REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of June
2, 1999, between Knowledge Capital Investment Group, a Texas general partnership
("Purchaser") and Xxxxxxxx Xxxxx Co., a Utah corporation (the "Company").
RECITALS
The parties hereto (or their predecessors) have entered into, or are
equity owners in entities that have entered into, other agreements which
contemplate, among other things, the execution and delivery of this Agreement by
the parties hereto.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, the parties hereto hereby agree as
follows:
1. Definitions. For purposes of this Agreement, the following terms have
the following meanings when used herein with initial capital letters:
(a) Advice: As defined in Section 6 hereof.
(b) Common Stock: The Common Stock, par value $0.05, of the Company.
(c) Demand Notice: As defined in Section 3 hereof.
(d) Demand Registration: As defined in Section 3 hereof.
(e) Losses: As defined in Section 8 hereof.
(f) Piggyback Registration: As defined in Section 4 hereof.
(g) Prospectus: The prospectus included in any Registration Statement
(including without limitation a prospectus that discloses information previously
omitted from a prospectus filed as part of an effective registration statement
in reliance upon Rule 430A promulgated under the Securities Act), as amended or
supplemented by any prospectus supplement,
with respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
(h) Registrable Securities: All shares of Series A Preferred and all
shares of Common Stock acquired by Purchaser or any permitted transferee or
their respective assigns upon conversion of any shares of Series A Preferred
(including any shares of Series A Preferred or Common Stock or other securities
that may be received by Purchaser or any permitted transferee or their
respective assigns (x) as a result of a stock dividend or stock split of Series
A Preferred or Common Stock or (y) on account of Series A Preferred or Common
Stock in a recapitalization or other transaction involving the Company) upon the
respective original issuance thereof, and at all times subsequent thereto, and
all other securities of the Company of any class or series that are otherwise
publicly traded and are beneficially owned by Purchaser or any of its
Affiliates, until, in the case of any such security, (i) it is effectively
registered under the Securities Act and disposed of in accordance with the
Registration Statement covering it, (ii) it is saleable by the holder thereof
pursuant to Rule 144(k), or (iii) it is distributed to the public pursuant to
Rule 144.
(i) Registration Expenses: As defined in Section 7 hereof.
(j) Registration Statement: Any registration statement of the Company
under the Securities Act that covers any of the Registrable Securities pursuant
to the provisions of this Agreement, including the related Prospectus, all
amendments and supplements to such registration statement (including
post-effective amendments), all exhibits and all material incorporated by
reference or deemed to be incorporated by reference in such registration
statement.
(k) Rule 144: Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC.
(l) SEC: The Securities and Exchange Commission.
(m) Securities Act: The Securities Act of 1933, as amended.
(n) Series A Preferred: Shares of Series A Preferred Stock, liquidation
preference $100 per share, of the Company.
2
(o) Special Counsel: As defined in Section 7(b) hereof.
(p) Underwritten registration or underwritten offering: A distribution,
registered pursuant to the Securities Act in which securities of the Company are
sold to an underwriter for reoffering to the public.
2. Holders of Registrable Securities. Whenever a number or percentage of
Registrable Securities is to be determined hereunder, each then-outstanding
Other Equity Security that is exercisable to purchase, convertible into, or
exchangeable for shares of capital stock of the Company will be deemed to be
equal to the number of shares of Common Stock for which such Other Equity
Security (or the security into which such Other Equity Security is then
convertible) is then convertible.
3. Demand Registration. (a) Requests for Registration. At any time and
from time to time after the date hereof, the holders of Registrable Securities
constituting at least 5% of the total number of Registrable Securities then
outstanding will have the right by written notice delivered to the Company (a
"Demand Notice"), to require the Company to register (a "Demand Registration")
under and in accordance with the provisions of the Securities Act the number of
Registrable Securities requested to be so registered (but not less than 5% of
the total number of Registrable Securities then outstanding); provided, however,
that no Demand Notice may be given prior to four months after the effective date
of the immediately preceding Demand Registration.
The number of Demand Registrations pursuant to this Section 3(a)
shall not exceed three; provided, however, that in determining the number of
Demand Registrations to which the holders of Registrable Securities are entitled
there shall be excluded (1) any Demand Registration that is an underwritten
registration if the managing underwriter or underwriters have advised the
holders of Registrable Securities that the total number of Registrable
Securities requested to be included therein exceeds the number of Registrable
Securities that can be sold in such offering in accordance with the provisions
of this Agreement without materially and adversely affecting the success of such
offering, (2) any Demand Registration that does not become effective or is not
maintained effective for the period required pursuant to Section 3(b) hereof,
unless in the case of this clause (2) such Demand Registration does not become
effective after being filed by the Company solely by reason of the refusal to
proceed by the holders of Registrable Securities unless (i) the refusal to
proceed is based upon the advice of counsel relating to a matter with respect to
the
3
Company, or (ii) the holders of the Registrable Securities elect to pay all
Registration Expenses in connection with such Demand Registration, and (3) any
Demand Registration in connection with which any other stockholder of the
Company exercises a right of first refusal which it may otherwise have and
purchases all the stock registered and to be sold pursuant to the Demand
Registration.
(b) Filing and Effectiveness. The Company will file a Registration
Statement relating to any Demand Registration within 60 calendar days, and will
use its best efforts to cause the same to be declared effective by the SEC as
soon as practicable thereafter, and in any event, within 120 calendar days, of
the date on which the holders of Registrable Securities first give the Demand
Notice required by Section 3(a) hereof with respect to such Demand Registration.
All requests made pursuant to this Section 3 will specify the number
of Registrable Securities to be registered and will also specify the intended
methods of disposition thereof; provided, that if the holder demanding such
registration specifies one particular type of underwritten offering, such method
of disposition shall be such type of underwritten offering or a series of such
underwritten offerings (as such demanding holders of Registrable Securities may
elect) during the period during which the Registration Statement is effective.
If any Demand Registration is requested to be effected as a "shelf"
registration by the holders of Registrable Securities demanding such Demand
Registration, the Company will keep the Registration Statement filed in respect
thereof effective for a period of up to 12 months from the date on which the SEC
declares such Registration Statement effective (subject to extension pursuant to
Sections 5 and 6 hereof) or such shorter period that will terminate when all
Registrable Securities covered by such Registration Statement have been sold
pursuant to such Registration Statement.
Within ten calendar days after receipt of such Demand Notice, the
Company will serve written notice thereof (the "Notice") to all other holders of
Registrable Securities and will, subject to the provisions of Section 3(c)
hereof, include in such registration all Registrable Securities with respect to
which the Company receives written requests for inclusion therein within 20
calendar days after the receipt of the Notice by the applicable holder.
The holders of Registrable Securities will be permitted to withdraw
Registrable Securities from a
4
Registration at any time prior to the effective date of such Registration
provided the remaining number of Registrable Securities subject to a Demand
Notice is at least 5% of the total number of Registrable Securities then
outstanding.
(c) Priority on Demand Registration. If any of the Registrable Securities
registered pursuant to a Demand Registration are to be sold in one or more firm
commitment underwritten offerings, the Company may also provide written notice
to holders of its equity securities (other than Registrable Securities), if any,
who have piggyback registration rights with respect thereto and will permit all
such holders who request to be included in the Demand Registration to include
any or all equity securities held by such holders in such Demand Registration on
the same terms and conditions as the Registrable Securities. Notwithstanding the
foregoing, if the managing underwriter or underwriters of the offering to which
such Demand Registration relates advises the holders of Registrable Securities
that the total amount of Registrable Securities and securities that such equity
security holders intend to include in such Demand Registration is in the
aggregate such as to materially and adversely affect the success of such
offering, then (i) first, the amount of securities to be offered for the account
of the holders of such other equity securities will be reduced, to zero if
necessary (pro rata among such holders on the basis of the amount of such other
securities to be included therein by each such holder), and (ii) second, the
number of Registrable Securities included in such Demand Registration will, if
necessary, be reduced and there will be included in such firm commitment
underwritten offering only the number of Registrable Securities that, in the
opinion of such managing underwriter or underwriters, can be sold without
materially and adversely affecting the success of such offering, allocated pro
rata among the holders of Registrable Securities on the basis of the amount of
Registrable Securities to be included therein by each such holder.
(d) Postponement of Demand Registration. The Company will be entitled to
postpone the filing period (or suspend the effectiveness) of any Demand
Registration for a reasonable period of time not in excess of 90 calendar days,
if the Company determines, in the good faith exercise of its reasonable business
judgment, that such registration and offering could materially interfere with
bona fide financing plans of the Company or would require disclosure of
information, the premature disclosure of which could materially and adversely
affect the Company. If the Company postpones the filing of a Registration
Statement, it will promptly notify the
5
holders of Registrable Securities in writing when the events or circumstances
permitting such postponement have ended.
4. Piggyback Registration. (a) Right to Piggyback. If at any time the
Company proposes to file a registration statement under the Securities Act with
respect to an offering of any class of equity securities (other than a
registration statement (i) on Form X-0, X-0 or any successor form thereto or
(ii) filed solely in connection with an offering made solely to employees of the
Company), whether or not for its own account, then the Company will give written
notice of such proposed filing to the holders of Registrable Securities at least
10 calendar days before the anticipated filing date. Such notice will offer such
holders the opportunity to register such amount of Registrable Securities as
each such holder may request (a "Piggyback Registration"). Subject to Section
4(b) hereof, the Company will include in each such Piggyback Registration all
Registrable Securities with respect to which the Company has received written
requests for inclusion therein. The holders of Registrable Securities will be
permitted to withdraw all or part of the Registrable Securities from a Piggyback
Registration at any time prior to the effective date of such Piggyback
Registration.
(b) Priority on Piggyback Registrations. The Company will cause the
managing underwriter or underwriters of a proposed underwritten offering to
permit holders of Registrable Securities requested to be included in the
registration for such offering to include therein all such Registrable
Securities requested to be so included on the same terms and conditions as any
similar securities, if any, of the Company included therein. Notwithstanding the
foregoing, if the managing underwriter or underwriters of such offering deliver
an opinion to the holders of Registrable Securities to the effect that the total
amount of securities which such holders, the Company and any other persons
having rights to participate in such registration propose to include in such
offering is such as to materially and adversely affect the success of such
offering, then:
(i) if such registration is a primary registration on behalf of the
Company, the amount of securities to be included therein (x) for the
account of holders of Registrable Securities on the one hand (allocated
pro rata among such holders on the basis of the Registrable Securities
requested to be included therein by each such holder), and (y) for the
account of all such other persons (exclusive of the Company), on the other
hand, will be reduced (to zero if necessary) pro rata in proportion to the
respective amounts of securities requested to be
6
included therein to the extent necessary to reduce the total amount of
securities to be included in such offering to the amount recommended by
such managing underwriter or underwriters; and
(ii) if such registration is an underwritten secondary registration
on behalf of holders of securities of the Company other than Registrable
Securities, the Company will include therein: (x) first, up to the full
number of securities of such persons exercising "demand" registration
rights that in the opinion of such managing underwriter or underwriters
can be sold or allocated among such holders as they may otherwise so
determine, and (y) second, the amount of Registrable Securities and
securities proposed to be sold by any other person in excess of the amount
of securities such persons exercising "demand" registration rights propose
to sell that, in the opinion of such managing underwriter or underwriters,
can be sold (allocated pro rata among the holders of such Registrable
Securities and such other persons on the basis of the dollar amount of
securities requested to be included therein).
(c) Registration of Securities other than Registrable Securities. Without
the written consent of the holders of a majority of the then-outstanding
Registrable Securities, the Company will not grant to any person the right to
request the Company to register any securities of the Company under the
Securities Act unless the rights so granted are subject to the prior rights of
the holders of Registrable Securities set forth herein, and, if exercised, would
not otherwise conflict or be inconsistent with the provisions of, this
Agreement.
5. Restrictions on Sale by Holders of Registrable Securities. Each holder
of Registrable Securities whose Registrable Securities are covered by a
Registration Statement filed pursuant to Section 3 or Section 4 hereof, agrees
and will confirm such agreement in writing, if such holder is so requested
(pursuant to a timely written notice) by the managing underwriter or
underwriters in an underwritten offering, not to effect any public sale or
distribution of any of the Company's equity securities (except as part of such
underwritten offering), including a sale pursuant to Rule 144, during the
10-calendar day period prior to, and during the 90-calendar day period (or such
longer period as any managing underwriter or underwriters may reasonably request
in connection with any underwritten public offering) beginning on, the closing
date of each underwritten offering made pursuant to such Registration Statement
or such other shorter period to which the executive officers may agree. If a
request is made pursuant to this
7
Section 5, the time period during which a Demand Registration (if a shelf
registration) is required to remain continuously effective pursuant to Section
3(b) will be extended by 100 calendar days or such shorter period that will
terminate when all such Registrable Securities not so included have been sold
pursuant to such Registration Statement.
6. Registration Procedures. In connection with the Company's registration
obligations pursuant to Sections 3 and 4 hereof, the Company will effect such
registrations to permit the sale of such Registrable Securities in accordance
with the intended method or methods of disposition thereof, and pursuant thereto
the Company will as expeditiously as possible:
(a) Prepare and file with the SEC a Registration Statement or Registration
Statements on any appropriate form under the Securities Act available for the
sale of the Registrable Securities by the holders thereof in accordance with the
intended method or methods of distribution thereof (including, without
limitation, distributions in connection with transactions with broker-dealers or
others for the purpose of hedging Registrable Securities, involving possible
sales, short sales, options, pledges or other transactions which may require
delivery and sale to broker-dealers or others of Registrable Securities), and
cause each such Registration Statement to become effective and remain effective
as provided herein; provided, however, that before filing a Registration
Statement or Prospectus or any amendments or supplements thereto (including
documents that would be incorporated or deemed to be incorporated therein by
reference) the Company will furnish to the holders of the Registrable Securities
covered by such Registration Statement, the Special Counsel and the managing
underwriters, if any, copies of all such documents proposed to be filed, which
documents will be subject to the review of such holders, the Special Counsel and
such underwriters, and the Company will not file any such Registration Statement
or amendment thereto or any Prospectus or any supplement thereto (including such
documents which, upon filing, would or would be incorporated or deemed to be
incorporated by reference therein) to which the holders of a majority of the
Registrable Securities covered by such Registration Statement, the Special
Counsel or the managing underwriter, if any, shall reasonably object on a timely
basis.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary to keep such
Registration Statement continuously effective for the applicable period
specified in Section 3; cause the related Prospectus to be supplemented by any
required Prospectus supplement, and as so supplemented to be filed
8
pursuant to Rule 424 (or any similar provisions then in force) under the
Securities Act; and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such Registration
Statement during the applicable period in accordance with the intended methods
of disposition by the sellers thereof set forth in such Registration Statement
as so amended or to such Prospectus as so supplemented.
(c) Notify the selling holders of Registrable Securities, the Special
Counsel and the managing underwriters, if any, promptly, and (if requested by
any such person) confirm such notice in writing, (i) when a Prospectus or any
Prospectus supplement or post-effective amendment has been filed, and, with
respect to a Registration Statement or any post-effective amendment, when the
same has become effective, (ii) of any request by the SEC or any other federal
or state governmental authority for amendments or supplements to a Registration
Statement or related Prospectus or for additional information, (iii) of the
issuance by the SEC or any other federal or state governmental authority of any
stop order suspending the effectiveness of a Registration Statement or the
initiation of any proceedings for that purpose, (iv) if at any time the
representations and warranties of the Company contained in any agreement
contemplated by Section 6(n) hereof (including any underwriting agreement) cease
to be true and correct, (v) of the receipt by the Company of any notification
with respect to the suspension of the qualification or exemption from
qualification of any of the Registrable Securities for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose, (vi) of the
occurrence of any event which makes any statement made in such Registration
Statement or related Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or which
requires the making of any changes in a Registration Statement, Prospectus or
documents so that, in the case of the Registration Statement, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading and, in the case of the Prospectus, it will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated or is necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and (vii) of the
Company's reasonable determination that a post-effective amendment to a
Registration Statement would be appropriate.
(d) Use every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of a Registration
9
Statement, or the lifting of any suspension of the qualification (or exemption
from qualification) of any of the Registrable securities for sale in any
jurisdiction, at the earliest possible moment.
(e) If requested by the managing underwriters, if any, or the holders of a
majority of the Registrable Securities being registered, (i) promptly
incorporate in a Prospectus supplement or post-effective amendment such
information as the managing underwriters, if any, and such holder agree should
be included therein as may be required by applicable law and (ii) make all
required filings of such Prospectus supplement or such post-effective amendment
as soon as practicable after the Company has received notification of the
matters to be incorporated in such Prospectus supplement or post-effective
amendment; provided, however, that the Company will not be required to take any
actions under this Section 6(e) that are not, in the opinion of counsel for the
Company, in compliance with applicable law.
(f) Furnish to each selling holder of Registrable Securities, the Special
Counsel and each managing underwriter, if any, without charge, at least one
conformed copy of the Registration Statement and any post-effective amendment
thereto, including financial statements (but excluding schedules, all documents
incorporated or deemed incorporated therein by reference and all exhibits,
unless requested in writing by such holder, counsel or underwriter).
(g) Deliver to each selling holder of Registrable Securities, the Special
Counsel and the underwriters, if any, without charge, as many copies of the
Prospectus or Prospectuses relating to such Registrable Securities (including
each preliminary prospectus) and any amendment or supplement thereto as such
persons may request; and the Company hereby consents to the use of such
Prospectus or each amendment or supplement thereto by each of the selling
holders of Registrable Securities and the underwriters, if any, in connection
with the offering and sale of the Registrable Securities covered by such
Prospectus or any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities, to register or
qualify or cooperate with the selling holders of Registrable Securities, the
underwriters, if any, and their respective counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or blue sky laws of such jurisdictions within the United States as
any seller or
10
underwriter reasonably requests in writing; keep each such registration or
qualification (or exemption therefrom) effective during the period such
Registration Statement is required to be kept effective and do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdiction of the Registrable Securities covered by the applicable
Registration Statement; provided, however that the Company will not be required
to (i) qualify generally to do business in any jurisdiction in which it is not
then so qualified or (ii) take any action that would subject it to general
service of process in any such jurisdiction in which it is not then so subject.
(i) Cooperate with the selling holders of Registrable Securities and the
managing underwriters, if any, to facilitate the timely preparation and delivery
of certificates representing Registrable Securities to be sold, which
certificates will not bear any restrictive legends; and enable such Registrable
Securities to be in such denominations and registered in such names as the
managing underwriters, if any, shall request at least two business days prior to
any sale of Registrable securities to the underwriters.
(j) Cause the Registrable Securities covered by the applicable
Registration Statement to be registered with or approved by such other
governmental agencies or authorities within the United States except as may be
required solely as a consequence of the nature of such selling holder's
business, in which case the Company will cooperate in all reasonable respects
with the filing of such Registration Statement and the granting of such
approvals as may be necessary to enable the seller or sellers thereof or the
underwriters, if any, to consummate the disposition of such Registrable
Securities.
(k) Upon the occurrence of any event contemplated by Section 6(c)(vi) or
6(c)(vii) hereof, prepare a supplement or post-effective amendment to each
Registration Statement or a supplement to the related Prospectus or any document
incorporated therein by reference or file any other required document so that,
as thereafter delivered to the purchasers of the Registrable Securities being
sold thereunder, such Prospectus will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(l) Use its best efforts to cause all Registrable Securities covered by
such Registration Statement to be, at the Company's option (i) listed on each
securities exchange, if
11
any, on which similar securities issued by the Company are then listed or, if no
similar securities issued by the Company are then so listed, on the New York
Stock Exchange or another national securities exchange if the securities qualify
to be so listed or (ii) authorized to be quoted on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") or the National Market
System of NASDAQ if the securities qualify to be so quoted; in each case, if
requested by the holders of a majority of the Registrable Securities covered by
such Registration statement or the managing underwriters, if any.
(m) Prior to the effective date of the first Demand Registration or the
first Piggyback Registration, whichever shall occur first, (i) engage an
appropriate transfer agent and provide the transfer agent with printed
certificates for the Registrable Securities in a form eligible for deposit with
The Depository Trust Company and (ii) provide a CUSIP number for the Registrable
Securities.
(n) Enter into such agreements (including, in the event of an underwritten
offering, an underwriting agreement in form, scope and substance as is customary
in underwritten offerings) and take all such other actions in connection
therewith (including those requested by the holders of a majority of the
Registrable Securities being sold or, in the event of an underwritten offering,
those requested by the managing underwriters) in order to expedite or facilitate
the disposition of such Registrable Securities and in such connection, whether
or not an underwriting agreement is entered into and whether or not the
registration is an underwritten registration, (i) make such representations and
warranties to the holders of such Registrable Securities and the underwriters,
if any, with respect to the business of the Company and its subsidiaries, the
Registration Statement, Prospectus and documents incorporated by reference or
deemed incorporated by reference, if any, in each case, in form, substance and
scope as are customarily made by issuers to underwriters in underwritten
offerings and confirm the same if and when requested; (ii) obtain opinions of
counsel to the Company and updates thereof (which counsel and opinions (in form,
scope and substance) shall be reasonably satisfactory to the managing
underwriters, if any, and the holders of a majority of the Registrable
Securities being sold) addressed to such selling holder of Registrable
Securities and each of the underwriters, if any, covering the matters
customarily covered in opinions requested in underwritten offerings and such
other matters as may be reasonably requested by such holders and underwriters,
including without limitation the matters referred to in Section 6(n)(i) hereof;
(iii) use its best efforts to
12
obtain "comfort" letters and updates thereof from the independent certified
public accountants of the Company (and, if necessary, any other certified public
accountants of any subsidiary of the Company or of any business acquired by the
Company for which financial statements and financial data is, or is required to
be, included in the Registration Statement), addressed to each selling holder of
Registrable Securities and each of the underwriters, if any, such letters to be
in customary form and covering matters of the type customarily covered in
"comfort" letters in connection with underwritten offerings; and (iv) deliver
such documents and certificates as may be requested by the holders of a majority
of the Registrable Securities being sold, the Special Counsel and the managing
underwriters, if any, to evidence the continued validity of the representations
and warranties of the Company and its subsidiaries made pursuant to clause (i)
above and to evidence compliance with any customary conditions contained in the
underwriting agreement or similar agreement entered into by the Company. The
foregoing actions will be taken in connection with each closing under such
underwriting or similar agreement as and to the extent required thereunder.
(o) Make available for inspection by a representative of the holders of
Registrable Securities being sold, any underwriter participating in any
disposition of Registrable Securities, and any attorney or accountant retained
by such selling holders or underwriter, all financial and other records,
pertinent corporate documents and properties of the Company and its
subsidiaries, and cause the officers, directors and employees of the Company and
its subsidiaries to supply all information reasonably requested by any such
representative, underwriter, attorney or accountant in connection with such
Registration Statement; provided, however, that any records, information or
documents that are designated by the Company in writing as confidential at the
time of delivery of such records, information or documents will be kept
confidential by such persons unless (i) such records, information or documents
are in the public domain or otherwise publicly available, (ii) disclosure of
such records, information or documents is required by court or administrative
order or is necessary to respond to inquires of regulatory authorities, or (iii)
disclosure of such records, information or documents, in the opinion of counsel
to such person, is otherwise required by law (including, without limitation,
pursuant to the requirements of the Securities Act).
(p) Comply with all applicable rules and regulations of the SEC and make
generally available to its security holders earning statements satisfying the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or
any similar
13
rule promulgated under the Securities Act) no later than 45 calendar days after
the end of any 12-month period (or 90 calendar days after the end of any
12-month period if such period is a fiscal year) (i) commencing at the end of
any fiscal quarter in which Registrable Securities are sold to underwriters in a
firm commitment or best efforts underwritten offering, and (ii) if not sold to
underwriters in such an offering, commencing on the first day of the first
fiscal quarter of the Company, after the effective date of a Registration
Statement, which statements shall cover said 12-month period.
(q) Cooperate with any reasonable request by holders of a majority of the
Registrable Securities offered for sale, including by ensuring participation by
the executive management of the Company in road shows, so long as such
participation does not materially interfere with the operation of the Company's
business.
The Company may require each seller of Registrable Securities as to
which any registration is being effected to furnish to the Company such
information regarding the distribution of such Registrable Securities as the
Company may, from time to time, reasonably request in writing and the Company
may exclude from such registration the Registrable Securities of any seller who
unreasonably fails to furnish such information within a reasonable time after
receiving such request.
Each holder of Registrable Securities will be deemed to have agreed
by virtue of its acquisition of such Registrable Securities that, upon receipt
of any notice from the Company of the occurrence of any event of the kind
described in Section 6(c)(ii), 6(c)(iii), 6(c)(v), 6(c)(vi) or 6(c)(vii) hereof,
such holder will forthwith discontinue disposition of such Registrable
Securities covered by such Registration Statement or Prospectus (a "Black-Out")
until such holder's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 6(k) hereof, or until it is advised in
writing (the "Advice") by the Company that the use of the applicable Prospectus
may be resumed, and has received copies of any additional or supplemental
filings that are incorporated or deemed to be incorporated by reference in such
Prospectus, provided, however, that in no event shall the aggregate number of
days during which a Black-Out is effective during any period of 24 consecutive
months exceed 90. In the event the Company shall give any such notice, the time
period prescribed in Section 3(a) hereof will be extended by the number of days
during the time period from and including the date of the giving of such notice
to and including the date when each
14
seller of Registrable Securities covered by such Registration Statement shall
have received (x) the copies of the supplemented or amended Prospectus
contemplated by Section 6(k) hereof or (y) the Advice.
7. Registration Expenses. (a) All Registration Expenses will be borne by
the Company whether or not any of the Registration Statements become effective.
"Registration Expenses" will mean all fees and expenses incident to the
performance of or compliance with this Agreement by the Company, including,
without limitation, (i) all registration and filing fees (including without
limitation fees and expenses (x) with respect to filings required to be made
with the National Association of Securities Dealers, Inc. and (y) of compliance
with securities or "blue sky" laws (including without limitation fees and
disbursements of counsel for the underwriters or selling holders in connection
with "blue sky" qualifications of the Registrable Securities and determination
of the eligibility of the Registrable Securities for investment under the laws
of such jurisdictions as the managing underwriters, if any, or holders of a
majority of the Registrable Securities being sold may designate)), (ii) printing
expenses (including without limitation expenses of printing certificates for
Registrable Securities in a form eligible for deposit with The Depository Trust
Company and of printing prospectuses if the printing of prospectuses is
requested by the holders of a majority of the Registrable Securities included in
any Registration Statement), (iii) messenger, telephone and delivery expenses,
(iv) fees and disbursements of counsel for the Company, the Special Counsel for
the sellers of the Registrable Securities, and counsel for the underwriters (v)
fees and disbursements of all independent certified public accountants referred
to in Section 6(n)(iii) hereof (including the expenses of any special audit and
"comfort" letters required by or incident to such performance), (vi) fees and
expenses of any "qualified independent underwriter" or other independent
appraiser participating in an offering pursuant to Section 3 of Schedule E to
the By-laws of the National Association of Securities Dealers, Inc., (vii)
Securities Act liability insurance if the Company so desires such insurance, and
(viii) fees and expenses of all other persons retained by the Company, provided,
however, that Registration Expenses will not include fees and expenses of
counsel for the holders of Registrable Securities other than fees and expenses
of the Special Counsel and any local counsel nor shall it include underwriting
discounts and commissions relating to the offer and sale of Registrable
Securities, all of which shall be borne by such holders. In addition, the
Company will pay its internal expenses (including without limitation all
salaries and expenses of its officers and
15
employees performing legal or accounting duties), the expense of any annual
audit, the fees and expenses incurred in connection with the listing of the
securities to be registered on any securities exchange on which similar
securities issued by the Company are then listed and the fees and expenses of
any person, including special experts, retained by the Company.
(b) In connection with any Demand Registration or Piggyback Registration
hereunder, the Company will reimburse the holders of the Registrable Securities
being registered in such registration for the reasonable fees and disbursements
of not more than one counsel (the "Special Counsel"), together with appropriate
local counsel, chosen by the holders of a majority of the Registrable Securities
being registered.
8. Indemnification. (a) Indemnification by the Company. The Company will,
without limitation as to time, indemnify and hold harmless, to the fullest
extent permitted by law, each holder of Registrable Securities registered
pursuant to this Agreement, the officers, directors and agents and employees of
each of them, each person who controls such holder (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act) and the
officers, directors, agents and employees of any such controlling person, from
and against all losses, claims, damages, liabilities, costs (including without
limitation the costs of investigation and attorneys' fees) and expenses
(collectively, "Losses"), as incurred, arising out of or based upon any untrue
or alleged untrue statement of a material fact contained in any Registration
Statement, Prospectus or form of Prospectus or in any amendment or supplement
thereto or in any preliminary prospectus, or arising out of or based upon any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as the same are based solely upon information furnished in
writing to the Company by such holder expressly for use therein; provided,
however, that the Company will not be liable to any holder of Registrable
Securities to the extent that any such Losses arise out of or are based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in any preliminary prospectus if either (A) (i) such holder failed to send
or deliver a copy of the Prospectus with or prior to the delivery of written
confirmation of the sale by such holder of a Registrable Security to the person
asserting the claim from which such Losses arise and (ii) the Prospectus would
have completely corrected such untrue statement or alleged untrue statement or
such omission or alleged omission; or (B) such untrue statement or alleged
untrue statement, omission or alleged omission is completely corrected in an
amendment or supplement to the Prospectus previously furnished
16
by or on behalf of the Company with copies of the Prospectus as so amended or
supplemented, and such holder thereafter fails to deliver such Prospectus as so
amended or supplemented prior to or concurrently with the sale of a Registrable
Security to the person asserting the claim from which such Losses arise.
The rights of any holder of Registrable Securities hereunder will
not be exclusive of the rights of any holder of Registrable Securities under any
other agreement or instrument of any holder of Registrable Securities to which
the Company is a party. Nothing in such other agreement or instrument will be
interpreted as limiting or otherwise adversely affecting a holder of Registrable
Securities hereunder and nothing in this Agreement will be interpreted as
limiting or otherwise adversely affecting the holder of Registrable Securities'
rights under any such other agreement or instrument, provided, however, that no
Indemnified Party will be entitled hereunder to recover more than its
indemnified Losses.
(b) Indemnification by Holders of Registrable Securities. In connection
with any Registration Statement in which a holder of Registrable Securities is
participating, such holder of Registrable Securities will furnish to the Company
in writing such information as the Company reasonably requests for use in
connection with any Registration Statement or Prospectus and will severally
indemnify, to the fullest extent permitted by law, the Company, its directors
and officers, agents and employees, each person who controls the Company (within
the meaning of Section 15 of the Securities Act and Section 20 of the Exchange
Act), and the directors, officers, agents or employees of such controlling
persons, from and against all Losses arising out of or based upon any untrue
statement of a material fact contained in any Registration Statement, Prospectus
or preliminary prospectus or arising out of or based upon any omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading, to the extent, but only to the extent, that such untrue
statement or omission is contained in any information so furnished in writing by
such holder to the Company expressly for use in such Registration Statement or
Prospectus and was relied upon by the Company in the preparation of such
Registration Statement, Prospectus or preliminary prospectus. In no event will
the liability of any selling holder of Registrable Securities hereunder be
greater in amount than the dollar amount of the proceeds (net of payment of all
expenses and underwriter's discounts and commissions) received by such holder
upon the sale of the Registrable Securities giving rise to such indemnification
obligation.
17
(c) Conduct of Indemnification Proceedings. If any person shall become
entitled to indemnity hereunder (an "indemnified party"), such indemnified party
shall give prompt notice to the party from which such indemnity is sought (the
"indemnifying party") of any claim or of the commencement of any action or
proceeding with respect to which such indemnified party seeks indemnification or
contribution pursuant hereto; provided, however, that the failure to so notify
the indemnifying party will not relieve the indemnifying party from any
obligation or liability except to the extent that the indemnifying party has
been prejudiced materially by such failure. All fees and expenses (including any
fees and expenses incurred in connection with investigating or preparing to
defend such action or proceeding) will be paid to the indemnified party, as
incurred, within five calendar days of written notice thereof to the
indemnifying party (regardless of whether it is ultimately determined that an
indemnified party is not entitled to indemnification hereunder). The
indemnifying party will not consent to entry of any judgment or enter into any
settlement or otherwise seek to terminate any action or proceeding in which any
indemnified party is or could be a party and as to which indemnification or
contribution could be sought by such indemnified party under this Section 8,
unless such judgment, settlement or other termination includes as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release, in form and substance satisfactory to the
indemnified party, from all liability in respect of such claim or litigation for
which such indemnified party would be entitled to indemnification hereunder.
(d) Contribution. If the indemnification provided for in this Section 8 is
unavailable to an indemnified party under Section 8(a) or 8(b) hereof in respect
of any Losses or is insufficient to hold such indemnified party harmless, then
each applicable indemnifying party, in lieu of indemnifying such indemnified
party, will, jointly and severally, contribute to the amount paid or payable by
such indemnified party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the indemnifying party or
indemnifying parties, on the one hand, and such indemnified party, on the other
hand, in connection with the actions, statements or omissions that resulted in
such Losses as well as any other relevant equitable considerations. The relative
fault of such indemnifying party or indemnifying parties, on the one hand, and
such indemnified party, on the other hand, will be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission of a
material fact, has been taken or made by, or related to
18
information supplied by, such indemnifying party or indemnified party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses will be deemed to include any legal
or other fees or expenses incurred by such party in connection with any action
or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 8(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provision of this Section 8(d), an indemnifying party that
is a selling holder of Registrable Securities will not be required to contribute
any amount in excess of the amount by which the total price at which the
Registrable Securities sold by such indemnifying party and distributed to the
public exceeds the amount of any damages which such indemnifying party has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
will be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
The indemnity, contribution and expense reimbursement obligations of
the Company hereunder will be in addition to any liability the Company may
otherwise have hereunder, under the Loan Agreement or otherwise. The provisions
of this Section 8 will survive so long as Registrable Securities remain
outstanding, notwithstanding any transfer of the Registrable Securities by any
holder thereof or any termination of this Agreement.
9. Rules 144 and 144A. The Company will file the reports required to be
filed by it under the Securities Act and the Exchange Act in a timely manner,
and will cooperate with any holder of Registrable Securities (including without
limitation by making such representations as any such holder may reasonably
request), all to the extent required from time to time to enable such holder to
sell Registrable Securities without registration under the Securities Act within
the limitations of the exemptions provided by Rules 144 and 144A (including,
without limitation, the requirements of Rule 144A(d)(4)). Upon the request of
any holder of Registrable Securities, the Company will deliver to such holder a
written statement as to whether it has complied with such filing requirements.
Notwithstanding the foregoing, nothing in this
19
Section 9 will be deemed to require the Company to register any of its
securities under any section of the Exchange Act.
11. Underwritten Registrations. If any of the Registrable Securities
covered by any Demand Registration are to be sold in an underwritten offering,
the investment banker or investment bankers and manager or managers that will
manage the offering will be selected by the holder of Registrable Securities
that gave the Demand Notice with respect to such offering; provided, that such
investment banker or manager shall be reasonably satisfactory to the Company. If
any Piggyback Registration is an underwritten offering, the Company will have
the right to select the investment banker or investment bankers and managers to
administer the offering.
11. Miscellaneous. (a) Remedies. In the event of a breach by the Company
of its obligations under this Agreement, each holder of Registrable Securities,
in addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under this Agreement. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of any
of the provisions of this Agreement and hereby further agrees that, in the event
of any action for specific performance in respect of such breach, it will waive
the defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company has not, as of the date
hereof, and will not, on or after the date hereof, enter into any agreement with
respect to its securities which is inconsistent with the rights granted to the
holders of Registrable Securities in this Agreement or otherwise conflicts with
the provisions hereof. This Agreement will be deemed to be an independent
agreement and no limitation or restriction contained in this Agreement will be
deemed to conflict with, limit or restrict the rights of Purchaser under this
Agreement.
(c) Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given, unless the Company has obtained the written consent of holders of a
majority of the then-outstanding Registrable Securities. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with respect
to a matter that relates exclusively to the rights of holders of Registrable
Securities whose securities are being sold pursuant to a Registration Statement
and that does not directly or indirectly affect the rights of other holders of
Registrable Securities
20
may be given by holders of at least 51% of the Registrable Securities being sold
by such holders; provided, however, that the provisions of this sentence may not
be amended, modified, or supplemented except in accordance with the provisions
of the immediately preceding sentence.
(d) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing and will be deemed given (i) when
made, if made by hand delivery, (ii) upon confirmation, if made by fax, or (iii)
one business day after being deposited with a reputable next-day courier,
postage prepaid, to the parties as follows:
(x) if to the Company, initially at 0000 Xxxx Xxxxxxx Xxxxxxxxx,
Xxxx Xxxx Xxxx, Xxxx 00000-0000, Fax Number (000) 000-0000, Attention: Xxx
X. Xxxxxxxxxxx, and thereafter at such other address, notice of which is
given to the holders of Registrable Securities in accordance with the
provisions of this Section 11(d);
(y) if to Purchaser, initially at 0000 Xxxxx Xxxxxxxx Xxxxx, Xxxxxx,
Xxxxx 00000, Fax Number (000) 000-0000, Attention: Xxxxxx X. Xxxxxx, and
thereafter at such other address, notice of which is given in accordance
with the provisions of Section 11(d); and
(z) if to any other holder of Registrable Securities, at the most
current address given by such holder to the Company in accordance with the
provisions of this Section 11(d).
(e) Owner of Registrable Securities. The Company will maintain, or will
cause its registrar and transfer agent to maintain, a stock book with respect to
the Series A Preferred and the Common Stock, in which all transfers of
Registrable Securities of which the Company has received notice will be
recorded. The Company may deem and treat the person in whose name Registrable
Securities are registered in the stock book of the Company as the owner thereof
for all purposes, including without limitation the giving of notices under this
Agreement.
(f) Successors and Assigns. This Agreement will inure to the benefit of
and be binding upon the successors and permitted assigns of each of the parties
and will inure to the benefit of each holder of any Registrable Securities. The
Company may not assign its rights or obligations hereunder without the prior
written consent of each holder of any Registrable Securities. The holders of the
Registrable Securities may assign the rights and obligations under this
Agreement to any subsequent holder of such Registrable Securities.
Notwithstanding the foregoing,
21
no transferee will have any of the rights granted under this Agreement (i) until
such transferee shall have acknowledged its rights and obligations hereunder by
a signed written statement of such transferee's acceptance of such rights and
obligations or (ii) if the transferor notifies the Company in writing on or
prior to such transfer that the transferee shall not have such rights.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed will be deemed to be an original and all of which taken
together will constitute one and the same instrument.
(h) Headings. The headings in this Agreement are for convenience of
reference only and will not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, AS APPLIED TO CONTRACTS MADE AND
PERFORMED WITHIN THE STATE OF TEXAS, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF
LAWS.
(j) Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein will remain in full force and effect and will in
no way be affected, impaired or invalidated, and the parties hereto will use
their best efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such which may
be hereafter declared invalid, void or unenforceable.
(k) Entire Agreement. This Agreement is intended by the parties as a final
expression of their agreement and is intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the registration rights granted by the Company with respect to the Registrable
Securities. This Agreement supersedes all prior agreements and understandings
among the parties with respect to such registration rights.
(l) Attorneys' Fees. In any action or proceeding brought to enforce any
provision of this Agreement, or where any
22
provision hereof is validly asserted as a defense, the prevailing party, as
determined by the court, will be entitled to recover reasonable attorneys' fees
in addition to any other available remedy.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
KNOWLEDGE CAPITAL INVESTMENT GROUP
By: /s/ Xxx Xxxxx
--------------------------------------
Xxx Xxxxx
Duly Authorized
XXXXXXXX XXXXX CO., a Utah
corporation
By: /s/ Xxx Xxxxxxxx
--------------------------------------
Name: Xxx Xxxxxxxx
Title: Chief Executive Officer
23
