EXHIBIT 4.26
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of June 10,
2002, by and between PATRIOT SCIENTIFIC CORPORATION, a Delaware corporation (the
"Company"), and LINCOLN VENTURES, LLC, an Arizona limited liability company.
WHEREAS:
A. In connection with the Securities Purchase Agreement by and among
the parties hereto of even date herewith (the "Securities Purchase Agreement"),
the Company has agreed, upon the terms and subject to the conditions contained
therein, to issue and sell to the Buyer (i) convertible debentures (the
"Debentures") that are convertible into shares of the Company's common stock,
par value $0.00001 per share (the "Common Stock"), upon the terms and subject to
the limitations and conditions set forth in such Debentures and (ii) warrants
(the "Warrants") to purchase 7,674,583 shares of Common Stock, upon the terms
and conditions and subject to the limitations and conditions set forth in the
Warrants dated June 10, 2002; and
B. To induce the Buyer to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws;
NOW, THEREFORE, In consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Buyer hereby agree as follows:
1. DEFINITIONS.
a. As used in this Agreement, the following terms shall have the
following meanings:
(i) "BUYER" means the Lincoln Ventures, LLC, and any
transferee or assignee who agrees to become bound by the provisions of this
Agreement in accordance with Section 9 hereof.
(ii) "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("RULE 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange Commission
(the "SEC").
(iii) "REGISTRABLE SECURITIES" means (a) the shares of Common
Stock (the "Conversion Shares") issued or issuable upon conversion of or
otherwise pursuant to the Debentures (including, without limitation, any shares
issued or issuable pursuant to Sections 1.3 and 1.4 of the
1
Debentures and Section 2 herein) (b) any shares of Common Stock (the "Warrant
Shares") issued or issuable upon exercise of or otherwise pursuant to the
Warrants and (c) any shares of capital stock issued or issuable as a dividend on
or in exchange for or otherwise with respect to any of the foregoing.
(iv) "REGISTRATION STATEMENT(S)" means a registration
statement(s) of the Company under the 0000 Xxx.
b. Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Securities Purchase
Agreement.
2. REGISTRATION.
a. MANDATORY REGISTRATION. The Company shall prepare, and, on or prior
to July 1, 2002 (the "FILING DATE") file with the SEC a Registration Statement
on Form S-3 (or, if Form S-3 is not then available, on such form of Registration
Statement as is then available to effect a registration of the Registrable
Securities, subject to the consent of the Buyer, which consent will not be
unreasonably withheld) covering the resale of the Registrable Securities, which
Registration Statement, to the extent allowable under the 1933 Act and the rules
and regulations promulgated thereunder (including Rule 416), shall state that
such Registration Statement also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon conversion of or otherwise
pursuant to the Debentures and exercise of or otherwise pursuant to the Warrants
to prevent dilution resulting from stock splits, stock dividends or similar
transactions. The number of shares of Common Stock initially included in such
Registration Statement shall be no less than one and one-half (1.5) times the
aggregate number of Conversion Shares that are then issuable upon conversion of
or otherwise pursuant to the Debentures (based on the Conversion Price (as
defined in the Debentures) then in effect) and the aggregate number of Warrant
Shares that are then issuable upon exercise of or otherwise pursuant to the
Warrants, without regard to any limitation on the Buyer's ability to convert the
Debentures or exercise the Warrants. The Company acknowledges that the number of
shares initially included in the Registration Statement represents a good faith
estimate of the maximum number of shares issuable upon conversion of or
otherwise pursuant to the Debentures and exercise of or otherwise pursuant to
the Warrants. The Registration Statement (and each amendment or supplement
thereto, and each request for acceleration of effectiveness thereof) shall be
provided to (and subject to the approval of) the Buyer and its counsel prior to
its filing or other submission.
b. [INTENTIONALLY OMITTED].
c. PAYMENTS BY THE COMPANY. The Company shall use its best efforts to
obtain effectiveness of the Registration Statement as soon as practicable, but
in any event not later than October 1, 2002 (the "REGISTRATION DEADLINE"). If
(i) the Registration Statement covering the Registrable Securities required to
be filed by the Company pursuant to Section 2(a) hereof is not declared
effective by the SEC by the Registration Deadline, or (ii) after the
Registration Statement has been declared effective by the SEC, sales of all of
the Registrable Securities cannot be made pursuant to the Registration
Statement, or (iii) the Common Stock is not listed or included for quotation on
the Over the Counter Electronic Bulletin Board (the "OTC-BB"), the Nasdaq
National Market ("NNM"), the Nasdaq Small Cap Market ("NASDAQ
2
SMALL CAP"), the New York Stock Exchange (the "NYSE") or the American Stock
Exchange (the "AMEX"), then the Company will make payments to the Buyer in such
amounts and at such times as shall be determined pursuant to this Section 2(c)
as partial relief for the damages to the Buyer by reason of any such delay in or
reduction of its ability to sell the Registrable Securities (which remedy shall
not be exclusive of any other remedies available at law or in equity). The
Company shall pay to each holder of the Debentures or Registrable Securities an
amount equal to the then outstanding principal amount of the Debentures (and, in
the case of holders of Registrable Securities, the principal amount of
Debentures from which such Registrable Securities were converted or the
aggregate exercise price paid for such Registrable Securities upon exercise of
the Warrants) ("OUTSTANDING PRINCIPAL AMOUNT") multiplied by the Applicable
Percentage (as defined below) times the number of months (prorated for partial
months) after the Registration Deadline and prior to the date the Registration
Statement is declared effective by the SEC;
The term "APPLICABLE PERCENTAGE" means 2.0 hundredths (.02). (For
example, if the Registration Statement becomes effective one (1) month after the
Registration Deadline, the Company would pay $20,000 for each $1,000,000 of
Outstanding Principal Amount. If thereafter, sales of all of the Registrable
Securities could not be made pursuant to the Registration Statement for an
additional period of one (1) month, the Company would pay an additional $20,000
for each $1,000,000 Outstanding Principal Amount. Such amounts shall be paid in
cash within five (5) days after the end of each period that gives rise to such
obligation, PROVIDED that, if any such period extends for more than thirty (30)
days, interim payments shall be made for each such thirty (30) day period,
PROVIDED, FURTHER, that, if such amounts are not paid within the
period specified, at the Buyer's option, such amounts may be added to the
Conversion Amount (as defined in the Debentures) of the Debentures and
thereafter be convertible into Common Stock at the "CONVERSION PRICE" (as
defined in the Debentures) in accordance with the terms of the Debentures. Any
shares of Common Stock issued upon conversion of such amounts shall be
Registrable Securities. Nothing herein shall limit the Buyer's right to pursue
damages for the failure to timely obtain effectiveness of the Registration
Statement by the Registration Deadline or to thereafter maintain the
effectiveness of the Registration Statement as required pursuant to this
Agreement or to maintain the listing of the Common Stock;
d. PIGGY-BACK REGISTRATIONS. If at any time prior to the expiration of
the Registration Period (as hereinafter defined) the Company shall determine to
file with the SEC a Registration Statement relating to an offering for its own
account or the account of others under the 1933 Act of any of its equity
securities (other than on Form S-4 or Form S-8 or their then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans), the Company shall
send to Buyer written notice of such determination and, if within fifteen (15)
days after the effective date of such notice, the Buyer shall so request in
writing, the Company shall include in such Registration Statement all or any
part of the Registrable Securities the Buyer requests to be registered, except
that if, in connection with any underwritten public offering for the account of
the Company, the managing underwriter(s) thereof shall impose a limitation on
the number of shares of Common Stock which may be included in the Registration
Statement because, in such underwriter(s)' judgment, marketing or other factors
dictate such limitation is necessary to facilitate public distribution, then the
Company shall be obligated to include in such Registration Statement
3
only such limited portion of the Registrable Securities with respect to which
the Buyer has requested inclusion hereunder as the underwriter shall permit;
PROVIDED, HOWEVER, that the Company shall not exclude any Registrable
Securities unless the Company has first excluded all outstanding securities, the
holders of which are not entitled by contract to inclusion of such securities in
such Registration Statement or are not entitled to pro rata inclusion with the
Registrable Securities; and
PROVIDED, FURTHER, HOWEVER, that, after giving effect to the
immediately preceding proviso, any exclusion of Registrable Securities shall be
made pro rata with holders of other securities having the contractual right to
include such securities in the Registration Statement other than holders of
securities entitled to inclusion of their securities in such Registration
Statement by reason of demand registration rights. No right to registration of
Registrable Securities under this Section 2(d) shall be construed to limit any
registration required under Section 2(a) hereof. If an offering in connection
with which the Buyer is entitled to registration under this Section 2(d) is an
underwritten offering, then the Buyer shall, unless otherwise agreed by the
Company, offer and sell such Registrable Securities in an underwritten offering
using the same underwriter or underwriters and, subject to the provisions of
this Agreement, on the same terms and conditions as other shares of Common Stock
included in such underwritten offering. Notwithstanding anything to the contrary
set forth herein, the registration rights of the Buyer pursuant to this Section
2(d) shall only be available in the event the Company fails to timely file,
obtain effectiveness or maintain effectiveness of any Registration Statement to
be filed pursuant to Section 2(a) in accordance with the terms of this
Agreement.
e. ELIGIBILITY FOR FORM S-3. The Company represents and warrants that
it meets the registrant eligibility and transaction requirements for the use of
Form S-3 for registration of the sale by the Buyer of the Registrable Securities
and the Company shall file all reports required to be filed by the Company with
the SEC in a timely manner so as to maintain such eligibility for the use of
Form S-3.
3. OBLIGATIONS OF THE COMPANY. In connection with the registration of
the Registrable Securities, the Company shall have the following obligations:
a. The Company shall prepare promptly, and file with the SEC as soon
as practicable after the date of the Closing under the Securities Purchase
Agreement (the "CLOSING DATE") (but no later than the Filing Date), a
Registration Statement with respect to the number of Registrable Securities
provided in Section 2(a), and thereafter use its best efforts to cause such
Registration Statement relating to Registrable Securities to become effective as
soon as possible after such filing (but in no event later than the Registration
Deadline), and keep the Registration Statement effective pursuant to Rule 415 at
all times until such date as is the earlier of (i) the date on which all of the
Registrable Securities have been sold and (ii) the date on which the Registrable
Securities (in the opinion of counsel to the Buyer) may be immediately sold to
the public without registration or restriction (including without limitation as
to volume by each holder thereof) under the 1933 Act (the "REGISTRATION
PERIOD"), which Registration Statement (including any amendments or supplements
thereto and prospectuses contained therein) shall not contain any untrue
4
statement of a material fact or omit to state a material fact required to be
stated therein, or necessary to make the statements therein not misleading.
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Registration
Statements and the prospectus used in connection with the Registration
Statements as may be necessary to keep the Registration Statements effective at
all times during the Registration Period, and, during such period, comply with
the provisions of the 1933 Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statements
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statements. In the event that on any
Trading Day (as defined in the Debentures) (the "REGISTRATION TRIGGER DATE") the
number of shares available under a Registration Statement filed pursuant to this
Agreement is insufficient to cover all of the Registrable Securities issued or
issuable upon conversion of or otherwise pursuant to the Debentures (based on
the Conversion Price (as defined in the Debentures) then in effect) and exercise
of or otherwise pursuant to the Warrants, in each case without giving effect to
any limitations on the Buyer' ability to convert the Debentures or exercise the
Warrants, the Company shall amend the Registration Statement, or file a new
Registration Statement (on the short form available therefore, if applicable),
or both, so as to cover one hundred fifty percent (150%) of all of the
Registrable Securities so issued or issuable (without giving effect to any
limitations on conversion contained in the Debentures or exercise contained in
the Warrants) as of the Registration Trigger Date, in each case, as soon as
practicable, but in any event within twenty (20) business days after the
necessity therefore arises (based on the market price of the Common Stock and
other relevant factors on which the Company reasonably elects to rely),
provided, however that the Company shall have a sufficient number of authorized
and unissued shares. In the event the Company does not have a sufficient number
of authorized and unissued shares, the Company shall use its best efforts to
obtain all necessary shareholder approvals and to make all necessary filings to
increase its authorized shares as promptly as practicable and, within twenty
(20) business days after the necessary increase in its authorized shares shall
become effective, amend the Registration Statement or file a new Registration
Statement as set forth above. The Company shall use its best efforts to cause
such amendment and/or new Registration Statement to become effective as soon as
practicable following the filing thereof, but in any event within sixty (60)
days of the Registration Trigger Date or as promptly as practicable in the event
the Company is required to increase its authorized shares. The provisions of
Section 2(c) above shall be applicable with respect to the Company's obligations
under this Section 3(b).
c. The Company shall furnish to the Buyer and its legal counsel (i)
promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one copy of each Registration Statement and any
amendment thereto, each preliminary prospectus and prospectus and each amendment
or supplement thereto, and, in the case of the Registration Statement referred
to in Section 2(a), each letter written by or on behalf of the Company to the
SEC or the staff of the SEC, and each item of correspondence from the SEC or the
staff of the SEC, in each case relating to such Registration Statement (other
than any portion of any thereof which contains information for which the Company
has sought confidential treatment), and (ii) such number of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto and such other documents as the Buyer may reasonably request
in order to facilitate the disposition of the Registrable Securities owned by
the Buyer. The Company will
5
immediately notify the Buyer by facsimile of the effectiveness of each
Registration Statement or any post-effective amendment. The Company will
promptly respond to any and all comments received from the SEC, with a view
towards causing each Registration Statement or any amendment thereto to be
declared effective by the SEC as soon as practicable and shall file an
acceleration request as soon as practicable, but no later than three (3)
business days (the "ACCELERATION REQUEST DEADLINE"), following the resolution or
clearance of all SEC comments or, if applicable, following notification by the
SEC that any such Registration Statement or any amendment thereto will not be
subject to review.
d. The Company shall use reasonable efforts to (i) register and
qualify the Registrable Securities covered by the Registration Statements under
such other securities or "blue sky" laws of such jurisdictions in the United
States as the Buyer, (ii) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions;
e. [INTENTIONALLY OMITTED]
f. As promptly as practicable after becoming aware of such event, the
Company shall notify the Buyer of the happening of any event, of which the
Company has knowledge, as a result of which the prospectus included in any
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and use its best
efforts promptly to prepare a supplement or amendment to any Registration
Statement to correct such untrue statement or omission, and deliver such number
of copies of such supplement or amendment to the Buyer as the Buyer may
reasonably request; provided that, for not more than twenty (20) consecutive
days (or a total of not more than sixty (60) days in any twelve (12) month
period), the Company may delay the disclosure of material non-public information
concerning the Company (as well as prospectus or Registration Statement
updating) the disclosure of which at the time is not, in the good faith opinion
of the Company, in the best interests of the Company (an "ALLOWED DELAY");
provided, further, that the Company shall promptly (i) notify the Buyer in
writing of the existence of (but in no event, without the prior written consent
of the Buyer, shall the Company disclose to the Buyer any of the facts or
circumstances regarding) material non-public information giving rise to an
Allowed Delay and (ii) advise the Buyer in writing to cease all sales under such
Registration Statement until the end of the Allowed Delay, provided the above
actions are consistent with the requirements of the 1933 Act and/or 1934 Act or
other applicable law. Upon expiration of the Allowed Delay, the Company shall
again be bound by the first sentence of this Section 3(f) with respect to the
information giving rise thereto.
g. The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of any Registration
Statement, and, if such an order is issued, to obtain the withdrawal of such
order at the earliest possible moment and to notify the Buyer who holds
Registrable Securities being sold (or, in the event of an underwritten offering,
the managing underwriters) of the issuance of such order and the resolution
thereof.
6
h. The Company shall permit a single firm of counsel designated by the
Buyer to review such Registration Statement and all amendments and supplements
thereto (as well as all requests for acceleration or effectiveness thereof) a
reasonable period of time prior to their filing with the SEC (not less than
three (3) business days but not more then five (5) business days) and not file
any document in a form to which such counsel reasonably objects and will not
request acceleration of such Registration Statement without prior notice to such
counsel.
i. The Company shall make generally available to its security holders
as soon as practicable, but not later than ninety (90) days after the close of
the period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 under the 0000 Xxx) covering a twelve-month period
beginning not later than the first day of the Company's fiscal quarter next
following the effective date of the Registration Statement.
j. At the request of the Buyer participating in an underwritten
offering pursuant to Section 2(d), the Company shall furnish, on the date that
Registrable Securities are delivered to an underwriter for sale in connection
with any Registration Statement pursuant to Section 2(d), (i) an opinion, dated
as of such date, from counsel representing the Company for purposes of such
Registration Statement, in form, scope and substance as is customarily given in
an underwritten public offering, addressed to the underwriters, if any, and the
Buyer and (ii) a letter, dated such date, from the Company's independent
certified public accountants in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering, addressed to the underwriters, if any, and the Buyer.
k. The Company shall make available for inspection by (i) the Buyer,
and (ii) one firm of attorneys and one firm of accountants or other agents
retained by the Buyer (collectively, the "INSPECTORS") all pertinent financial
and other records, and pertinent corporate documents and properties of the
Company (collectively, the "RECORDS"), as shall be reasonably deemed necessary
by each Inspector to enable each Inspector to exercise its due diligence
responsibility, and cause the Company's officers, directors and employees to
supply all information which any Inspector may reasonably request for purposes
of such due diligence;
PROVIDED, HOWEVER, that each Inspector shall hold in confidence and
shall not make any disclosure (except to the Buyer) of any Record or other
information which the Company determines in good faith to be confidential, and
of which determination the Inspectors are so notified, unless (a) the disclosure
of such Records is necessary to avoid or correct a misstatement or omission in
any Registration Statement, (b) the release of such Records is ordered pursuant
to a subpoena or other order from a court or government body of competent
jurisdiction, or (c) the information in such Records has been made generally
available to the public other than by disclosure in violation of this or any
other agreement. The Company shall not be required to disclose any confidential
information in such Records to any Inspector until and unless such Inspector
shall have entered into confidentiality agreements (in form and substance
satisfactory to the Company) with the Company with respect thereto,
substantially in the form of this Section 3(k). The Buyer agrees that it shall,
upon learning that disclosure of such Records is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
notice to the Company and allow the
7
Company, at its expense, to undertake appropriate action to prevent disclosure
of, or to obtain a protective order for, the Records deemed confidential.
Nothing herein (or in any other confidentiality agreement between the Company
and the Buyer) shall be deemed to limit the Buyer's ability to sell Registrable
Securities in a manner which is otherwise consistent with applicable laws and
regulations.
l. The Company shall hold in confidence and not make any disclosure of
information concerning the Buyer provided to the Company unless (i) disclosure
of such information is necessary to comply with federal or state securities
laws, (ii) the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other order from a court
or governmental body of competent jurisdiction, or (iv) such information has
been made generally available to the public other than by disclosure in
violation of this or any other agreement. The Company agrees that it shall, upon
learning that disclosure of such information concerning the Buyer is sought in
or by a court or governmental body of competent jurisdiction or through other
means, give prompt notice to the Buyer prior to making such disclosure, and
allow the Buyer, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.
m. The Company shall use its best efforts to (i) cause all the
Registrable Securities covered by the Registration Statement to be listed on
each national securities exchange on which securities of the same class or
series issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange, or
(ii) to the extent the securities of the same class or series are not then
listed on a national securities exchange, secure the designation and quotation,
of all the Registrable Securities covered by the Registration Statement on the
NNM or, if not eligible for the NNM on the Nasdaq Small Cap or, if not eligible
for the Nasdaq Small Cap, on the Over the Counter electronic bulletin board and,
without limiting the generality of the foregoing, to arrange for at least two
market makers to register with the National Association of Securities Dealers,
Inc. ("NASD") as such with respect to such Registrable Securities.
n. The Company shall provide a transfer agent and registrar, which may
be a single entity, for the Registrable Securities not later than the effective
date of the Registration Statement.
o. The Company shall cooperate with the Buyer who holds Registrable
Securities being offered and the managing underwriter or underwriters, if any,
to facilitate the timely preparation and delivery of certificates (not bearing
any restrictive legends) representing Registrable Securities to be offered
pursuant to such Registration Statement and enable such certificates to be in
such denominations or amounts, as the case may be, as the managing underwriter
or underwriters, if any, or the Buyer may reasonably request and registered in
such names as the managing underwriter or underwriters, if any, or the Buyer may
request, and, within three (3) business days after a Registration Statement
which includes Registrable Securities is ordered effective by the SEC, the
Company shall deliver, and shall cause legal counsel selected by the Company to
deliver, to the transfer agent for the Registrable Securities (with copies to
the Buyer) an appropriate instruction and an opinion of such counsel in the form
required by the transfer agent in order to issue the Registrable Securities free
of restrictive legends.
8
p. At the request of the holders of a majority-in-interest of the
Registrable Securities, the Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to a
Registration Statement and any prospectus used in connection with the
Registration Statement as may be necessary in order to change the plan of
distribution set forth in such Registration Statement.
q. The Company shall not, and shall not agree to, allow the holders of
any securities of the Company to include any of their securities in any
Registration Statement under Section 2(a) hereof or any amendment or supplement
thereto under Section 3(b) hereof without the consent of the holders of a
majority-in-interest of the Registrable Securities. In addition, the Company
shall not offer any securities for its own account or the account of others in
any Registration Statement under Section 2(a) hereof or any amendment or
supplement thereto under Section 3(b) hereof without the consent of the holders
of a majority-in-interest of the Registrable Securities.
r. The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Buyer of Registrable Securities
pursuant to a Registration Statement.
s. The Company shall comply with all applicable laws related to a
Registration Statement and offering and sale of securities and all applicable
rules and regulations of governmental authorities in connection therewith
(including without limitation the 1933 Act and the 1934 Act and the rules and
regulations promulgated by the SEC).
4. OBLIGATIONS OF THE BUYER. In connection with the registration of
the Registrable Securities, the Buyer 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 the Buyer that the Buyer shall furnish to the Company
such information regarding itself, the Registrable Securities held by it and the
intended method of disposition of the Registrable Securities held by it as shall
be reasonably required to effect the registration of such Registrable Securities
and shall execute such documents in connection with such registration as the
Company may reasonably request. At least three (3) business days prior to the
first anticipated filing date of the Registration Statement, the Company shall
notify the Buyer of the information the Company requires from each the Buyer.
b. The Buyer, by the Buyer's acceptance of the Registrable Securities,
agrees to cooperate with the Company as reasonably requested by the Company in
connection with the preparation and filing of the Registration Statements
hereunder, unless the Buyer has notified the Company in writing of the Buyer's
election to exclude all of the Buyer's Registrable Securities from the
Registration Statements.
c. In the event of an underwritten offering pursuant to Section 2(d)
in which any Registrable Securities are to be included, the Buyer agrees to
enter into and perform the Buyer's obligations under an underwriting agreement,
in usual and customary form, including, without limitation, customary
indemnification and contribution obligations, with the managing underwriter of
such offering and take such
9
other actions as are reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities, unless the Buyer has notified the
Company in writing of the Buyer's election to exclude all of the Buyer's
Registrable Securities from such Registration Statement.
d. The Buyer agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 3(f) or 3(g), the
Buyer will immediately discontinue disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until the Buyer's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 3(f) or 3(g) and, if so directed by the
Company, the Buyer 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 the Buyer's possession, of the prospectus covering such Registrable
Securities current at the time of receipt of such notice.
e. No Buyer may participate in any underwritten registration hereunder
unless the Buyer (i) agrees to sell the Buyer's Registrable Securities on the
basis provided in any underwriting arrangements in usual and customary form
entered into by the Company, (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements, and (iii)
agrees to pay its pro rata share of all underwriting discounts and commissions
and any expenses in excess of those payable by the Company pursuant to Section 5
below.
5. EXPENSES OF REGISTRATION. All reasonable expenses, other than
underwriting discounts and commissions, incurred in connection with
registrations, filings or qualifications pursuant to Sections 2 and 3,
including, without limitation, all registration, listing and qualification fees,
printers and accounting fees, the fees and disbursements of counsel for the
Company, and the reasonable fees and disbursements of one counsel selected by
the Buyer pursuant to Sections 2(b) and 3(h) hereof shall be borne by the
Company.
6. INDEMNIFICATION. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:
a. To the extent permitted by law, the Company will indemnify, hold
harmless and defend (i) the Buyer, (ii) the directors, officers, partners,
managers, members, employees, agents and each person who controls any Buyer
within the meaning of the 1933 Act or the Securities Exchange Act of 1934, as
amended (the "1934 ACT"), if any, (iii) any underwriter (as defined in the 0000
Xxx) for the Buyer in connection with an underwritten offering pursuant to
Section 2(d) hereof, and (iv) the directors, officers, partners, employees and
each person who controls any such underwriter within the meaning of the 1933 Act
or the 1934 Act, if any (each, an "INDEMNIFIED PERSON"), against any joint or
several losses, claims, damages, liabilities or expenses (collectively, together
with actions, proceedings or inquiries by any regulatory or self-regulatory
organization, whether commenced or threatened, in respect thereof, "CLAIMS") to
which any of them may become subject insofar as such Claims arise out of or are
based upon: (i) any untrue statement or alleged untrue statement of a material
fact in a Registration Statement or the omission or alleged omission to state
therein a material fact required to be stated or necessary to make the
statements therein not misleading; (ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus if
10
used prior to the effective date of such Registration Statement, or contained in
the final prospectus (as amended or supplemented, if the Company files any
amendment thereof or supplement thereto with the SEC) or the omission or alleged
omission to state therein any material fact necessary to make the statements
made therein, in light of the circumstances under which the statements therein
were made, not misleading; or (iii) any violation or alleged violation by the
Company of the 1933 Act, the 1934 Act, any other law, including, without
limitation, any state securities law, or any rule or regulation thereunder
relating to the offer or sale of the Registrable Securities (the matters in the
foregoing clauses (i) through (iii) being, collectively, "VIOLATIONS"). Subject
to the restrictions set forth in Section 6(c) with respect to the number of
legal counsel, the Company shall reimburse the Indemnified Person, promptly as
such expenses are incurred and are due and payable, for any reasonable legal
fees or other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(a): (i) shall not apply to a Claim arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by any Indemnified Person or underwriter for
such Indemnified Person expressly for use in connection with the preparation of
such Registration Statement or any such amendment thereof or supplement thereto;
(ii) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of the Company, which
consent shall not be unreasonably withheld; and (iii) with respect to any
preliminary prospectus, shall not inure to the benefit of any Indemnified Person
if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented, such corrected prospectus was timely made
available by the Company pursuant to Section 3(c) hereof, and the Indemnified
Person was promptly advised in writing not to use the incorrect prospectus prior
to the use giving rise to a Violation and such Indemnified Person,
notwithstanding such advice, used it. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of the
Indemnified Person and shall survive the transfer of the Registrable Securities
by the Buyer pursuant to Section 9.
b. [Intentionally Omitted].
c. Promptly after receipt by an Indemnified Person under this Section
6 of notice of the commencement of any action (including any governmental
action), such Indemnified Person shall, if Claim in respect thereof is to be
made against any the Company under this Section 6, deliver to the Company a
written notice of the commencement thereof, and the Company shall have the right
to participate in, and, to the extent the Company so desires, to assume control
of the defense thereof with counsel mutually satisfactory to the Company and the
Indemnified Person, as the case may be.
PROVIDED, HOWEVER, that an Indemnified Person shall have the right to
retain its own counsel with the fees and expenses to be paid by the Company, if,
in the reasonable opinion of counsel retained by the Company, the representation
by such counsel of the Indemnified Person and the Company would be inappropriate
due to actual or potential differing interests between such Indemnified Person
and any other party represented by such counsel in such proceeding. The Company
shall pay for only one separate legal counsel for the Indemnified Persons, and
such legal counsel shall be selected by Buyer, if the Buyer is entitled to
indemnification hereunder. The failure to deliver written notice to the Company
within a reasonable time of the commencement of any such action shall not
relieve the Company of any liability to
11
the Indemnified Person under this Section 6, except to the extent that the
Company is actually prejudiced in its ability to defend such action. The
indemnification required by this Section 6 shall be made by periodic payments of
the amount thereof during the course of the investigation or defense, as such
expense, loss, damage or liability is incurred and is due and payable.
7. CONTRIBUTION. To the extent any indemnification by the Company is
prohibited or limited by law, the Company agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law.
8. REPORTS UNDER THE 1934 ACT. With a view to making available to the
Buyer the benefits of Rule 144 promulgated under the 1933 Act or any other
similar rule or regulation of the SEC that may at any time permit the Buyer to
sell securities of the Company to the public without registration ("RULE 144"),
the Company agrees to:
a. make and keep public information available, as those terms are
understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
c. furnish to the Buyer so long as the Buyer owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the 1933 Act and
the 1934 Act, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested to permit the Buyers to
sell such securities pursuant to Rule 144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS. The rights under this Agreement
shall be automatically assignable by the Buyers to any transferee of all or any
portion of Registrable Securities if: (i) the Buyer agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment, (ii)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee, and (b) the securities with respect to which such registration rights
are being transferred or assigned, (iii) following such transfer or assignment,
the further disposition of such securities by the transferee or assignee is
restricted under the 1933 Act and applicable state securities laws, (iv) at or
before the time the Company receives the written notice contemplated by clause
(ii) of this sentence, the transferee or assignee agrees in writing with the
Company to be bound by all of the provisions contained herein, and (v) such
transfer shall have been made in accordance with the applicable requirements of
the Securities Purchase Agreement.
12
10. AMENDMENT OF REGISTRATION RIGHTS. Provisions of this Agreement may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with
written consent of the Company, the Buyer (to the extent such Buyer still owns
Registrable Securities) and Buyers who hold a majority interest of the
Registrable Securities. Any amendment or waiver effected in accordance with this
Section 10 shall be binding upon the Buyer and the Company.
11. MISCELLANEOUS.
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
b. Any notices required or permitted to be given under the terms
hereof shall be sent by certified or registered mail (return receipt requested)
or delivered personally or by courier (including a recognized overnight delivery
service) or by facsimile and shall be effective five days after being placed in
the mail, if mailed by regular United States mail, or upon receipt, if delivered
personally or by courier (including a recognized overnight delivery service) or
by facsimile, in each case addressed to a party. The addresses for such
communications shall be:
If to the Company: To the address set forth immediately below such
Company's name on the signature pages hereto.
With copy to:
Xxxx Xxxxxxxx, Esq.
XXXX, FORWARD, XXXXXXXX AND SCRIPPS, LLP
000 Xxxx Xxxxxxxx, Xxxxx 0000
Xxx Xxxxx, XX 00000
Tel (000) 000-0000
Fax (000) 000-0000
If to a Buyer: To the address set forth immediately below such Buyer's
name on the signature pages hereto.
Each party shall provide notice to the other party of any change in address.
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
d. This Agreement shall be governed by and construed in accordance
with the internal laws of the
00
Xxxxx xx Xxx Xxxx. Any controversy or claim arising out of or related to this
Debenture or the breach thereof, shall be settled by binding arbitration in New
York, NY in accordance with the Expedited Procedures (Rules 53-57) of the
Commercial Arbitration Rules of the American Arbitration Association ("AAA"). A
proceeding shall be commenced upon written demand by Company or the Buyer to the
other. The arbitrator(s) shall enter a judgment by default against any party,
which fails or refuses to appear in any properly noticed arbitration proceeding.
The proceeding shall be conducted by one (1) arbitrator, unless the amount
alleged to be in dispute exceeds two hundred fifty thousand dollars ($250,000),
in which case three (3) arbitrators shall preside. The arbitrator(s) will be
chosen by the parties from a list provided by the AAA, and if they are unable to
agree within ten (10) days, the AAA shall select the arbitrator(s). The
arbitrators must be experts in securities law and financial transactions. The
arbitrators shall assess costs and expenses of the arbitration, including all
attorneys' and experts' fees, as the arbitrators believe is appropriate in light
of the merits of the parties' respective positions in the issues in dispute.
Each party submits irrevocably to the jurisdiction of any state court sitting in
New York, NY or to the United States District Court sitting in New York for
purposes of enforcement of any discovery order, judgment or award in connection
with such arbitration. The award of the arbitrator(s) shall be final and binding
upon the parties and may be enforced in any court having jurisdiction. The
arbitration shall be held in such place as set by the arbitrator(s) in
accordance with Rule 55. With respect to any arbitration proceeding in
accordance with this section, the prevailing party's reasonable attorney's fees
and expenses shall be borne by the non-prevailing party.
Although the parties, as expressed above, agree that all claims,
including claims that are equitable in nature, for example specific performance,
shall initially be prosecuted in the binding arbitration procedure outlined
above, if the arbitration panel dismisses or otherwise fails to entertain any or
all of the equitable claims asserted by reason of the fact that it lacks
jurisdiction, power and/or authority to consider such claims and/or direct the
remedy requested, then, in only that event, will the parties have the right to
initiate litigation respecting such equitable claims or remedies. The forum for
such equitable relief shall be in either a state or federal court sitting in New
York, NY. Each party waives any right to a trial by jury, assuming such right
exists in an equitable proceeding, and irrevocably submits to the jurisdiction
of said New York court. New York law shall govern both the proceeding as well as
the interpretation and construction of the Debenture and the transaction as a
whole.
e. This Agreement and the Securities Purchase Agreement (including all
schedules and exhibits thereto) constitute the entire agreement among the
parties hereto with respect to the subject matter hereof and thereof. There are
no restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein and therein. This Agreement and the Securities
Purchase Agreement supersede all prior agreements and understandings among the
parties hereto with respect to the subject matter hereof and thereof.
f. Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.
g. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
14
h. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same agreement. This Agreement, once executed by a party, may be delivered to
the other party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.
i. Each party shall do and perform, or cause to be done and performed,
all such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.
j. Except as otherwise provided herein, all consents and other
determinations to be made by the Buyer pursuant to this Agreement shall be made
by Buyers holding a majority of the Registrable Securities, determined as if the
all of the Debentures then outstanding have been converted into for Registrable
Securities.
k. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Buyer by vitiating the intent and
purpose of the transactions contemplated hereby. Accordingly, the Company
acknowledges that the remedy at law for breach of its obligations hereunder will
be inadequate and agrees, in the event of a breach or threatened breach by the
Company of any of the provisions hereunder, that the Buyer shall be entitled, in
addition to all other available remedies in law or in equity, to an injunction
or injunctions to prevent or cure breaches of the provisions of this Agreement
and to enforce specifically the terms and provisions hereof, without the
necessity of showing economic loss and without any bond or other security being
required.
l. The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and no rules of
strict construction will be applied against any party.
m. In the event that any provision of this Agreement is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any
provision hereof which may prove invalid or unenforceable under any law shall
not affect the validity or enforceability of any other provision hereof.
n. The initial number of Registrable Securities included in any
Registration Statement and each increase to the number of Registrable Securities
included therein shall be allocated pro rata among the Buyers based on the
number of Registrable Securities held by the Buyer at the time of such
establishment or increase, as the case may be. In the event an Buyer shall sell
or otherwise transfer any of such holder's Registrable Securities, each
transferee shall be allocated a pro rata portion of the number of Registrable
Securities included in a Registration Statement for such transferor. Any shares
of Common Stock included on a Registration Statement and which remain allocated
to any person or entity which does not hold any Registrable Securities shall be
allocated to the remaining Buyers, pro rata based on the number of shares of
Registrable Securities then held by the Buyers. For the avoidance of doubt, the
number of Registrable
15
Securities held by a Buyer shall be determined as if all the Debentures and
Warrants then outstanding and held by a Buyer were converted into or exercised
for Registrable Securities.
o. There shall be no oral modifications or amendments to this
Agreement. This Agreement may be modified or amended only in writing.
IN WITNESS WHEREOF, the undersigned Buyer and the Company have caused
this Agreement to be duly executed as of the 10th day of June, 2002.
PATRIOT SCIENTIFIC CORPORATION LINCOLN VENTURES, LLC
By: /S/ XXXXXX X. XXXXXXXX By: /S/ XXXXXXX XXXXX
-------------------------------- --------------------------------
Xxxxxx X. Xxxxxxxx, CFO Xxxxxxx Xxxxx, Manager
ADDRESS: ADDRESS:
PATRIOT SCIENTIFIC CORPORATION c/o Entity Services Group, LLC
10989 Via Frontera 000 Xxxxx Xxxx, Xxxxx 000
Xxx Xxxxx, XX 00000 Xxxxxxxxxx, XX 00000
Telephone: (000) 000-0000 Telephone: (000) 000-0000
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
16
