from time to time to enable the Holder to sell Common Shares without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144 promulgated under the Securities Act, including providing
any legal opinions of counsel to the Company referred to in the Purchase
Agreement. Upon the request of any Holder, the Company shall deliver to such
Holder a written certification of a duly authorized officer as to whether it has
complied with such requirements.
8. Miscellaneous.
(a) Remedies. The remedies provided in this Agreement and the Purchase Agreement
are cumulative and not exclusive of any remedies provided by law. In the event
of a breach by the Company or by the Holder of any of their obligations under
this Agreement, the Holder or the Company, as the case may be, in addition to
being entitled to exercise all rights granted by law and under this Agreement,
including recovery of damages, will be entitled to specific performance of its
rights under this Agreement. The Company and the Holder agree that monetary
damages would not provide adequate compensation for any losses incurred by
reason of a breach by it of any of the provisions of this Agreement and hereby
further agrees that, in the event of any action for specific performance in
respect of such breach, it shall waive the defense that a remedy at law would be
adequate.
(b) No Inconsistent Agreements. Neither the Company nor any of its Affiliates
has as of the date hereof entered into, nor shall the Company or any of its
Affiliates, on or after the date of this Agreement, enter into, any agreement
with respect to its securities that is inconsistent with the rights granted to
the Holder in this Agreement or otherwise conflicts with the provisions hereof.
Without limiting the generality of the foregoing, without the written consent of
the Holder, the Company shall not grant to any Person the right to request the
Company to register any securities of the Company under the Securities Act if
the rights so granted are inconsistent with the rights granted to the Holder set
forth herein, or otherwise prevent the Company with complying with all of its
obligations hereunder.
(c) No Piggyback on Registrations. Neither the Company nor any of its security
holders (other than the Holder in such capacity pursuant hereto or as the
Company notifies Purchaser in writing prior to the First Closing) may include
securities of the Company in the Registration Statement.
(d) Failure to File Registration Statement and Other Events. The Company and the
Holder agree that the Holder will suffer damages if the Registration Statement
is not filed on or prior to the Filing Date or is not declared effective by the
Commission on or prior to the Effectiveness Date and maintained in the manner
contemplated herein during the Effectiveness Period or if certain other events
occur. The Company and the Holder further agree that it would not be feasible to
ascertain the extent of such damages with precision. Accordingly, if (i) the
Registration Statement is not filed on or prior to the Filing Date, or is not
declared effective by the Commission on or prior to the Effectiveness Date, or
(ii) the Company fails to file with the Commission a request for acceleration in
accordance with Rule 12dl-2 promulgated under the Exchange Act within five (5)
Business Days of the date that the Company is notified (orally or in writing,
whichever is earlier) by the Commission that a Registration Statement will not
be "reviewed," or not subject to further review, or (iii) the Registration
Statement is filed with and declared effective by the Commission but thereafter
ceases to be effective or available as to all Registrable Securities at any time
during the Effectiveness Period, without being succeeded within a reasonable
period by a subsequent Registration Statement filed with and declared effective
by the Commission, or (iv) the Company suspends the use of the Prospectus
forming a part of such Registration Statement for more than thirty (30) days in
any period of 365 consecutive days if the Company suspends in reliance on its
ability to do so due to the existence of a development that, in the good faith
discretion of the Board, makes it appropriate to so suspend or which renders the
Company unable to comply with the Commission requirements, or the Company
suspends the use of the Prospectus forming a part of such Registration Statement
for more than sixty (60) days in any period of 365 consecutive days for any
other reason, or (v) during the Effectiveness Period, trading in the Common
Stock shall be suspended for any reason for more than three (3) Business Days in
the aggregate, or (vi) the Company breaches in a material respect any covenant
or other material term or condition in the Transaction Documents (other than a
representation or warranty contained therein) or any other agreement, document,
certificate or other instrument delivered in connection with the transactions
contemplated hereby and thereby, and such breach continues for a period of
thirty (30) days after written notice thereof to the Company, or (vii) the
Company has breached Section 3(n) of this Agreement (any such failure or breach
being referred to as an "Event"), the Company shall pay as liquidated damages
for such failure or breach and not as a penalty (the "Liquidated Damages") to
the Holder an amount equal to two percent (2%) of the purchase price of the
Preferred Stock and Warrants paid by the Holder pursuant to the Purchase
Agreement for each thirty (30) day period, pro rated for any period less than
thirty (30) days, following the Event until the applicable Event has been cured.
Notwithstanding the foregoing, in no event shall the Company be required to pay
aggregate Liquidated Damages under this Section 8(d) in excess of ten percent
(10%) of the purchase price of the Preferred Stock and Warrants paid by the
Holder pursuant to the Purchase Agreement. Payments to be made pursuant to this
Section 8(d) shall be due and payable immediately upon demand in cash. The
parties agree that the Liquidated Damages represent a reasonable estimate on the
part of the parties, as of the date of this Agreement, of the amount of damages
that may be incurred by the Holder if the Registration Statement is not filed on
or prior to the Filing Date or has not been declared effective by the Commission
on or prior to the Effectiveness Date and maintained in the manner contemplated
herein during the Effectiveness Period or if any other Event as described herein
has occurred.
(e) Consent to Jurisdiction. Both the Company and the Purchaser (i) hereby
irrevocably submit to the jurisdiction of the United States District Court for
the Northern District of Texas and the courts of the State of Texas located in
Dallas County for the purposes of any suit, action or proceeding arising out of
or relating to this Agreement or the Purchase Agreement, and (ii) hereby waive,
and agree not to assert in any such suit, action or proceeding, any claim that
it is not personally subject to the jurisdiction of such court, that the suit,
action or proceeding is brought in an inconvenient forum or that the venue of
the suit, action or proceeding is improper. Both the Company and the Purchaser
consent to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing in this Section 8(e)
shall affect or limit any right to serve process in any other manner permitted
by law.
(f) Amendments and Waivers. 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 same shall be in writing and signed by the Company and the Purchaser.
(g) Notices. Any and all notices or other communications or deliveries required
or permitted to be provided hereunder shall be in writing and shall be deemed
given and effective on the earlier of (i) the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile telephone
number specified for notice prior to 5:00 p.m., Eastern Standard Time, on a
Business Day, (ii) the first Business Day after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified for notice later than 5:00 p.m., Eastern Standard
Time, on any date and earlier than 11:59 p.m., Eastern Standard Time, on such
date, (iii) the Business Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) actual receipt by the
party to whom such notice is required to be given.
(x) if to the Company:
Avitar, Inc.
00 Xxx Xxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xx. Xxx X. Xxxxxxxxxx, Xx., Chief Financial Officer
Telecopier: (000) 000-0000
Telephone: (000) 000-0000
with a copy to:
Dolgenos Xxxxxx & Xxxxxx LLP
00 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Telecopier: (000) 000-0000
Telephone: (000) 000-0000
(y) if to the Purchaser:
At the address of the Purchaser set forth on
Exhibit A to this Agreement.
with a copy to:
Xxxxxx X. Garden, P.C.
000 Xxxxxxxx Xxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Garden, Esq.
Telecopier: (000) 000-0000
Telephone: (000) 000-0000
addresses or facsimile number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice.
(h) Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and permitted assigns and shall
inure to the benefit of the Holder and its successors and assigns. The Company
may not assign this Agreement or any of its respective rights or obligations
hereunder without the prior written consent of the Purchaser. The Purchaser may
assign its rights hereunder in the manner and to the Persons as permitted under
the Purchase Agreement.
(i) Assignment of Registration Rights. The rights of the Holder hereunder,
including the right to have the Company register for resale Registrable
Securities in accordance with the terms of this Agreement, shall be assignable
by each Holder to any transferee of the Holder of all or a portion of the shares
of Registrable Securities if: (i) the Holder 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 assignees is
restricted under the Securities Act and applicable state securities laws; (iv)
at or before the time the Company receives the written notice contemplated by
clause (ii) of this Section, the transferee or assignee agrees in writing with
the Company to be bound by all of the provisions of this Agreement; and (v) such
transfer shall have been made in accordance with the applicable requirements of
the Purchase Agreement and shall be for no less than 50% of the Registrable
Securities. In addition, the Holder shall have the right to assign its rights
hereunder to any other Person with the prior written consent of the Company,
which consent shall not be unreasonably withheld, conditioned or delayed. The
rights to assignment shall apply to the Holder (and to subsequent) successors
and assigns. In the event of an assignment pursuant to this Section 8(i), the
Purchaser shall pay all incremental costs and expenses incurred by the Company
in connection with filing a Registration Statement (or an amendment to the
Registration Statement) to register the shares of Registrable Securities
assigned to any assignee or transferee of the Purchaser.
(j) Counterparts. This Agreement may be executed in any number of counterparts,
each of which when so executed shall be deemed to be an original, and all of
which taken together shall constitute one and the same Agreement. In the event
that any signature is delivered by facsimile transmission, such signature shall
create a valid binding obligation of the party executing (or on whose behalf
such signature is executed) the same with the same force and effect as if such
facsimile signature were the original thereof.
(k) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to principles
of conflicts of law thereof. This Agreement shall not be interpreted or
construed with any presumption against the party causing this Agreement to be
drafted.
(l) Cumulative Remedies. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law.
(m) Termination. This Agreement shall terminate on the date on which all
remaining Registrable Securities may be sold without restriction pursuant to
Rule 144(k) of the Securities Act.
(n) Severability. If any term, provision, covenant or restriction of this
Agreement is held to be invalid, illegal, void or unenforceable in any respect,
the remainder of the terms, provisions, covenants and restrictions set forth
herein shall remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their reasonable
efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
(o) Headings. The headings herein are for convenience only, do not constitute a
part of this Agreement and shall not be deemed to limit or affect any of the
provisions hereof.
[Remainder of page intentionally left blank.]
IN WITNESS WHEREOF, the parties hereto have caused this
Registration Rights Agreement to be duly executed by their respective authorized
persons as of the date first indicated above.
AVITAR, INC.
By:
---------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Chief Executive Officer
GRYPHON MASTER FUND, L.P.
By: Gryphon Partners, L.P., its General Partner
By: Gryphon Management Partners, L.P.,
its General Partner
By: Gryphon Advisors, LLC, its General Partner
By: _____________________________
Xxxxxx X. Garden, Authorized Agent
A-1
EXHIBIT A
THE PURCHASER
Gryphon Master Fund, L.P.
000 Xxxxxxxx Xxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
Attn: Xxxx X. Xxxxxxx
B-2
B-1
EXHIBIT B
PLAN OF DISTRIBUTION
We are registering the warrants and the shares of preferred stock and
common stock on behalf of the selling stockholders. The warrants and the shares
of preferred stock and common stock may be sold in one or more transactions at
fixed prices, at prevailing market prices at the time of sale, at prices related
to the prevailing market prices, at varying prices determined at the time of
sale, or at negotiated prices. These sales may be effected at various times in
one or more of the following transactions, or in other kinds of transactions:
o transactions on the American Stock Exchange or on any national securities
exchange or U.S. inter-dealer system of a registered national securities
association on which the warrants and our preferred stock and common stock
may be listed or quoted at the time of sale;
o in the over-the-counter market;
o in private transactions and transactions otherwise than on these exchanges
or systems or in the over-the-counter market;
o in connection with short sales of the shares;
o by pledge to secure or in payment of debt and other obligations;
o through the writing of options, whether the options are listed on an
options exchange or otherwise;
o in connection with the writing of non-traded and exchange-traded call
options, in hedge transactions and in settlement of other transactions in
standardized or over-the-counter options; or
o through a combination of any of the above transactions.
The selling stockholder and its successors, including its transferees,
pledgees or donees or their successors, may sell the warrants, preferred stock
and common stock directly to the purchaser or through underwriters,
broker-dealers or agents, who may receive compensation in the form of discounts,
concessions or commissions from the selling stockholder or the purchaser. These
discounts, concessions or commissions as to any particular underwriter,
broker-dealer or agent may be in excess of those customary in the types of
transactions involved.
In addition, any securities covered by this prospectus which qualify
for sale pursuant to Rule 144 of the Securities Act may be sold under Rule 144
rather than pursuant to this prospectus.
We entered into a registration rights agreement for the benefit of the
selling stockholders to register the warrants and our preferred stock and common
stock under applicable federal and state securities laws. The registration
rights agreement provides for cross-indemnification of the selling stockholders
and us and our respective directors, officers and controlling persons against
specific liabilities in connection with the offer and sale of the warrants,
preferred stock and common stock, including liabilities under the Securities
Act. We will pay substantially all of the expenses incurred by the selling
stockholders incident to the registration of the offering and sale of the
warrants, preferred stock and common stock.
EXHIBIT C
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[Name and address of Transfer Agent]
=================
-----------------
Attn: ____________
Re: Avitar, Inc.
Ladies and Gentlemen:
We are counsel to Avitar, Inc., a Delaware corporation (the "Company"),
and have represented the Company in connection with that certain Securities
Purchase Agreement (the "Purchase Agreement"), dated as of September 30, 2003,
by and between the Company and the Purchaser (the "Purchaser") named therein
pursuant to which the Company issued to the Purchaser shares of its 6%
Convertible Preferred Stock, $0.001 par value (the "Preferred Stock"). Pursuant
to the Purchase Agreement, the Company has also entered into a Registration
Rights Agreement with the Purchaser (the "Registration Rights Agreement"), dated
as of September 30, 2003, pursuant to which the Company agreed, among other
things, to register the Registrable Securities (as defined in the Registration
Rights Agreement) under the Securities Act of 1933, as amended (the "1933 Act").
In connection with the Company's obligations under the Registration Rights
Agreement, on _________ __, 2003, the Company filed a Registration Statement on
Form S-3 (File No. 333-________) (the "Registration Statement") with the
Securities and Exchange Commission (the "SEC") relating to the resale of the
Registrable Securities which names the Purchaser as selling stockholder
thereunder.
In connection with the foregoing, we advise you that a member of the
SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [ENTER TIME
OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge,
after telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and, accordingly, the
Registrable Securities are available for resale under the 1933 Act in the manner
specified in, and pursuant to the terms of, the Registration Statement.
Very truly yours,
By:
cc: Gryphon Master Fund, L.P.
