EXHIBIT 4.2
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LIFEF/X, INC.
INVESTOR RIGHTS AGREEMENT
DECEMBER 17, 2001
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INVESTOR RIGHTS AGREEMENT
This Investor Rights Agreement (this "Agreement") is made effective as of
December 17, 2001, by and between Lifef/x, Inc., a Nevada corporation (the
"Company") and Safeguard 2001 Capital, L.P., a Delaware limited partnership (the
"Lender").
RECITALS
A. The Company and the Lender are parties to the Credit Agreement dated as
of the date hereof (the "Credit Agreement"), pursuant to which the Lender agrees
to lend the Company certain funds.
B. The obligations of the Lender under the Credit Agreement are
conditioned, among other things, upon the execution and delivery of this
Agreement by the Company and the Lender.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound, the parties hereto agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following respective meanings:
"COMMISSION" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"COMMON STOCK" shall mean the common stock of the Company, par value $0.001
per share.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, or
any similar federal rule or statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"HOLDER" means (i) the Lender so long as its holds Registrable Securities
and (ii) any person holding Registrable Securities to whom rights have been
transferred under this Agreement, in accordance with Section 3 hereof.
"INITIATING HOLDERS" means any Holder or Holders who, in the aggregate,
hold not less than 20% of the Registrable Securities then outstanding.
"REGISTRABLE SECURITIES" means (i) the Common Stock of the Company issued
or issuable upon exercise of the Warrant or upon conversion or exchange of
convertible or exchangeable securities received upon exercise of the Warrant
(ii) any shares of Common Stock
of the Company held as of the date hereof or acquired hereafter by the Lender or
any transferee, successor or assign of the Lender and (iii) any Common Stock of
the Company issued or issuable in respect of the foregoing upon any stock split,
stock dividend, recapitalization or similar event; provided, however, that
securities shall only be treated as Registrable Securities if and so long as (x)
they have not been registered or sold to or through a broker or dealer or
underwriter in a public distribution or a public securities transaction and (y)
the registration rights with respect to such securities have not terminated
pursuant to Section 2.10.
The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"REGISTRATION EXPENSES" shall mean all expenses, except as otherwise stated
below, incurred by the Company in complying with Sections 2.1, 2.2 and 2.3
hereof, including without limitation, all registration, qualification and filing
fees, printing expenses, escrow fees, fees and disbursements of counsel for the
Company, blue sky fees and expenses, the expense of any special audits incident
to or required by any such registration (but excluding the compensation of
regular employees of the Company which shall be paid in any event by the
Company). Registration Expenses shall also include the fees and disbursements
for one special counsel to the selling stockholders.
"RULE 144" and "RULE 145" shall mean Rules 144 and 145, respectively,
promulgated under the Securities Act, or any similar federal rules thereunder,
all as the same shall be in effect at the time.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or any
similar federal rule or statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"SELLING EXPENSES" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
the Holders and, except as set forth above, all fees and disbursements of
counsel for any Holder.
"STOCKHOLDERS" shall mean the Founders and the Investors.
"WARRANT" shall mean the Warrant dated as of the date hereof issued by the
Company
2. REGISTRATION.
2.1 REQUESTED REGISTRATION.
(a) REQUEST FOR REGISTRATION. In case the Company shall receive from
Initiating Holders a written request that the Company effect any registration
with respect to shares of Registrable Securities, the Company will:
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(i) promptly give written notice of the proposed registration to
all other Holders; and
(ii) as soon as practicable, use commercially reasonable efforts to
effect such registration as part of a firm commitment underwritten public
offering with underwriters reasonably acceptable to the Initiating Holders and
the Company (including, without limitation, appropriate qualification under
applicable state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act and any other governmental
requirements or regulations) as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Registrable
Securities as are specified in such request, together with all or such portion
of the Registrable Securities of any Holder or Holders joining in such request
by delivering a written notice to such effect to the Company within twenty days
after the date of such written notice from the Company.
Notwithstanding the foregoing, the Company shall not be obligated to take
any action to effect or complete any such registration pursuant to this Section
2.1:
(A) Unless the requested registration would have an aggregate
offering price of all Registrable Securities sought to be registered by all
Holders, net of underwriting discounts and commissions, exceeding $5,000,000;
(B) Following the filing of, and for 180 days immediately
following the effective date of (but in no event later than 270 days immediately
following the filing date of), any registration statement pertaining to
securities of the Company (other than a registration of securities in a Rule 145
transaction, with respect to an employee benefit plan, pursuant to Form S-8,
pursuant to Form S-3 if a shelf filing for a secondary offering of securities,
or a registration of other than equity securities), provided that the Company is
actively employing in good faith commercially reasonable efforts to cause such
registration statement to become effective;
(C) After the Company has effected two registrations pursuant
to this Section 2.1(a) and such registrations have been declared or ordered
effective;
(D) If the Initiating Holders are able to request a
registration on Form S-3 pursuant to Section 2.3 hereof;
(E) Within 180 days after the Company has effected such a
registration pursuant to this Section 2.1(a), and such registration has been
declared or ordered effective; or
(F) If the Company shall furnish to the Initiating Holders a
certificate signed by the President of the Company (i) giving notice of its bona
fide intention to effect the filing of a registration statement with the
Commission within approximately 60 days, or (ii) stating that in the good faith
judgment of the Board of Directors it would be seriously detrimental to the
Company or its stockholders for a registration statement to be filed in the near
future. In such case, the Company's obligation to use its commercially
reasonable efforts to register, qualify or comply under this Section 2.1(a)
shall be deferred one or more times for a
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period not to exceed 90 days from the receipt of the request to file such
registration by such Initiating Holder or Holders, provided that the Company may
not exercise this deferral right more than once per twelve-month period.
Subject to the foregoing clauses (A) through (F), the Company shall file a
registration statement covering the Registrable Securities so requested to be
registered as soon as practicable after receipt of the request or requests of
the Initiating Holders.
(b) UNDERWRITING. In the event of a registration pursuant to Section 2.1,
the Company shall advise the Holders as part of the notice given pursuant to
Section 2.1(a)(i) that the right of any Holder to registration pursuant to
Section 2.1 shall be conditioned upon such Holder's participation in the
underwriting arrangements required by this Section 2.1, and the inclusion of
such Holder's Registrable Securities in the underwriting to the extent requested
shall be limited to the extent provided herein. The Company shall, together with
all Holders proposing to distribute their securities through such underwriting,
enter into an underwriting agreement in customary form with the managing
underwriter selected for such underwriting by a majority in interest of the
Initiating Holders, but subject to the Company's reasonable approval.
Notwithstanding any other provision of this Section 2.1, if the managing
underwriter determines that marketing factors require a limitation of the number
of shares to be underwritten, the managing underwriter may limit the Registrable
Securities to be included in such registration to an amount no less than 33% of
all shares to be included in such offering; provided that the Company shall
ensure that such reductions shall be made in the following order of priority:
(x) first, the shares held by selling holders other than Holders of Registrable
Securities shall be reduced; (y) second, the shares of the Company to be
included in the underwriting shall be reduced, and (z) third, the shares held by
the Holders of Registrable Securities shall be reduced pro rata based upon the
number of Registrable Securities held by each Holder. The Company shall so
advise all Holders requesting to be included in the registration and
underwriting, and the number of shares of Registrable Securities that may be
included in the registration and underwriting shall be allocated among all
Holders requesting to be included in the registration and underwriting in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities held by them at the time of filing the registration statement. No
Registrable Securities excluded from the underwriting by reason of the
underwriter's marketing limitation shall be included in such registration. To
facilitate the allocation of shares in accordance with the above provisions, the
Company or the underwriters may round the number of shares allocated to any
Holder to the nearest 100 shares. If any Holder of Registrable Securities
disapproves of the terms of the underwriting, such person may elect to withdraw
therefrom by written notice to the Company.
2.2 COMPANY REGISTRATION.
(a) NOTICE OF REGISTRATION. If at any time or from time to time the
Company shall determine to register any of its equity securities, either for its
own account or the account of a Holder or other holders, other than (i) a
registration relating solely to employee benefit plans, (ii) a registration
relating solely to a Rule 145 transaction, or (iii) a registration in which the
only equity security being registered is Common Stock issuable upon conversion
of convertible debt securities which are also being registered, the Company
will:
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(i) promptly give to each Holder written notice thereof; and
(ii) include in such registration (and any related qualifications
including compliance with Blue Sky laws), and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests, made within ten days after the date of such written notice from the
Company, by any Holder.
(b) UNDERWRITING. If the registration of which the Company gives notice
is for a registered public offering involving an underwriting, the Company shall
so advise the Holders as a part of the written notice given pursuant to Section
2.2(a)(i). In such event, the right of any Holder to registration pursuant to
Section 2.2 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of Registrable Securities in the underwriting
shall be limited to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company and the other Holders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by the Company.
Notwithstanding any other provision of this Section 2.2, if the managing
underwriter determines that marketing factors require a limitation of the number
of shares to be underwritten, the managing underwriter may limit the Registrable
Securities to be included in such registration to zero; provided that the
Company shall ensure that such reductions shall be made in the following order
of priority: (x) first, the shares held by selling holders other than Holders of
Registrable Securities shall be reduced; (y) second, the shares held by the
Holders of Registrable Securities shall be reduced pro rata based upon the
number of Registrable Securities held by each Holder, and (z) third, the shares
of the Company to be included in the underwriting shall be reduced. The Company
shall so advise all Holders requesting to be included in the registration and
underwriting, and the number of shares of Registrable Securities that may be
included in the registration and underwriting shall be allocated among all the
Holders requesting to be included in the registration and underwriting in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities held by them at the time of filing the registration statement. To
facilitate the allocation of shares in accordance with the above provisions, the
Company or the underwriters may round the number of shares allocated to any
Holder to the nearest 100 shares. If any Holder disapproves of the terms of any
such underwriting, such person may elect to withdraw therefrom by written notice
to the Company.
(c) RIGHT TO TERMINATE REGISTRATION. The Company shall have the right
to terminate or withdraw any registration initiated by it under this Section 2.2
prior to the effectiveness of such registration whether or not any Holder has
elected to include securities in such registration.
2.3 REGISTRATION ON FORM S-3.
(a) REQUEST FOR REGISTRATION. In case the Company shall receive from
Initiating Holders a written request that the Company file a registration
statement on Form S-3 (or any successor form to Form S-3) for a public offering
of shares of the Registrable Securities the aggregate price to the public of
which, net of underwriting discounts and commissions, would exceed $500,000, and
the Company is a registrant entitled to use Form S-3 to register the Registrable
Securities for such an offering, the Company shall use commercially reasonable
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efforts to cause such Registrable Securities to be registered for the offering
on such form and to cause such Registrable Securities to be qualified in such
jurisdictions as such Holder or Holders may reasonably request; provided,
however, that the Company shall not be required to effect more than one
registration pursuant to this Section 2.3 in any 90-day period. If such offer is
to be an underwritten offer, the underwriters must be acceptable to both the
Initiating Holders and the Company. The Company shall inform the other Holders
of the proposed registration and offer them the opportunity to participate. In
the event the registration is proposed to be part of a firm commitment
underwritten public offering, the substantive provisions of Section 2.1(b) shall
be applicable to each such registration initiated under this Section 2.3.
(b) REGISTRATION. Notwithstanding the foregoing, the Company shall not
be obligated to take any action pursuant to this Section 2.3:
(i) Following the filing of, and for 90 days immediately following
the effective date of (but in no event later than 270 days immediately following
the filing date of), any registration statement pertaining to securities of the
Company (other than a registration of securities in a Rule 145 transaction, with
respect to an employee benefit plan, pursuant to Form S-8, pursuant to Form S-3
if a shelf filing for a secondary offering of securities, or a registration of
other than equity securities), provided that the Company is actively employing
in good faith commercially reasonable efforts to cause such registration
statement to become effective;
(ii) Within 90 days after the Company has effected such a
registration pursuant to this Section 2.3(a), and such registration has been
declared or ordered effective; or
(iii) If the Company shall furnish to the Initiating Holders a
certificate signed by the President of the Company (i) giving notice of its bona
fide intention to effect the filing of a registration statement with the
Commission within approximately 60 days, or (ii) stating that, in the good faith
judgment of the Board of Directors, it would be seriously detrimental to the
Company or its stockholders for a registration statement to be filed in the near
future, then the Company's obligation to use its commercially reasonable efforts
to file a registration statement shall be deferred one or more times for a
period not to exceed 90 days from the receipt of the request to file such
registration by such Initiating Holder or Holders, provided that the Company may
not exercise this deferral right more than once per twelve-month period.
2.4 SUBSEQUENT REGISTRATION RIGHT. The Company shall not enter into any
agreement granting any holder or prospective holder of any securities of the
Company registration rights superior to or on a pari passu basis with the rights
granted the Holders hereunder without the written consent of the Holders of a
majority of the Registrable Securities.
2.5 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with (i) two registrations pursuant to Section 2.1, (ii) all
registrations pursuant to Section 2.2, and (iii) all registrations pursuant to
Section 2.3, shall be borne by the Company. Unless otherwise stated, all Selling
Expenses relating to securities registered on behalf of the Holders and all
other registration expenses shall be borne by the Holders of such securities pro
rata on the basis of the number of shares so registered or proposed to be so
registered.
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2.6 REGISTRATION PROCEDURES. In the case of each registration effected by
the Company pursuant to this Agreement, the Company will keep each Holder
advised in writing as to the initiation of such registration and as to the
completion thereof. The Company will:
(a) REGISTRATION STATEMENT. Prepare and file with the Commission a
registration statement with respect to such Registrable Securities and use all
reasonable efforts to cause such registration statement to become effective,
and, upon the request of the Holders of a majority of the Registrable Securities
registered thereunder, keep such registration statement effective for up to one
hundred and eighty (180) days or, if earlier, until the Holder or Holders have
completed the distribution related thereto; provided, however, that such 180-day
period shall be extended for a period of time equal to the period the Holder
refrains from selling any securities included in such registration at the
request of an underwriter of Common Stock (or other securities of the Company).
(b) AMENDMENTS AND SUPPLEMENTS. Prepare and file with the Commission such
amendments and supplements to such registration statement and the prospectus
used in connection with such registration statement as may be necessary to
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement for the period set
forth in paragraph (a) above.
(c) PROSPECTUS. Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
(d) QUALIFICATION. Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders; provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions, unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act.
(e) UNDERWRITING OBLIGATIONS. In the event of any underwritten public
offering, enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the managing underwriter(s) of such
offering. Each Holder participating in such underwriting shall also enter into
and perform its obligations under such an agreement.
(f) NOTICE. Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing.
The Company will use reasonable efforts to amend or supplement such prospectus
in order to cause such prospectus not to include any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing.
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(g) LISTING. Cause all such Registrable Securities registered pursuant
hereto to be listed on each securities exchange or automated quotation system on
which similar securities issued by the Company are then listed.
(h) TRANSFER AGENT; CUSIP NUMBER. Provide a transfer agent and
registrar for all Registrable Securities registered pursuant hereunder and a
CUSIP number for all such Registrable Securities not later than the effective
date of such registration.
(i) OPINION, COMFORT LETTER. Use its best efforts to furnish, on the
date that such Registrable Securities are delivered to the underwriters for
sale, if such securities are being sold through underwriters, (i) an opinion,
dated as of such date, of the counsel representing the Company for the purposes
of such registration, in form and substance as is customarily given to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and (ii) a letter dated as of such date, from the independent certified
public accountants of the Company, in form and substance as is customarily given
by independent certified public accountants to underwriters in an underwritten
public offering addressed to the underwriters.
2.7 INDEMNIFICATION.
(a) COMPANY INDEMNIFICATION. The Company will indemnify each Holder,
each of its officers and directors and partners, and each person controlling
such Holder within the meaning of Section 15 of the Securities Act, with respect
to which registration has been effected pursuant to this Agreement, against all
expenses, claims, losses, damages or liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document, or any
amendment or supplement thereto, incident to any such registration, or based on
any 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 in which they were made, not misleading, or any violation by the
Company of the Securities Act, the Exchange Act, state securities laws or any
rule or regulation promulgated under such laws applicable to the Company in
connection with any such registration, and the Company will reimburse each such
Holder, each of its officers and directors, and each person controlling such
Holder, for any legal and any other expenses reasonably incurred, as such
expenses are incurred, in connection with investigating, preparing or defending
any such claim, loss, damage, liability or action, provided that the Company
will not be liable in any such case to the extent that any such claim, loss,
damage, liability or expense arises out of or is based on any untrue statement
or omission or alleged untrue statement or omission, made in reliance upon and
in conformity with written information furnished to the Company by an instrument
duly executed by such Holder or controlling person, and stated to be
specifically for use therein; provided further that the indemnity agreement
contained in this subsection 2.7(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld).
(b) HOLDER INDEMNIFICATION. Each Holder will, if Registrable Securities
held by such Holder are included in the securities as to which such registration
is being effected, indemnify the Company, each of its directors and officers,
other holders of the Company's
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securities covered by such registration statement, each person who controls the
Company within the meaning of Section 15 of the Securities Act, and each other
such Holder, each of its officers and directors and each person controlling such
Holder within the meaning of Section 15 of the Securities Act, against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration statement, prospectus, offering
circular or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or any violation by the Holder of the
Securities Act, the Exchange Act, state securities laws or any rule or
regulation promulgated under such laws applicable to the Holder, and will
reimburse the Company, such other Holders, such directors, officers, persons,
underwriters or control persons for any legal or any other expenses reasonably
incurred, as such expenses are incurred, in connection with investigating or
defending any such claim, loss, damage, liability or action, but in the case of
the Company or the other Holders or their officers, directors or controlling
persons, only to the extent that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by an instrument
duly executed by such Holder and stated to be specifically for use therein.
Notwithstanding the foregoing, the liability of each Holder under this
subsection 2.7(b) shall be limited in an amount equal to the initial public
offering price of the shares sold by such Holder, unless such liability arises
out of or is based on willful misconduct or fraud by such Holder.
(c) NOTICE. Each party entitled to indemnification under this Section
2.7 (the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Agreement unless the failure to give such notice is
materially prejudicial to an Indemnifying Party's ability to defend such action
and provided further, that the Indemnifying Party shall not assume the defense
for matters as to which there is a conflict of interest or there are separate
and different defenses. No Indemnifying Party, in the defense of any such claim
or litigation, shall, except with the consent of each Indemnified Party (whose
consent shall not be unreasonably withheld), consent to entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party of a
release from all liability in respect to such claim or litigation.
(d) CONTRIBUTION. If the indemnification provided for in this Section
2.7 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any losses, claims, damages or liabilities
referred to herein, the indemnifying party, in lieu of indemnifying such
indemnified party thereunder, shall to the extent permitted by applicable law
contribute to the amount paid or payable by such indemnified party as a result
of such loss,
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claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the untrue statement or omission that
resulted in such loss, claim, damage or liability, as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and of
the indemnified party shall be determined by a court of law by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission to state a material fact relates to information supplied by
the indemnifying party or by the indemnified party and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission; PROVIDED, that in no event shall any contribution by
a Holder hereunder exceed the proceeds from the offering received by such
Holder.
(e) SURVIVAL. The obligations of the Company and Holders under this
Section 2.7 shall survive completion of any offering of Registrable Securities
in a registration statement and the termination of this agreement. The
provisions of this Section 2.7 shall survive any termination of this Agreement.
(f) CONFLICT WITH UNDERWRITING AGREEMENT. Notwithstanding the
foregoing, to the extent that the provisions on indemnification and contribution
contained in the underwriting agreement entered into in connection with the
underwritten public offering are in conflict with the foregoing provisions, the
provisions in the underwriting agreement shall control.
2.8 INFORMATION BY HOLDER. The Holder or Holders of Registrable Securities
included in any registration shall furnish to the Company such information
regarding such Holder or Holders, the Registrable Securities held by them and
the distribution proposed by such Holder or Holders as the Company may request
in writing and as shall be required in connection with any registration referred
to in this Agreement.
2.9 RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Restricted Securities to the public without registration, after such
time as a public market exists for the Common Stock of the Company, the Company
agrees to use commercially reasonable efforts to: (a) PUBLIC INFORMATION. Make
and keep public information available, as those terms are understood and defined
in Rule 144 under the Securities Act, at all times after the effective date that
the Company becomes subject to the reporting requirements of the Securities Act
or the Exchange Act;
(b) FILING. File with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements); and
(c) RULE 144 STATEMENT. So long as a Holder owns any Restricted
Securities, to furnish to the Holder forthwith upon request a written statement
by the Company as to its compliance with the reporting requirements of said Rule
144 (at any time after 90 days after the effective date of the first
registration statement filed by the Company for an offering of its securities to
the general public), a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents of the Company and other
information in the
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possession of or reasonably obtainable by the Company as the Holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing the Holder to sell any such securities without registration.
2.10 TERMINATION OF REGISTRATION RIGHTS. The rights granted pursuant to
Sections 2.1, 2.2 and 2.3 of this Agreement shall terminate as to any Holder
upon the earlier of (i) the date seven years after the date hereof and (ii) the
date such Holder is able to immediately sell all shares of Registrable
Securities held or entitled to be held upon conversion by such Holder under Rule
144 during any 90-day period.
3. TRANSFER OF RIGHTS. The rights granted to Holders under Section 2 of
this Agreement may be assigned to any transferee or assignee, other than a
competitor or potential competitor of the Company (as determined in good faith
by the Company's Board of Directors) in connection with any transfer or
assignment of Registrable Securities by the Holder, provided that: (i) such
transfer is otherwise effected in accordance with applicable securities laws and
the terms of this Agreement; (ii) such assignee or transferee acquires at least
twenty percent (20%) of the shares of Registrable Securities (as adjusted for
stock splits, stock dividends, stock combinations and the like) initially
acquired by the transferring Holder (including preferred stock convertible into
Registrable Securities), (iii) written notice is promptly given to the Company;
and (iv) such transferee or assignee agrees to be bound by the provisions of
this Agreement. Notwithstanding the foregoing, the rights granted to the Holders
hereunder may be assigned without compliance with item (ii) above to any
constituent partner or member of a Holder which is a partnership or limited
liability company, or to an affiliate (as such term is defined in rule 405 of
the securities act) of a Holder which is a corporation, partnership or limited
liability company.
4. RIGHT OF FIRST REFUSAL ON COMPANY ISSUANCES.
4.1 PRO RATA SHARE. The Company hereby grants to the Holder the right of
first refusal to purchase its Pro Rata Share of New Securities (as defined in
Section 4.2) which the Company may, from time to time, propose to sell and
issue. A "PRO RATA SHARE," for purposes of this right of first refusal, equals
the proportion that the total number of Registrable Securities then held by the
Holder plus the number of shares of Common Stock then held by the Holder bears
to the sum of the total number of shares of Common Stock then outstanding.
4.2 NEW SECURITIES. Except as set forth below, "NEW SECURITIES" shall mean
any shares of capital stock of the Company, including Common Stock and any
series of Preferred Stock, whether now authorized or not, and rights, options or
warrants to purchase said shares of Common Stock or Preferred Stock, and
securities of any type whatsoever that are, or may become, convertible into or
exchangeable for said shares of Common Stock or Preferred Stock. Notwithstanding
the foregoing, "NEW SECURITIES" does not include stock issued and issuable: (i)
upon conversion of shares of Preferred Stock; (ii) to employees, consultants or
directors pursuant to stock option, stock grant, stock purchase, or similar
plans and arrangements which, along with any amendments thereto, have been
approved by the Board of Directors and the Holder; (iii) pursuant to
subscriptions, warrants, options, convertible securities or other rights
outstanding as of the date hereof; (iv) solely in consideration for the
acquisition by the Company of all or substantially all of the stock or assets of
any other entity provided that such issuance is approved by the Board of
Directors including all directors affiliated with the Lender; or (v) upon
exercise
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or conversion of securities with respect to which the Holder previously had an
opportunity to exercise the right of first refusal pursuant to this Section 4.
4.3 NOTICE. In the event the Company proposes to undertake an issuance of
New Securities, it shall give the Holder written notice of its intention,
describing the amount and type of New Securities, and the price and terms upon
which the Company proposes to issue the same. The Holder shall have ten days
from the date of any such notice to agree to purchase up to its respective Pro
Rata Share of such New Securities for the price and upon the terms specified in
the notice by giving written notice to the Company and stating therein the
quantity of New Securities to be purchased.
4.4 COMPANY SALE OF NEW SECURITIES. Beginning ten days after the notice
given pursuant to Section 4.3 above, the Company shall have 90 days to sell the
New Securities not elected or eligible to be purchased by the Holder at the
price and upon the terms no more favorable to the purchasers of such securities
than specified in the Company's notice. In the event the Company has not sold
all of the New Securities within said 90 day period, the Company shall not
thereafter issue or sell any New Securities without first offering such
securities in the manner provided above.
5. SAFEGUARD SUBSCRIPTION RIGHT. In connection with any underwritten public
offering of securities of the Company by the Company, the Company shall:
(a) provide in the related underwriting agreement a right for the Holder
to designate persons (the "Safeguard Designees") who may purchase from the
underwriters shares of the Company's Common Stock (the "Directed Shares") at the
offering price (the "IPO Price") to the public set forth in the prospectus
relating to such offering and on the other terms and conditions specified in the
underwriting agreement;
(b) use its reasonable efforts to cause the underwriters of such
offering to allow the Safeguard Designees to purchase at the IPO Price a number
of Directed Shares equal to 30% of the shares of Common Stock offered by the
Company in such offering (the "Required Shares"); and
(c) if the number of shares of Common Stock actually offered to the
Safeguard Designees from the Company, either directly or through an underwriter
(the "Company Shares"), is less than the number of Required Shares, then the
Holder shall have the right to sell to the Safeguard Designees in the public
offering that number of shares of Common Stock of the Company that it holds
equal to the difference between the number of Required Shares and the number of
Company Shares. If necessary, the Company shall use its best efforts to obtain
the underwriters' consent to allow such additional shares of Common Stock to be
sold to the Safeguard Designees.
6. RIGHTS OFFERING.
(a) RIGHTS.
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(i) In the alternative to a Directed Shares Subscription Program,
the Company shall, upon receipt of the Rights Offering Notice (as defined
below), grant to the Safeguard Designees rights (the "Rights") to purchase from
the Company such number of shares of Common Stock as determined by Safeguard up
to a maximum of 30% of the sum of (A) all issued shares of Common Stock, (B) all
shares of Common Stock reserved for issuance (including all shares of Common
Stock issuable upon conversion of the Company's preferred stock, if any), and
(C) all shares of Common Stock subject to, but not reserved for, issuance
pursuant to options, warrants or other agreements, instruments or
understandings, all as of the effective date of the registration statement. The
Rights shall be issued in an offering (the "Rights Offering") pursuant to a
registration statement, shall be exercisable for a period of no greater than 45
days after the commencement of the Rights Offering and shall be transferable by
the holder thereof during that period. The Company shall engage an investment
banking firm selected by the Holder, subject to the reasonable approval of a
majority of the Board of Directors of the Company, which firm shall underwrite,
on a standby, firm commitment basis, any portion of the offered Common Stock not
purchased through the exercise of Rights. The Company shall also engage legal
counsel selected by the Holder, subject to the reasonable approval of a majority
of the Board of Directors of the Company, which counsel shall represent the
Company in connection with the conduct of the Rights Offering. The exercise
price of the Rights shall be determined by negotiation among the Company, the
underwriters and the selling stockholders, if any. Prior to the commencement of
the Rights Offering, the Company shall use its best efforts to cause any holder
of more than 2% of its Common Stock (or rights to acquire more than 2% of its
Common Stock) to execute and deliver to the underwriter of the Rights Offering
an agreement to withhold such shares from the market for such period, not
exceeding 180 days following the closing of the Rights Offering, as the
underwriter shall request.
(ii) The Holder may initiate the Rights Offering by giving written
notice to the Company (the "Rights Offering Notice") at any time during the
Rights Exclusivity Period (as hereinafter defined). The obligations of the
Company pursuant to this paragraph (a) shall commence on the date hereof and
expire on December 31, 2008 (such period, the "RIGHTS EXCLUSIVITY PERIOD")
unless a registration statement relating to the Rights Offering has been filed
with the SEC by such date, in which case the Rights shall not expire until 150
days after the date such filing was made.
(iii) The Company agrees that it will not, without the Holder's
prior written consent, undertake any registration of any of its securities under
the Act or the 1934 Act other than pursuant to: (A) this Section, (B)
registration rights granted to a third party prior to the date hereof, or (C) a
registration relating to any employee benefit plan or with respect to any
corporate reorganization or other transaction under Rule 145 of the Securities
Act, prior to the earlier of the expiration of the Rights Exclusivity Period or
the completion of a Rights Offering, except with the consent of the Holder.
(b) STOCK SPLIT. After the Holder has notified the Company of its
intention to commence the Rights Offering, the Company shall, if necessary,
prior to the filing of such registration statement as provided hereinafter (or
at such earlier date as agreed to by the Company and the Holder), take all such
actions as shall be necessary to cause a split of its authorized Common Stock in
such ratio as the Holder shall determine. All references to share
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amounts in this Agreement other than as specifically noted shall be deemed to
refer to share amounts prior to such split.
(c) REGISTRATION STATEMENT. Upon notice by the Holder to the Company of
its intention to commence the Rights Offering, the Company shall promptly
prepare a registration statement to register under the Act the Rights and the
shares of the Common Stock to be acquired upon exercise of the Rights (the
"Rights Shares"). The Company covenants that such registration statement and the
prospectus included therein shall be in form reasonably satisfactory to Holder,
shall comply in all respects with the Act and the rules and regulations of the
SEC promulgated thereunder, and shall 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 light of the circumstances under
which they were made, not misleading.
(d) REGISTRATION PROCESS.
(i) The Company shall use its best efforts to cause such
registration statement to be filed with the SEC and to become effective as
promptly as practicable. The Company shall prepare and file with the SEC,
promptly upon the Holder's request, any amendments or supplements to the
registration statement or prospectus that, in the Holder's opinion, may be
necessary or advisable in connection with the Rights Offering, subject to the
reasonable approval of counsel for the Company. The Company shall not file any
amendment or supplement to the registration statement or prospectus unless (A)
it has furnished the Holder with a copy of such amendment or supplement a
reasonable time prior to filing and (B) the Holder has not reasonably objected
to such amendment or supplement by notice to the Company. The Company shall not
issue any advertisement, press release, mailing or other solicitation material
of which the Holder reasonably disapproves by prompt written notice to the
Company after receiving reasonable notice thereof. The Company shall comply with
the Act and the rules and regulations thereunder in connection with the Rights
Offering and, until the termination of the Rights Offering, the Company shall
use its best efforts to qualify the Rights Shares under the securities laws of
all jurisdictions in which qualification is required and there are holders of
the Holder common stock and to continue such qualifications in effect during the
exercise period of the Rights.
(ii) The Company shall notify Holder and each selling stockholder
(if any) at any time when a prospectus relating thereto is required to be
delivered under the Act within the period that the Company is required to keep
the registration statement effective of the happening of any event as a result
of which the prospectus included in such registration statement, together with
any associated term sheet, contains an untrue statement of a material fact or
omits any fact necessary to make the statement therein not misleading, and, at
the request of any such selling stockholder or Holder, the Company will prepare
a supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Registrable Securities or Rights and shares of Common
Stock underlying such Rights, such prospectus will not contain an untrue
statement of a material fact or omit to state any fact necessary to make the
statement therein not misleading;
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(iii) The Company shall cause all such Registrable Securities or
Rights and shares of Common Stock underlying such Rights to be listed or
included on securities exchanges on which similar securities issued by the
Company are then listed or included;
(iv) The Company shall provide a transfer agent and registrar for
all such Registrable Securities or Rights and shares of Common Stock underlying
such Rights not later than the effective date of such registration statement;
(v) The Company shall enter into such customary agreements
(including an underwriting agreement in customary form) and take such other
customary actions as may be reasonably necessary to expedite or facilitate the
disposition of such Registrable Securities or the consummation of the Rights
Offering;
(vi) The Company shall obtain a "comfort" letter addressed to the
Company from its independent public accountants in customary form and covering
such matters of the type customarily covered by "comfort" letters; and
(vii) The Company shall make available for inspection by any selling
stockholder or the Holder, any underwriter participating in any disposition or
the Rights Offering pursuant to such registration statement, and any attorney,
accountant or other agent retained by any such seller, the Holder or any
underwriter, all financial and other records, pertinent corporate documents and
properties of the Company, and cause the Company's officers, directors and
employees to supply all information reasonably requested by any such seller or
the Holder or any such underwriter, attorney, accountant or agent in connection
with such registration statement.
At the time of mailing the prospectus relating to the Rights Offering and
at the time of the closing of the Rights Offering, Holder shall be entitled to
receive (i) from the Company such certificates and documents evidencing
compliance with such representations and warranties of the Company as the Holder
shall reasonably request, and (ii) from the Company's counsel and independent
accountants such opinions and documents as Holder may reasonably request thereof
as if it were applicable to the Rights Offering.
(e) USE OF PROCEEDS. The Company shall apply all proceeds of the Rights
Offering first, to the payment of the expenses of the Rights Offering, and
thereafter, to general working capital purposes or such other purposes as shall
be described in the prospectus and agreed to by the Holder.
(f) REGISTRATION SERVICES.
(i) SERVICES. The Holder shall diligently and in a timely fashion
assist the Company in structuring the Rights Offering, in preparing the
necessary registration statement and related disclosure documentation, in
clearing the Rights Offering with the SEC and applicable state securities
commissions and shall provide such other services and assistance in connection
with the Rights Offering as the Company shall reasonably request; provided that
nothing contained herein shall require the Holder to provide to the Company any
services or assistance which, if rendered by the Holder, would require the
Holder to register as a broker-
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dealer under Section 15 of the 1934 Act, or as an investment adviser under the
Investment Advisers Act of 1940, as amended.
(ii) WORKING GROUP. The Company shall cause its counsel and auditors
and the Company's employees to render such assistance in consummating the Rights
Offering, at the Company's expense, as is customary in the consummation by a
company of its initial public offering. In addition, in rendering services under
this paragraph (6)(f)(2), the Holder may engage special legal counsel, one or
more rights, registrar and transfer agents, and such other consultants as the
Holder may deem necessary or desirable in connection with the Rights Offering,
the expenses of which shall be paid by the Company. In addition, the Holder may
require the Company to engage a registered broker-dealer of the Holder's
designation, subject to the reasonable approval of the Company, to provide such
services in connection with the Rights Offering as the Holder may deem
reasonably necessary or desirable, including without limitation, to effect or
underwrite the offering of the Rights or the Rights Shares in states in which
applicable state laws require that a registered broker-dealer effect such
offering.
(iii) EXPENSES. The Company shall bear and pay all expenses incurred
for a Rights Offering to the same extent provided in Section 2.2 for a
Company-initiated offering.
(g) INDEMNIFICATION. The Company shall indemnify the Holder in
connection with a Rights Offering as provided in Section 2.7.
7. MISCELLANEOUS.
7.1 AMENDMENT. Except as otherwise provided herein, additional parties may
be added to this Agreement and any provision of this Agreement may be amended or
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 the Holders of a majority of the Registrable
Securities then outstanding. Any amendment or waiver effected in accordance with
this Section 7.1 shall be binding upon each Holder of Registrable Securities at
the time outstanding, each future holder of any of such securities, and the
Company.
7.2 NOTICES. All notices and other communications provided for hereunder
shall, unless otherwise stated herein, be in writing (including by facsimile
transmission) and mailed, sent or delivered to the respective parties hereto at
or to their respective addresses or facsimile numbers set forth below their
names on the signature pages hereof, or at or to such other address or facsimile
number as shall be designated by any party in a written notice to the other
party hereto. All such notices and communications shall be effective (i) if
delivered by hand, when delivered; (ii) if sent by mail, upon the earlier of the
date of receipt or five Business Days after deposit in the mail, first class,
postage prepaid; and (iii) if sent by facsimile transmission, when sent.
7.3 NO WAIVER; CUMULATIVE REMEDIES. No failure on the part of a Holder to
exercise, and no delay in exercising, any right, remedy, power or privilege
under this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, remedy, power or privilege preclude any
other or further exercise thereof or the exercise of any
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other right, remedy, power or privilege. The rights and remedies under the this
Agreement are cumulative and not exclusive of any rights, remedies, powers and
privileges that may otherwise be available to the Lender.
7.4 BINDING EFFECT. This Agreement shall become effective when it shall
have been executed by the Company and the Lender and thereafter shall be binding
upon, inure to the benefit of and be enforceable by the Company, the Lender and
their respective successors and assigns.
7.5 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE COMMONWEALTH OF PENNSYLVANIA.
7.6 WAIVER OF JURY TRIAL. THE COMPANY AND THE LENDER EACH WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY
OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO
CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE COMPANY AND THE LENDER EACH
AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL
WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT
THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION
AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN
PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR ANY
PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.
7.7 SUBMISSION TO JURISDICTION. The Company hereby (i) submits to the
nonexclusive jurisdiction of the courts of the Commonwealth of Pennsylvania and
the Federal courts of the United States sitting in the Eastern District of
Pennsylvania for the purpose of any action or proceeding arising out of or
relating to this Agreement, (ii) agrees that all claims in respect of any such
action or proceeding may be heard and determined in such courts, (iii)
irrevocably waives (to the extent permitted by applicable law) any objection
which it now or hereafter may have to the laying of venue of any such action or
proceeding brought in any of the foregoing courts in and of the Commonwealth of
Pennsylvania, and any objection on the ground that any such action or proceeding
in any such court has been brought in an inconvenient forum, and (iv) agrees
that a final judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner permitted by law.
7.8 ENTIRE AGREEMENT. This Agreement reflects the entire agreement between
the Company and the Lender with respect to the matters set forth herein and
supersedes any prior agreements, commitments, drafts, communication, discussions
and understandings, oral or written, with respect thereto.
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7.9 SEVERABILITY. Whenever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under all applicable
laws and regulations. If, however, any provision of any of this Agreement shall
be prohibited by or invalid under any such law or regulation in any
jurisdiction, it shall, as to such jurisdiction, be deemed modified to conform
to the minimum requirements of such law or regulation, or, if for any reason it
is not deemed so modified, it shall be ineffective and invalid only to the
extent of such prohibition or invalidity without affecting the remaining
provisions of this Agreement, or the validity or effectiveness of such provision
in any other jurisdiction.
7.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute but one and the same agreement.
7.11 SPECIFIC PERFORMANCE. The parties hereto hereby declare that it is
impossible to measure in money the damages which will accrue to a party hereto
or to their heirs, personal representatives, or assigns by reason of a failure
to perform any of the obligations under this Agreement and agree that the terms
of this Agreement shall be specifically enforceable. If any party hereto or his
heirs, personal representatives, or assigns institutes any action or proceeding
to specifically enforce the provisions hereof, any person against whom such
action or proceeding is brought hereby waives the claim or defense therein that
such party or such personal representative has an adequate remedy at law, and
such person shall not offer in any such action or proceeding the claim or
defense that such remedy at law exists.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement,
as of the date first above written.
THE COMPANY
LIFEF/X, INC.
By /S/ XXXXXXX X. XXXXXXX
---------------------------------
Title: Chief Executive Officer
Address:
000 Xxxxxxx Xxxxxx, Xxxxxxxx Xxx
Xxxxxx, XX 00000
Attn.: Chief Executive Officer
Fax No. 000-000-0000
THE LENDER
SAFEGUARD 2001 CAPITAL, L.P.
By: Safeguard Delaware, Inc.
Title: General Partner
By /s/ N. Xxxxxxx Xxxxxxx
----------------------------------
Title: Executive Vice President
and General Counsel
Address:
000 Xxxxx Xxxx Xxxxx
Xxxxx, XX 00000
Attn.: _______________________________
Fax No. ______________________________
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