EXHIBIT 10.27
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT dated this ____ day of
August, 1998 (this "Agreement"), between DYNAMICWEB ENTERPRISES,
INC., a New Jersey corporation, with principal executive offices
located at 000 Xxxxx 00 Xxxx, Xxxxxxxxx, Xxx Xxxxxx 000000 (the
"Company"), and the undersigned (the "Initial Investor").
WITNESSETH:
WHEREAS, upon the terms and subject to the conditions
of the Securities Purchase Agreement dated as of August _, 1998,
between the Initial Investor and the Company (the "Securities
Purchase Agreement"), the Company has agreed to issue and sell to
the Initial Investor (1) on the date hereof, 875 shares of the
Company's Series A 6% Convertible Preferred Stock, par value
$0.001 (collectively, the "Initially Issued Preferred Shares")
which, upon the terms of and subject to the conditions of the
Company's Certificate of Amendment to the Company's Certificate
of Incorporation (the "Certificate of Amendment"), are
convertible into shares of the Company's common stock, par value
$0.0001 (the "Common Stock") and Common Stock Purchase Warrants
(collectively, the "Initially Issued Warrants") to purchase
87,500 shares of Common Stock (the "First Tranche"); and (ii)
subsequent to the date hereof, upon the terms and conditions
contained in the Securities Purchase Agreement, including the
satisfaction of the conditions precedent contained therein, an
additional 675 shares of the Company's Series A 6% Convertible
Preferred Stock, par value $0.001 (collectively, the
"Subsequently Issued Preferred Shares" and together with the
Initially Issued Preferred Shares, collectively referred to as
the "Preferred Shares") and 67,500 Common Stock Purchase Warrants
(collectively, the Subsequently Issued Warrants" together with
the Initially Issued Warrants, collectively referred to as the
"Warrants") on the Second Funding Date (as defined herein) (the
"Second Tranche"); and
WHEREAS, to induce the Initial Investor to execute and
deliver the Securities Purchase Agreement, the Company has agreed
to provide with respect to the Common Stock issued or issuable in
lieu of cash dividend payments on the Preferred Shares, upon
conversion of the Preferred Shares and exercise of the Warrants
certain registration rights under the Securities Act;
NOW, THEREFORE, in consideration of the premises and
the mutual covenants contained herein, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. Definitions.
(a) As used in this Agreement, the following
terms shall have the following meanings:
(i) "Affiliate", of any specified Person
means any other Person who directly, or indirectly through one or
more intermediaries, is in control of, is controlled by, or is
under common control with, such specified Person. For purposes
of this definition, control of a Person means the power, directly
or indirectly, to direct or cause the direction of the management
and policies of such Person whether by contract, securities,
ownership or otherwise; and the terms "controlling" and
"controlled" have the respective meanings correlative to the
foregoing.
(ii) "Commission" means the Securities and
Exchange Commission.
(iii) "Current Market Price' on any date of
determination means the closing bid price of a share of the
Common Stock on such day as reported on the National Association
of Securities Dealers, Inc. ("NASD") Over the Counter ("OTC")
Bulletin Board System ("BBS", together with NASD and OTC, the
"NASDfBBS"), or, if such security is not listed or admitted to
trading on the NASD/BBS, on the principal national security
exchange or quotation system on which such security is quoted or
listed or admitted to trading, or, if not quoted or listed or
admitted to trading on any national securities exchange or
quotation system, the closing bid price of such security on the
over-the-counter market on the day in question as reported by the
National Quotation Bureau Incorporated, or a similar generally
accepted reporting service, or if not so available, in such
manner as furnished by any NASD member firm selected from time to
time by the Board of Directors of the Company for that purpose,
or a price determined in good faith by the Board of Directors of
the Company as being equal to the fair market value thereof, as
the case may be.
(iv) "Exchange Act" means the Securities
Exchange Act of 1934, as amended, and the rules and regulations
of the Commission thereunder, or any similar successor statute.
(v) "Initial Funding Date" means the date
and time of the issuance and sale of the Initially Issued
Preferred Shares and the Initially Issued Warrants in the First
Tranche.
(vi) "Investors" means the Initial Investor
and any transferee or assignee of Registrable Securities who
agrees to become bound by all of the terms and provisions of this
Agreement in accordance with Section 8 hereof.
(vii) "Public Offering" means an offer
registered with the Commission and the appropriate state
securities commissions by the Company of its Common Stock and
made pursuant to the Securities Act.
(viii) "Person" means any individual,
partnership, corporation, limited liability company, joint stock
company, association, trust, unincorporated
organization, or a government or agency or political subdivision
thereof.
(ix) "Prospectus" means the prospectus
(including, without limitation, any preliminary prospectus and
any final prospectus filed pursuant to Rule 424(b) under the
Securities Act, including any prospectus that discloses
information previously omitted from a prospectus filed as part of
an effective registration statement in reliance on Rule 430A
under the Securities Act) included in the Registration Statement,
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
by all other amendments and supplements to such prospectus,
including all material incorporated by reference in such
prospectus and all documents filed after the date of such
prospectus by the Company under the Exchange Act and incorporated
by reference therein.
(x) "Registrable Securities" means the
Common Stock issued or issuable (i) in lieu of cash dividend
payments on the Preferred Shares (assuming all of the Preferred
Shares included in the First Tranche and the Second Tranche have
been issued and sold), (ii) upon conversion of the Preferred
Shares (assuming all of the Preferred Shares included in the
First Tranche and the Second Tranche have been issued and sold)
or (iii) upon exercise of the Warrants (assuming all of the
Warrants included in the First Tranche and the Second Tranche
have been issued and sold); provided, however, a share of Common
Stock shall cease to be a Registrable Security for purposes of
this Agreement when it no longer is a Restricted Security.
(xi) "Registration Statement" means a
registration statement of the Company filed on an appropriate
form under the Securities Act providing for the registration of,
and the sale on a continuous or delayed basis by the holders of,
all of the Registrable Securities pursuant to Rule 415 under the
Securities Act, including the Prospectus contained therein and
forming a part thereof, any amendments to such registration
statement and supplements to such Prospectus, and all exhibits
and other material incorporated by reference in such registration
statement and Prospectus.
(xii) "Restricted Security" means any share
of Common Stock issued or issuable in lieu of cash dividend
payments on the Preferred Shares, upon conversion of the
Preferred Shares or exercise of the Warrants except any such
share that (i) has been registered pursuant to an effective
registration statement under the Securities Act and sold in a
manner contemplated by the Prospectus included in the
Registration Statement, (ii) has been transferred in compliance
with the resale provisions of Rule 144 under the Securities Act
(or any successor provision thereto) or is transferable pursuant
to paragraph (d) of Rule 144 under the Securities Act (or any
successor provision thereto), or (iii) other-,vise has
been transferred and a new share of Common Stock not subject to
transfer restrictions under the Securities Act has been delivered
by or on behalf of the Company.
(xiii) "Second Funding Date" means the date
and time of the issuance and sale of the Subsequently Issued
Preferred Shares and the Subsequently Issued Warrants in the
Second Tranche.
(xiv) "Securities Act" means the Securities
Act of 1933, as amended, and the rules and regulations of the
Commission thereunder, or any similar successor statute.
(b) All capitalized terms used and not defined
herein have the respective meaning assigned to them in the
Securities Purchase Agreement.
2. Registration.
(a) Filing and Effectiveness of Registration
Statement. The Company shall prepare and file with the
Commission not later than sixty (60) days after the Initial
Funding Date, a Registration Statement relating to the offer and
sale of all of the Registrable Securities and shall use its best
efforts to cause the Commission to declare such Registration
Statement effective under the Securities Act as promptly as
practicable but not later than one hundred and twenty (1 20) days
after the Initial Funding Date, assuming for purposes hereof a
Conversion Price under the Certificate of Amendment of $2.50 per
share. The Company shall not include any other securities in the
Registration Statement relating to the offer and sale of the
Registrable Securities, except for shares of Common Stock issued
or issuable upon exercise of stock options granted under the
Company's 1997 Stock Option Plan, as amended, and 90,000 shares
of Common Stock issued or issuable under Stock Options granted to
Perry and Co. The Company shall notify the Initial Investor by
written notice that such Registration Statement has been declared
effective by the Commission within 24 hours of such declaration
by the Commission.
(b) Registration Default. If the Registration
Statement covering the Registrable Securities or the Additional
Registrable Securities (as defined in Section 2(d) hereof)
required to be filed by the Company pursuant to Section 2(a) or
2(d) hereto as the case may be, is not (i) filed with the
Commission within sixty (60) days after the Initial Funding Date
or (ii) declared effective by the Commission within one hundred
and twenty (120) days after the Initial Funding Date (either of
which, without duplication, an "Initial Date"), then the Company
shall make the payments to the Initial Investor as provided in
the next sentence as liquidated damages and not as a penalty.
The amount to be paid by the Company to the Initial Investor
shall be determined as of each Computation Date (as defined
below), and such amount shall be equal to 2% (the "Liquidated
Damage Rate") of the aggregate of the Initial Purchase
Price and the Second Purchase Price (as each such term is defined
in the Securities Purchase Agreement) from the Initial Date to
the first Computation Date and for each Computation Date
thereafter, calculated on a pro rata basis to the date on which
the Registration Statement is filed with (in the event of an
Initial Date pursuant to (c)(i) above) or declared effective by
(in the event of an Initial Date pursuant to (c)(ii) above) the
Commission (the "Periodic Amount") provided, however, that in no
event shall the Liquidated Damages be less than $25,000. The
full Periodic Amount shall be paid by the Company to the Initial
Investor by wire transfer of immediately available funds within
three days after each Computation Date.
As used in this Section 2(b), "Computation Date"
means the date which is 10 days after the Initial Date and, if
the Registration Statement required to be filed by the Company
pursuant to Section 2(a) has not theretofore been declared
effective by the Commission, each date which is 30 days after the
previous Computation Date until such Registration Statement is so
declared effective.
Notwithstanding the above, if the Registration
Statement covering the Registrable Securities or the Additional
Registrable Securities (as defined in Section 2(d) hereof)
required to be filed by the Company pursuant to Section 2(a) or
2(d) hereof, as the case may be, is not filed with the Commission
by the sixtieth (60th) day after the Initial Funding Date, the
Company shall be in default of this Registration Rights
Agreement.
(c) Eligibility for Use of Form S-3. The Company
is not currently eligible to file a Registration Statement on
Form S-3 because it does not meet its minimum financial
requirements. The Company agrees that at such time as it meets
all the requirements for the use of Securities Act Registration
Statement on Form S-2 it shall file all reports and information
required to be filed by it with the Commission in a timely manner
and take all such other action so as to maintain such eligibility
for the use of such form. Until such time as the Company is
eligible to file such Registration Statement on Form S-2 or Form
S-3, the Company agrees that it shall file a Securities Act
Registration Statement on Form SB-2 with the Commission in a
timely manner and take all such other action so as to maintain
such eligibility for the use of such form.
(d) In the event the Current Market Price
declines to $2.50, the Company shall, to the extent required by
the Securities Act (because the additional shares were not
covered by the Registration Statement filed pursuant to
Section 2(a)), as reasonably determined by the Initial Investor,
file an additional Registration Statement with the Commission for
such additional number of Registrable Securities as would be
issuable upon conversion of the Preferred Shares and exercise of
the Warrants (the "Additional Registrable Securities") in
addition to those previously registered, assuming a
Conversion Price of $2.00 per share. The Company shall, to the
extent required by the Securities Act, as reasonably determined
by the Initial Investor, prepare and file with the Commission not
later than the 30th day thereafter, a Registration Statement
relating to the offer and sale of such Additional Registrable
Securities and shall use its best efforts to cause the Commission
to declare such Registration Statement effective under the
Securities Act as promptly as practicable but not later than 60
days thereafter. The Company shall not include any other
securities in the Registration Statement relating to the offer
and sale of such additional Registrable Securities.
(e) (i) If the Company proposes to register any
of its warrants. Common Stock or any other shares of common
stock of the Company under the Securities Act (other than a
registration (A) on Form S-8 or S-4 or any successor or similar
forms, (B) relating to Common Stock or any other shares of common
stock of the Company issuable upon exercise of employee share
options or in connection with any employee benefit or similar
plan of the Company or (C) in connection with a direct or
indirect acquisition by the Company of another Person or any
transaction with respect to which Rule 145 (or any successor
provision) under the Securities Act applies), whether or not for
sale for its own account, it will each such time, give prompt
written notice at least 20 days prior to the anticipated filing
date of the registration statement relating to such registration
to the Initial Investor, which notice shall set forth such
Initial Investor's rights under this Section 3(e) and shall offer
the Initial Investor the opportunity to include in such
registration statement such number of Registrable Shares as the
Initial Investor may request. Upon the written request of an
Initial Investor made within ten (10) days after the receipt of
notice from the Company (which request shall specify the number
of Registrable Shares intended to be disposed of by such Initial
Investor), the Company will use its best efforts to effect the
registration under the Securities Laws of all Registrable Shares
that the Company has been so requested to register by the Initial
Investor, to the extent requisite to permit the disposition of
the Registrable Shares so to be registered; provided, however,
that (A) if such registration involves a Public Offering, the
Initial Investor must sell their Registrable Shares to the
underwriters selected as provided in Section 3(b) hereof on the
same terms and conditions as apply to the Company and (B) if, at
any time after giving written notice of its intention to register
any Registrable Shares pursuant to this Section 3 and prior to
the effective date of the registration statement filed in
connection with such registration, the Company shall determine
for any reason not to register such Registrable Shares, the
Company shall give written notice to the Initial Investor and,
thereupon, shall be relieved of its obligation to register any
Registrable Shares in connection with such registration. The
Company's obligations under this Section 2(e) shall terminate on
the date that the registration statement to be filed in
accordance with Section 2(a) is declared effective by the
Commission.
(ii) If a registration pursuant to this
Section 2(e) involves a Public Offering and the managing
underwriter thereof advises the Company that, in its view, the
number of shares of Common Stock, Warrants or other shares of
Common Stock that the Company and the Initial Investor intend to
include in such registration exceeds the largest number of shares
of Common Stock or Warrants (including any other shares of Common
Stock or Warrants of the Company) that can be sold without having
an adverse effect on such Public Offering (the "Maximum Offering
Size"), the Company will include in such registration, only that
number of shares of Common Stock or Warrants, as applicable, such
that the number of Registrable Shares registered does not exceed
the Maximum Offering Size, with the difference between the number
of shares in the Maximum Offering Size and the number of shares
to be issued by the Company to be allocated (after including all
shares to be issued and sold by the Company) among the Company
and the Initial Investor pro rata on the basis of the relative
number of Registrable Shares offered for sale under such
registration by each of the Company and the Initial Investor.
If as a result of the proration provisions of
this Section 2(e)(ii), any, Initial Investor is not entitled to
include all such Registrable Shares in such registration, such
Initial Investor may elect to withdraw its request to include any
Registrable Shares in such registration. With respect to
registrations pursuant to this Section 2(e), the number of
securities required to satisfy any underwriters' over-allotment
option shall be allocated pro rata among the Company and the
Initial Investor on the basis of the relative number of
securities otherwise to be included by each of them in the
registration with respect to which such over-allotment option
relates.
3. Obligations of the Company. In connection with
the registration of the Registrable Securities, the Company
shall:
(a) Promptly (i) prepare and file with the
Commission such amendments (including post-effective amendments)
to the Registration Statement and supplements to the Prospectus
as may be necessary to keep the Registration Statement
continuously effective and in compliance with the provisions of
the Securities Act applicable thereto so as to permit the
Prospectus forming part thereof to be current and useable by
Investors for resales of the Registrable Securities for a period
of two years from the date on which the Registration Statement is
first declared effective by the Commission (the "Effective Time")
or such shorter period that will terminate when all the
Registrable Securities covered by the Registration Statement have
been sold pursuant thereto in accordance with the plan of
distribution provided in the Prospectus, transferred pursuant to
Rule 144 under the Securities Act or otherwise transferred in a
manner that results in the delivery of new securities
not subject to transfer restrictions under the Securities Act
(the "Registration Period") and (ii) take all lawful action such
that each of (A) the Registration Statement and any amendment
thereto does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, not misleading and (B) the Prospectus forming part of
the Registration Statement, and any amendment or supplement
thereto, does not at any time during the Registration Period
include 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 light of the circumstances under which
they were made, not misleading. Notwithstanding the foregoing
provisions of this Section 3(a), the Company may, during the
Registration Period, suspend the use of the Prospectus for a
period not to exceed 60 days (whether or not consecutive) in any
12-month period if the Board of Directors of the Company
determines in good faith that because of valid business reasons,
including pending mergers or other business combination
transactions, the planned acquisition or divestiture of assets,
pending material corporate developments and similar events, it is
in the best interests of the Company to suspend such use, and
prior to or contemporaneously with suspending such use the
Company provides the Investors with written notice of such
suspension, which notice need not specify the nature of the event
giving rise to such suspension. At the end of any such
suspension period, the Company shall provide the Investors with
written notice of the termination of such suspension.
(b) During the Registration Period, comply with
the provisions of the Securities Act with respect to the
Registrable Securities of the Company covered by the Registration
Statement until such time as all of such Registrable Securities
have been disposed of in accordance with the intended methods of
disposition by the Investors as set forth in the Prospectus
forming part of the Registration Statement;
(c) (i) Prior to the filing with the Commission
of any Registration Statement (including any amendments thereto)
and the distribution or delivery of any Prospectus (including any
supplements thereto), provide draft copies thereof to the
Investors and reflect in such documents all such comments as the
Investors (and their counsel) reasonably may propose and (ii)
furnish to each Investor whose Registrable Securities are
included in the Registration Statement and its legal counsel
identified to the Company, (A) promptly after the same is
prepared and publicly distributed, filed with the Commission, or
received by the Company, one copy of the Registration Statement,
each Prospectus, and each amendment or supplement thereto, and
(B) such number of copies of the Prospectus and all amendments
and supplements thereto and such other documents, as such
Investor may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such Investor;
(d) (i) Register or qualify the Registrable
Securities covered by the Registration Statement under such
securities or "blue sky" laws of such jurisdictions as the
Investors who hold a majority-in-interest of the Registrable
Securities being offered reasonably request, (ii) prepare and
file in such jurisdictions such amendments (including post-
effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness
thereof at all times during the Registration Period, (iii) take
all such other lawful actions as may be necessary to maintain
such registrations and qualifications in effect at all times
during the Registration Period, and (iv) take all such other
lawful actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided,
however, that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business in
any jurisdiction where it would not otherwise be required to
qualify but for this Section 3(d);
(e) As promptly as practicable after becoming
aware of such event, notify each Investor of the occurrence of
any event, as a result of which the Prospectus included in the
Registration Statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were
made, not misleading, and promptly prepare an amendment to the
Registration Statement and supplement to the Prospectus to
correct such untrue statement or omission, and deliver a number
of copies of such supplement and amendment to each Investor as
such Investor may reasonably request;
(f) As promptly as practicable after becoming
aware of such event, notify each Investor who holds Registrable
Securities being sold (or, in the event of an underwritten
offering, the managing underwriters) of the issuance by the
Commission of any stop order or other suspension of the
effectiveness of the Registration Statement at the earliest
possible time and take all lawful action to effect the
withdrawal, recession or removal of such stop order or other
suspension;
(g) Cause all the Registrable Securities covered
by the Registration Statement to be listed on the principal
national securities exchange, and included in an inter-dealer
quotation system of a registered national securities association,
on or in which securities of the same class or series issued by
the Company are then listed or included;
(h) Maintain a transfer agent and registrar,
which may be a single entity, for the Registrable Securities not
later than the effective date of the Registration Statement;
(i) Cooperate with the Investors who hold
Registrable Securities being offered to facilitate the timely
preparation and delivery of certificates for the
Registrable Securities to be offered pursuant to the Registration
Statement and enable such certificates for the Registrable
Securities to be in such denominations or amounts, as the case
may be, as the Investors reasonably may request and registered in
such names as the Investor may request; and, within three
business days after a Registration Statement which includes
Registrable Securities is declared effective by the Commission,
deliver and cause legal counsel selected by the Company to
deliver to the transfer agent for the Registrable Securities
(with copies to the Investors whose Registrable Securities are
included in such Registration Statement) an appropriate
instruction and, to the extent necessary, an opinion of such
counsel;
(j) Take all such other lawful actions reasonably
necessary to expedite and facilitate the disposition by the
Investors of their Registrable Securities in accordance with the
intended methods therefor provided in the Prospectus which are
customary under the circumstances;
(k) Make generally available to its security
holders as soon as practicable, but in any event not later than
three (3) months after (i) the effective date (as defined in Rule
158(c) under the Securities Act) of the Registration Statement,
and (ii) the effective date of each post-effective amendment to
the Registration Statement as the case may be, an earnings
statement of the Company and its subsidiaries complying with
Section 11(a) of the Securities Act and the rules and regulations
of the Commission thereunder (including, at the option of the
Company, Rule 158);
(l) In the event of an underwritten offering,
promptly include or incorporate in a Prospectus supplement or
post-effective amendment to the Registration Statement such
information as the managers reasonably agree should be included
therein and to which the Company does not reasonably object and
make all required filings of such Prospectus supplement or
post-effective amendment as soon as practicable after it is
notified of the matters to be included or incorporated in such
Prospectus supplement or post-effective amendment;
(m) (i) Make reasonably available for inspection
by Investors, any underwriter participating in any disposition
pursuant to the Registration Statement, and any attorney,
accountant or other agent retained by such Investors or any such
underwriter all relevant financial and other records, pertinent
corporate documents and properties of the Company and its
subsidiaries, and (ii) cause the Company's officers, directors
and employees to supply all information reasonably requested by
such Investors or any such underwriter, attorney, accountant or
agent in connection with the Registration Statement, in each
case, as is customary for similar due diligence examinations;
provided, however, that all records, information and documents
that are designated in writing by the Company, in good faith, as
confidential, proprietary or containing any material
nonpublic information shall be kept confidential by such
Investors and any such underwriter, attorney, accountant or agent
(pursuant to an appropriate confidentiality agreement in the case
of any such holder or agent), unless such disclosure is made
pursuant to judicial process in a court proceeding (after first
giving the Company an opportunity promptly to seek a protective
order or otherwise limit the scope of the information sought to
be disclosed) or is required by law, or such records, information
or documents become available to the public generally or through
a third party not in violation of an accompanying obligation of
confidentiality; provided, however, that such records,
information and documents shall be used by such person solely for
the purpose of determining that disclosures made in the
Registration Statement are true and correct, and for no other
purpose; and provided further that, if the foregoing inspection
and information gathering would otherwise disrupt the Company's
conduct of its business, such inspection and information
gathering shall, to the maximum extent possible, be coordinated
on behalf of the Investors and the other parties entitled thereto
by one firm of counsel designed by and on behalf of the majority
in interest of Investors and other parties;
(n) In connection with any underwritten offering,
make such representations and warranties to the Investors
participating in such underwritten offering and to the managers,
in form, substance and scope as are customarily made by the
Company to underwriters in secondary underwritten offerings;
(o) In connection with any underwritten offering,
obtain opinions of counsel to the Company (which counsel and
opinions (in form, scope and substance) shall be reasonably
satisfactory to the managers) addressed to the underwriters,
covering such matters as are customarily covered in opinions
requested in secondary underwritten offerings (it being agreed
that the matters to be covered by such opinions shall include,
without limitation, as of the date of the opinion and as of the
Effective Time of the Registration Statement or most recent post-
effective amendment thereto, as the case may be, the absence from
the Registration Statement and the Prospectus, including any
documents incorporated by reference therein, of an untrue
statement of a material fact or the omission of a material fact
required to be stated therein or necessary to make the statements
therein (in the case of the Prospectus, in light of the
circumstances under which they were made) not misleading, subject
to customary limitations);
(p) In connection with any underwritten offering,
obtain "cold comfort" letters and updates thereof from the
independent public accountants of the Company (and, if necessary,
from the independent public accountants of any subsidiary of the
Company or of any business acquired by the Company, in each case
for which financial statements and financial data are, or are
required to be, included in the Registration Statement),
addressed to each underwriter participating in such underwritten
offering (if such underwriter has provided such letter,
representations or documentation, if any, required for such cold
comfort letter to be so addressed), in customary form and
covering matters of the type customarily covered in "cold
comfort" letters in connection with secondary underwritten
offerings;
(q) In connection with any underwritten offering,
deliver such documents and certificates as may be reasonably
required by the managers, if any; and
(r) In the event that any broker-dealer
registered under the Exchange Act shall be an "Affiliate" (as
defined in Rule 2729(b)(1) of the rules and regulations of the
National Association of Securities Dealers, Inc. (the "NASD
Rules") (or any successor provision thereto)) of the Company or
has a "conflict of interest" (as defined in Rule 2720(b)(7) of
the NASD Rules (or any successor provision thereto)) and such
broker-dealer shall underwrite, participate as a member of an
underwriting syndicate or selling group or assist in the
distribution of any Registrable Securities covered by the
Registration Statement, whether as a holder of such Registrable
Securities or as an underwriter, a placement or sales agent or a
broker or dealer in respect thereof, or otherwise, xxx.Xxxxxxx
shall assist such broker-dealer in complying with the
requirements of the NASD Rules, including, without limitation, by
(A) engaging a "qualified independent underwriter" (as defined in
Rule 2720(b)(15) of the NASD Rules (or any successor provision
thereto)) to participate in the preparation of the Registration
Statement relating to such Registrable Securities, to exercise
usual standards of due diligence in respect thereof and to
recommend the public offering price of such Registrable
Securities, (B) indemnifying such qualified independent
underwriter to the extent of the indemnification of underwriters
provided in Section 6(a) hereof, and (C) providing such
information to such broker-dealer as may be required in order for
such broker-dealer to comply with the requirements of the NASD
Rules.
4. Obligations of the Investors. In connection with
the registration of the Registrable Securities, the Investors
shall have the following obligations:
(a) It shall be a condition precedent to the
obligations of the Company to complete the registration pursuant
to this Agreement with respect to the Registrable Securities of a
particular Investor that such Investor shall furnish to the
Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of
the Registrable Securities held by it as shall be reasonably
required to effect the registration of such Registrable
Securities and shall execute such documents in connection with
such registration as the Company may reasonably request. As
least seven days prior to the first anticipated filing date of
the Registration Statement, the Company shall notify each
Investor of the information the Company requires from
each such Investor (the "Requested Information") if such Investor
elects to have any of its Registrable Securities included in the
Registration Statement. If at least two business days prior to
the anticipated filing date the Company has not received the
Requested Information from an Investor (a "Non-Responsive
Investor") , then the Company may file the Registration Statement
without including Registrable Securities of such Non-Responsive
Investor and have no further obligations to the Non-Responsive
Investor;
(b) Each Investor by its acceptance of the
Registrable Securities agrees to cooperate with the Company in
connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the
Company in writing of its election to exclude all of its
Registrable Securities from the Registration Statement; and
(c) Each Investor agrees that, upon receipt of
any notice from the Company of the occurrence of any event of the
kind described in Section 3(e) or 3(f), it shall immediately
discontinue its disposition of Registrable Securities pursuant to
the Registration Statement covering such Registrable Securities
until such Investor's receipt of the copies of the supplemented
or amended Prospectus contemplated by Section 3(e) and, if so
directed by the Company, such Investor shall deliver to the
Company (at the expense of the Company) or destroy (and deliver
to the Company a certificate of destruction) all copies in such
Investor's possession, of the Prospectus covering such
Registrable Securities current at the time of receipt of such
notice.
5. Expenses of Registration. All expenses, other
than underwriting discounts and commissions, incurred in
connection with registrations, filings or qualifications pursuant
to Section 3, but including, without limitation, all
registration, listing, and qualifications fees, printing and
engraving fees, accounting fees, and the fees and disbursements
of counsel for the Company, and the reasonable fees of one firm
of counsel to the holders of a majority in interest of the
Registrable Securities shall be borne by the Company.
6. Indemnification and Contribution.
(a) The Company shall indemnify and hold harmless
each Investor and each underwriter, if any, which facilitates the
disposition of Registrable Securities, and each of their
respective officers and directors and each person who controls
such Investor or underwriter within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act (each such
person being sometimes hereinafter referred to as an "Indemnified
Person") from and against any losses, claims, damages or
liabilities, joint or several, to which such Indemnified Person
may become subject under the Securities Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement or an omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, not
misleading, or arise out of or are based upon an untrue statement
or alleged untrue statement of a material fact contained in any
Prospectus or an omission or alleged omission to state therein 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; and the Company hereby
agrees to reimburse such Indemnified Person for all reasonable
legal and other expenses incurred by them in connection with
investigating or defending any such action or claim as and when
such expenses are incurred; provided, however, that the Company
shall not be liable to any such Indemnified Person in any such
case to the extent that any such loss, claim, damage or liability
arises out of or is based upon (i) an untrue statement or alleged
untrue statement made in, or an omission or alleged omission
from, such Registration Statement or Prospectus in reliance upon
and in conformity with written information furnished to the
Company by such Indemnified Person expressly for use therein or
(ii) in the case of the occurrence of an event of the type
specified in Section 3(e), the use by the Indemnified Person of
an outdated or defective Prospectus after the Company has
provided to such Indemnified Person an updated Prospectus
correcting the untrue statement or alleged untrue statement or
omission or alleged omission giving rise to such loss, claim,
damage or liability.
(b) Indemnification by the Investors and
Underwriters. Each Investor agrees, as a consequence of the
inclusion of any of its Registrable Securities in a Registration
Statement, and each underwriter, if any, which facilitates the
disposition of Registrable Securities shall agree, as a
consequence of facilitating such disposition of Registrable
Securities, severally and not jointly, to (i) indemnify and hold
harmless the Company, its directors (including any person who,
with his or her consent, is named in the Registration Statement
as a director nominee of the Company), its officers who sign any
Registration Statement and each person, if any, who controls the
Company within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act, against any losses,
claims, damages or liabilities to which the Company or such other
persons may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact
contained in such Registration Statement or Prospectus or arise
out of or are based upon the omission or alleged omission to
state therein a material fact required to be ;Stated therein or
necessary to make the statements therein (in light of the
circumstances under which they were made, in the case of the
Prospectus), not misleading, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in
reliance upon and in conformity with written information
furnished to the Company by such holder or underwriter expressly
for use therein; provided, however, that no Investor or
underwriter shall be liable under this Section 6(b) for any
amount in excess of the net proceeds paid to such Investor or
underwriter in respect of shares sold by it, and (ii) reimburse
the Company for any legal or other expenses incurred by the
Company in connection with investigating or defending any such
action or claim as such expenses are incurred.
(c) Notice of Claims, etc. Promptly after
receipt by a party seeking indemnification pursuant to this
Section 6 (an "Indemnified Party") of written notice of any
investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a "Claim"), the
Indemnified Party promptly shall notify the party against whom
indemnification pursuant to this Section 6 is being sought (the
"Indemnifying Party") of the commencement thereof; but the
omission to so notify the Indemnifying Party shall not relieve it
from any liability that it otherwise may have to the Indemnified
Party, except to the extent that the Indemnifying Party is
materially prejudiced and forfeits substantive rights and
defenses by reason of such failure. In connection with any Claim
as to which both the Indemnifying Party and the Indemnified Party
are parties, the Indemnifying Party shall be entitled to assume
the defense thereof Notwithstanding the assumption of the defense
of any Claim by the Indemnifying Party, the Indemnified Party
shall have the right to employ separate legal counsel and to
participate in the defense of such Claim, and the Indemnifying
Party shall bear the reasonable fees, out-of-pocket costs and
expenses of such separate legal counsel to the Indemnified Party
if (and only if): (x) the Indemnifying Party shall have agreed to
pay such fees, costs and expenses, (y) the Indemnified Party and
the Indemnifying Party shall reasonably have concluded that
representation of the Indemnified Party by the Indemnifying Party
by the same legal counsel would not be appropriate due to actual
or, as reasonably determined by legal counsel to the Indemnified
Party, potentially differing interests between such parties in
the conduct of the defense of such Claim, or if there may be
legal defenses available to the Indemnified Party that are in
addition to or disparate from those available to the Indemnifying
Party, or (z) the Indemnifying Party shall have failed to employ
legal counsel reasonably satisfactory to the Indemnified Party
within a reasonable period of time after notice of the
commencement of such Claim. If the Indemnified Party employs
separate legal counsel in circumstances other than as described
in clauses (x) , (y) or (z) above, the fees, costs and expenses
of such legal counsel shall be borne exclusively by the
Indemnified Party. Except as provided above, the Indemnifying
Party shall not, in connection with any Claim in the same
jurisdiction, be liable for the fees and expenses of more than
one firm of counsel for the Indemnified Party (together with
appropriate local counsel). The Indemnifying Party shall not,
without the prior written consent of the Indemnifying Party
(which consent shall not unreasonably be withheld),
settle or compromise any Claim or consent to the entry of any
judgment that does not include an unconditional release of the
Indemnifying Party from all liabilities with respect to such
Claim or judgment.
(d) Contribution. If the indemnification
provided for in this Section 6 is unavailable to or insufficient
to hold harmless an Indemnified Person under subsection (a) or
(b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein,
then each Indemnifying Party shall contribute to the amount paid
or payable by such Indemnified Party as a result of such losses,
claims, damages or liabilities (or actions in respect thereof) in
such proportion as is appropriate to reflect the relative fault
of the Indemnifying Party and the Indemnified Party in connection
with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions in respect thereof),
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
the untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to
information supplied by such Indemnified Party or by such
Indemnified Party, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such
statement or omission. 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 (even if the
Investors or any underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to in this
Section 6 (d) . The amount paid or payable by an Indemnified
Party as a result of the losses, claims, damages or liabilities
(or actions in respect thereof) referred to above shall be deemed
to include any legal or other fees or expenses reasonably
incurred by such indemnified party in connection with
investigating or defending any such action or claim. 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 obligations of the Investors
and any underwriters in this Section 6(d) to contribute shall be
several in proportion to the percentage of Registrable Securities
registered or underwritten, as the case may be, by them and not
joint.
(e) Notwithstanding any other provision of this
Section 6, in no event shall any (i) Investor be required to
undertake liability to any person under this Section 6 for any
amounts in excess of the dollar amount of the proceeds to be
received by such Investor from the sale of such Investor's
Registrable Securities (after deducting any fees, discounts and
commissions applicable thereto) pursuant to any Registration
Statement under which such Registrable Securities are to be
registered under the Securities Act and
(ii) underwriter be required to undertake liability to any Person
hereunder for any amounts in excess of the aggregate discount,
commission or other compensation payable to such underwriter with
respect to the Registrable Securities underwritten by it and
distributed pursuant to the Registration Statement.
(f) The obligations of the Company under this
Section 6 shall be in addition to any liability which the Company
may otherwise have to any Indemnified Person and the obligations
of any Indemnified Person under this Section 6 shall be in
addition to any liability which such Indemnified Person may
otherwise have to the Company. The remedies provided in this
Section 6 are not exclusive and shall not limit any rights or
remedies which may otherwise be available to an indemnified party
at law or in equity.
7. Rule 144. With a view to making available to the
Investors the benefits of Rule 144 under the Securities Act or
any other similar rule or regulation of the Commission that may
at any time permit the Investors to sell securities of the
Company to the public without registration ("Rule 144"), the
Company agrees to use its best efforts to:
(a) comply with the provisions of
paragraph (c)(1) of Rule 144; and
all reports and other documents required to be filed by the
Company pursuant to Section 13 or 15(d) under the Exchange Act;
and, if at any time it is not required to file such reports but
in the past had been required to or did file such reports, it
will, upon the request of any Holder, make available other
information as required by, and so long as necessary to permit
sales of, its Registrable Securities pursuant to Rule 144.
8. Assignment. The rights to have the Company
register Registrable Securities pursuant to this Agreement shall
be automatically assigned by the Investors to any permitted
transferee of all or any portion of such securities (or all or
any portion of any Preferred Shares or Warrant of the Company
which is convertible into such securities) of Registrable
Securities only if. (a) the Investor agrees in writing with the
transferee or assignee to assign such rights, and a copy of such
agreement is furnished to the Company within a reasonable time
after such assignment, (b) the Company is, within a reasonable
time after such transfer or assignment, furnished with written
notice of (i) the name and address of such transferee or assignee
and (ii) the securities with respect to which such registration
rights are being transferred or assigned, (c) immediately
following such transfer or assignment, the securities so
transferred or assigned to the transferee or assignee constitute
Restricted Securities, and (d) at or before the time the Company
received the written notice contemplated by clause (b) of this
sentence the transferee or assignee agrees in writing
with the Company to be bound by all of the provisions contained
herein.
9. Amendment and Waiver. Any provision of this
Agreement may be amended and the observance thereof may be waived
(either generally or in a particular instance and either
retroactively or prospectively) , only with the written consent
of the Company and Investors who hold a majority-in-interest of
the Registrable Securities. Any amendment or waiver effected in
accordance with this Section 9 shall be binding upon each
Investor and the Company.
10. Miscellaneous.
(a) A person or entity shall be deemed to be a
holder of Registrable Securities whenever such person or entity
owns of record such Registrable Securities. If the Company
receives conflicting instructions, notices or elections from two
or more persons or entities with respect to the same Registrable
Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such
Registrable Securities.
(b) If, after the date hereof and prior to the
Commission declaring the Registration Statement to be filed
pursuant to Section 2(a) effective under the Securities Act, the
Company grants to any Person any registration rights with respect
to any Company securities which are more favorable to such other
Person than those provided in this Agreement, then the Company
forthwith shall grant (by means of an amendment to this Agreement
or otherwise) identical registration rights to all Investors
hereunder.
(c) Except as may be otherwise provided herein,
any notice or other communication or delivery required or
permitted hereunder shall be in writing and shall be delivered
personally or sent by certified mail, postage prepaid, or by a
nationally recognized overnight courier service, and shall be
deemed given when so delivered personally or by overnight courier
service, or, if mailed, three (3) days after the date of deposit
in the United States mails, as follows:
(1) if to the Company, to:
DYNAMICWEB ENTERPRISES, INC.
000 Xxxxx 00X, Xxxxxxxx X, Xxxxx 000
Xxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxxx, Xx.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to:
XXXXXXX & XXX
One Glenhardie Xxxxxxxxx Xxxxxx
Xxxxx 000
Xxxxx, XX 00000-0000
Attention: Xxxxx Xxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(2) if to the Initial Investor, to:
THE SHAAR FUND LTD.,
c/o SHAAR ADVISORY SERVICES LTD.
00 Xxxx Xxxxxx Xxxxxx, Xxxxxxxxx 0X
Xxxxxxxxx, Xxxxxx
Attention: Xxxxxx Xxxxxxxx
with a copy to:
XXXXXXX, XXXXXXXXX LLP
0 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(3) if to any other Investor, at such
address as such Investor shall have
provided in writing to the Company.
The Company, the Initial Investor or any Investor may change the
foregoing address by notice given pursuant to this Section 10(c).
(d) Failure of any party to exercise any right or
remedy under this Agreement or otherwise, or delay by a party in
exercising such right or remedy, shall not operate as a waiver
thereof
(e) This Agreement shall be governed by and
interpreted in accordance with the laws of the State of New York.
Each of the parties consents to the jurisdiction of the federal
courts whose districts encompass any part of the City of New York
or the state courts of the State of New York sitting in the City
of New York in connection with any dispute arising under this
Agreement and hereby waives, to the maximum extent permitted by
law, any objection including any objection based on forum non
conveniens, to the bringing of any such proceeding in such
jurisdictions.
(f) The remedies provided in this Agreement are
cumulative and not exclusive of any remedies provided by law. If
any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provision,
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 best 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.
(g) The Company shall not enter into any
agreement with respect to its securities that is inconsistent
with the rights granted to the holders of Registrable Securities
in this Agreement or otherwise conflicts with the provisions
hereof. The Company is not currently a party to any agreement
granting any registration rights with respect to any of its
securities to any person which conflicts with the Company's
obligations hereunder or gives any other party the right to
include any securities in any Registration Statement filed
pursuant hereto, except for such rights and conflicts as have
been irrevocably waived, and except for the Company's agreement
with Perry and Co. to register the underlying Common Stock with
respect to 90,000 stock options granted to Perry and Co. Without
limiting the generality of the foregoing, without the written
consent of the Holders of a majority in interest of the
Registrable Securities, the Company shall not grant to any person
the right to request it to register any of its securities under
the Securities Act unless the rights so granted are subject in
all respect to the prior rights of the holders of Registrable
Securities set forth herein, and are not otherwise in conflict or
inconsistent with the provisions of this Agreement. The
restrictions on the Company's rights to grant registration rights
under this paragraph shall terminate on the date the Registration
Statement to be filed pursuant to Section 2(a) is declared
effective by the Commission.
(h) This Agreement, the Securities Purchase
Agreement, the Escrow Instructions, dated as of the date hereof
(the "Escrow Instructions"), between the Company, the Initial
Investor and Xxxxxxx, Xxxxxxxxx LLP, the Preferred Shares and the
Warrants constitute the entire agreement among the parties hereto
with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein. This Agreement, the
Securities Purchase Agreement, the Escrow Instructions, the
Certificate of Amendment and the Warrants supersede all prior
agreements and undertakings among the parties hereto with respect
to the subject matter hereof.
(i) Subject to the requirements of Section 8
hereof, this Agreement shall inure to the benefit of and be
binding upon the successors and assigns of each of the parties
hereto.
(j) All pronouns and any variations thereof refer
to the masculine, feminine or neuter, singular or plural, as the
context may require.
(k) The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise
affect the meaning thereof.
(l) The Company acknowledges that any failure by
the Company to perform its obligations under Section 3, or any
delay in such performance could result in direct damages to the
Investors and the Company agrees that, in addition to any other
liability the Company may have by reason of any such failure or
delay, the Company shall be liable for all direct damages caused
by such failure or delay.
(m) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all
of which shall constitute one and the same agreement. A
facsimile transmission of this signed Agreement shall be legal
and binding on all parties hereto.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties have caused this
Agreement to be duty executed and delivered as of the date first
above written.
DYNAMICWEB ENTERPRISES, INC.
By_________________________________
Name: Xxxxxx X. Xxxxxxxxxx, Xx.
Title: Chief Executive Officer
THE SHAAR FUND LTD.
By: INTERCARIBBEAN SERVICES, LTD.
By____________________________
Name:
Title:
PAGE 21
IN WITNESS WHEREOF, the parties have caused this
Agreement to be duly executed and delivered as of the date first
above written.
DYNAMICWEB ENTERPRISES, INC.
By /s/Xxxxxx X. Xxxxxxxxxx, Xx.
Name: Xxxxxx X. Xxxxxxxxxx, Xx.
Title: Chief Executive Officer
THE SHAAR FUND LTD.
By: INTERCARIBBEAN SERVICES. LTD.
By /s/ Xxxxxx Xxxxxxxx
Name: Xxxxxx Xxxxxxxx
