REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of May__, 2000,
by and among XXXXXXXXX.XXX, a Nevada corporation, with its principal place of
business at 000 Xxxxxxx Xxxx Xxxxx, Xxxxxxxx, Xxxxxxxxxx 00000 (the Company"),
and INTELLECT CAPITAL GROUP, LLC, a Delaware limited liability company with its
principal place of business at 00000 Xxxxx Xxxxxx Xxxxxxxxx, Xxxxx 000, Xxx
Xxxxxxx, Xxxxxxxxxx 00000 ("Investor").
WHEREAS:
A. In connection with that certain Stock Purchase Agreement by and among
the parties of even date herewith (the "Stock Purchase Agreement"), the Company
has agreed, upon the terms and subject to the conditions of the Stock Purchase
Agreement, (i) to issue and sell to the Investor shares of the Company's Series
B Preferred Stock (the "Preferred Stock"), which will be convertible into shares
of the Company's common stock, $.00l par value per share (the "Common Stock")
(as converted, the "Conversion Shares") in accordance with the terms of the
Company's Certificate of Designations, Preferences and Rights of the Preferred
Stock (the "Certificate of Designations"); and
B. To induce the Investor to execute and deliver the Stock 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 Investor
hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings:
a. "INITIATING INVESTOR" means any Investor or Investors who in the
aggregate hold not less than fifty percent (50%) of the outstanding Securities.
b. "INVESTOR" means the original Investor and any transferee or assignee
thereof to whom Investor assigns its rights under this Agreement and who agrees
to become bound by the provisions of this Agreement in accordance with Section
9.
c. "OTHER STOCKHOLDERS" means persons other than Investors who, by virtue
of agreements with the Company, are entitled to include their securities in
certain registrations hereunder.
d. "PERSON" means a corporation, a limited liability company, an
association, a partnership, an organization, a business, an individual, a
governmental or political subdivision thereof or a governmental agency.
e. "REGISTER," "REGISTERED," and "REGISTRATION" refer to a registration
effected by preparing and filing one or more Registration 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(s) by the United States Securities and Exchange Commission (the
"SEC").
f. "SECURITIES" means the Conversion Shares issued or issuable upon
conversion of the Preferred Stock and any shares of capital stock issued or
issuable with respect to the Conversion Shares or the Preferred Stock as a
result of any stock split, stock dividend, recapitalization, exchange or similar
event.
g. "REGISTRATION STATEMENT" means a registration statement of the Company
filed under the 1933 Act.
Capitalized terms used herein and not otherwise defined herein shall have
the respective meanings set forth in the Stock Purchase Agreement.
2. REGISTRATION.
-------------
a. Requested Registration.
-----------------------
(i) If the Company shall receive from the Initiating Holders at any
time after six (6) months after the date of this Agreement a
written request that the Company effect any registration with
respect to at least fifty percent (50%) of the Securities, the
Company will: (A) promply give written notice of the proposed
registration to all other Investors; and (B) as soon as
practicable, use its best efforts to effect such registration
(including, without limitation, those obligations set forth in
Section 3 hereof) as would permit or facilitate the sale and
distribution of all or such portion of such Securities as are
specified in such request, together with all or such portion of
the Securities of any Investor or Investors joining in such
request as are specified in a written request received by the
Company within twenty (20) days after the written notice
referenced above is mailed or delivered.
(ii) The Company shall not be obligated to effect, or to take any
action to effect, any such registration pursuant to this Section
2a:
(A) in any particular jurisdiction in which the Company would be
required to execute a general consent to service of process
in effecting such registration,
2
qualification or compliance, unless the Company is already
subject to service in such jurisdiction and except as may be
required by the 1933 Act;
(B) after the Company has initiated one (1) such registration
pursuant to this Section 2a (counting for these purposes
only registrations which have been declared or ordered
effective and pursuant to which securities have been sold
and registrations which have been withdrawn by the Investors
as to which the Investors have not elected to bear the
registration expenses set forth in Section 5 hereof);
(C) during the period starting with the date sixty (60) days
prior to the Company's good faith estimate of the date of
filing of, and ending on a date one hundred eighty (180)
days after the effective date of, a Company-initiated
registration, provided that the Company is actively
employing in good faith all reasonable efforts to cause such
registration statement to become effective; or
(D) if the Initiating Investors propose to dispose of Securities
which may be immediately registered on Form S-3 pursuant to
a request made under Section 2d hereof.
(iii)Subject to the foregoing clauses (i) and (ii), the Company shall
file a registration statement covering the Securities so
requested to be registered as soon as practicable after the
receipt of the request of the Initiating Investors; provided,
however, that if (A) in the good faith judgment of the Board of
Directors of the Company, such registration would be seriously
detrimental to the Company and the Board of Directors concludes,
as a result, that it is essential to defer the filing of such
registration statement, then the Company shall have the right to
defer such a filing for the period during which such disclosure
would be seriously detrimental, provided that (except as provided
in clause (ii) (C) above), the Company may not defer the filing
for a period of more than ninety (90) days after receipt of the
request of the Initiating Investors, and provided further that
the Company shall not defer its obligation in this manner more
than once in any twelve (12) month period. The registration
statement filed pursuant to the request of the Initiating
Investors may, subject to the provisions of this clause (iii) and
Section 3p hereof, include other securities of the Company, with
respect to which registration rights have been granted, and may
include securities of the Company being sold for the account of
the Company.
3
(iv) If any offering pursuant to a Registration Statement pursuant to
this Section 2(a) involves an underwritten offering, the right of
any Investor to registration pursuant to this Section 2(a) shall
be conditioned upon such Investor's participation in such
underwriting and the inclusion of such Investor's Securities in
the underwriting to the extent provided herein. An Investor may
elect to include in such underwriting all or a part of the
Securities he or she holds.
(v) If the Company shall request inclusion in any registration
pursuant to this Section 2(a) securities sold for its own
account, or if any Other Stockholders shall request inclusion in
any registration pursuant to this Section 2, the Initiating
Investors shall, on behalf of all Investors, offer to include
such securities in the underwriting and may condition such offer
on their acceptance of the further applicable provisions of this
Agreement. The Company shall (together with all Investors and
Other Stockholders) enter into an underwriting agreement in
customary form with the representative of the underwriter or
underwriters selected for such underwriting by a majority in
interest of the Initiating Investors, but subject to the
Company's reasonable approval. Notwithstanding any other
provision of this Section 2, if the representative of the
underwriters advises the Initiating Investors in writing that
marketing factors require a limitation on the number of shares to
be underwritten, the number of shares to be included in the
underwriting or registration shall be allocated as set forth in
Section 3p hereof. If a person who has requested inclusion in
such registration as provided above does not agree to the terms
of any such underwriting, such person shall be excluded therefrom
by written notice from the Company, the underwriter or the
Initiating Investors. Any Securities or other securities held by
the person so excluded shall also be withdrawn from the
registration. If shares are so withdrawn from the registration
and if the number of shares to be included in such registration
was previously reduced as a result of marketing factors pursuant
to this clause (v), then the Company shall offer to all Investors
who have retained rights to include securities in the
registration the right to include additional securities in the
registration in an aggregate amount equal to the number of shares
so withdrawn, with such shares to be allocated among such
Investors requesting additional inclusion in accordance with
Section 3p hereof.
(vi) Penalty - Registration Statement. If a Registration Statement is
not filed with the SEC on or before the sixtieth (60th) day
following the Requested Registration, then, as partial relief for
the damages to Investor by reason of
4
any such delay in or reduction of its ability to sell the
underlying shares of Common Stock (which remedy shall not be
exclusive of any other remedies at law or in equity), the Company
will pay as liquidated damages a cash amount of Twenty Thousand
Dollars ($20,000) per month, pro rated daily for each partial
month for which the filing of the Registration Statement is
delayed.
b. Company Registration.
---------------------
(i) If the Company shall determine to register any of its securities
either for its own account or for the account of a security
holder or holders exercising their respective demand rights
(other than pursuant to Section 2a hereof), other than a
registration relating solely to employee benefit plans, or a
registration relating solely to a transaction under Rule 145 of
the 1933 Act, or a registration on any registration form that
does not permit secondary sales, the Company will: (A) promply
give to each Investor written notice thereof; and (B) use its
best efforts to include in such registration (and any related
qualification under blue sky laws), except as set forth in
Section 2c(ii) hereof, and in any underwriting involved therein,
all the Securities specified in a written request or requests
made by any Investor and received by the Company within twenty
(20) days after the written notice from the Company described
above is mailed or delivered by the Company. Such written request
may specify all or a part of an Investor's Securities. No right
to registration of Securities under this Section 2b shall be
construed to limit any registration required under Section 2a.
(ii) If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company
shall so advise the Investors as a part of the written notice
given pursuant to Section 2b(i) above. In such event, the right
of any Investor to registration pursuant to this Section 2b shall
be conditioned upon such Investor's participation in such
underwriting. All Investors proposing to distribute their
securities through such underwriting shall (together with the
Company and the Other Stockholders distributing their securities
through such underwriting) enter into an underwriting agreement
in customary form with the representative of the underwriter or
underwriters selected by the Company. Notwithstanding any other
provision of this Section 2b, if the representative of the
underwriters advises the Company in writing that in their
reasonable good faith opinion, marketing or other factors dictate
that a limitation on the number of shares of Common Stock which
may be included in the registration statement is necessary to
facilitate and not adversely affect the proposed offering, then
the Company shall include in such registration: (1) first, all
securities the Company proposes to sell for its own account, (2)
second, up to the full number of securities proposed to be
registered for the account of the holders of securities entitled
to inclusion of their securities in the registration statement by
reason of demand registration rights, and (3) third, the
securities requested to be registered by the Investors and other
holders of securities entitled to participate in the
registration, drawn from them pro rata based on the number each
has requested to be included in such registration. If any person
does not agree to the terms of
6
any such underwriting, he or she shall be excluded therefrom by
written notice from the Company or the underwriter. Any
Securities or other securities so excluded or withdrawn from such
underwriting shall be withdrawn from such registration. If shares
are so withdrawn and if the number of shares of Securities to be
included in such registration was previously reduced as a result
of marketing factors, the Company shall then offer to all persons
who have retained the right to include securities in the
registration the right to include additional securities in the
registration in an aggregate amount equal to the number of shares
so withdrawn, with such shares to be allocated among the persons
requesting additional inclusion in accordance with Section 3p
hereof.
c. Registration on Form S-3. The Company is currently not eligible for
-------------------------
the use of Form S-3. Therefore (i) the Company, with the consent of each
Investor pursuant to Section 2a, shall register the sale of the Securities on
another appropriate form, such as Form S-1 or Form SB-2, and (ii) the Company
shall use its best efforts to qualify for registration on Form S-3 or any
comparable or successor form or forms. After the Company has qualified for the
use of Form S-3, in addition to the rights contained in the foregoing provisions
of this Section 2, the Investors shall have the right to request registrations
on Form S-3 (such requests shall be in writing and shall state the number of
shares of Securities to be disposed of and the intended methods of disposition
of such shares by such Investor or Investors), provided, however, that the
Company shall not be obligated to effect any such registration if (i) the
Investors, together with the holders of any other securities of the Company
entitled to inclusion in such registration, propose to sell Securities and such
other securities (if any) on Form S-3 at an aggregate price to the public of
less than $500,000, or (ii) in a given twelve (12) month period, after the
Company has effected one (1) such registration in any such period. The
provisions of Section 2a and 2b shall also apply to any such registration under
this Section 2c.
3. RELATED OBLIGATIONS.
---------------------
In the case of each registration effected by the Company pursuant to
Section 2 hereof, the Company will keep each Investor advised in writing as to
6
the initiation of such registration and as to the completion thereof. The
Company shall have the following obligations:
a. Keep such registration effective for a period of one hundred twenty
(120) days or until the Investor or Investors have completed the distribution
described in the registration statement relating thereto, which ever first
occurs; provided, however, that (i) such one hundred twenty (120) day period
shall be extended for a period of time equal to the period the Investor refrains
from selling any Securities included in such registration at the request of an
underwriter of Common Stock or other securities of the Company; and (ii) in the
case of any registration of Securities on Form S-3 or other form which are
intended to be offered on a continuous or delayed basis, such one hundred twenty
(120) day period shall be extended, if necessary, to keep the registration
statement effective until all such Securities are sold, provided that Rule 415,
or any successor rule under the 1933 Act, permits an offering on a continuous or
delayed basis; and provided further that the right of any Investor to request
registration or inclusion in any registration pursuant to Section 2 hereof shall
terminate on the earlier of (x) the date as of which such Investor may sell all
of his or her Securities without restriction pursuant to Rule 144(k) promulgated
under the 1933 Act (or successor thereto) or (y) the date on which (A) the
Investor shall have sold all of his or her Securities and (B) none of the
Preferred Stock is outstanding (the "Registration Period") No Registration
Statement (including any amendments or supplements thereto and prospectuses
contained therein) to be utilized in such registration shall contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein, or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading.
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Registration
Statement(s) and the prospectus(es) used in connection with the Registration
Statement(s), which prospectus(es) are to be filed pursuant to Rule 424
promulgated under the 1933 Act, as may be necessary to keep the Registration
Statement(s) 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 Securities of the Company covered by the
Registration Statement(s).
c. The Company shall furnish to each Investor whose Securities are
included in the Registration Statement(s) and its legal counsel without charge
(i) promptly after the same is prepared and filed with the SEC at least one copy
of the Registration Statement and any amendment thereto, including financial
statements and schedules, all documents incorporated therein by reference and
all exhibits, the prospectus(es) included it such Registration Statement(s)
(including each preliminary prospectus) and, with regards to the Registration
Statement, any correspondence by or on behalf of the Company to the SEC or the
staff of the SEC and any correspondence from the SEC or the staff of the SEC to
the Company or its representatives, (ii) upon the effectiveness of any
Registration Statement, ten (10) copies of the prospectus included in such
Registration Statement and all amendments and supplements thereto (or such other
number of copies as such Investor may reasonably request) and (iii) such other
documents, including any preliminary prospectus, as such Investor may reasonably
7
request in order to facilitate the disposition of the Securities owned by such
Investor.
d. The Company shall use reasonable efforts to (i) register and qualify
the Securities covered by the Registration Statement(s) under such other
securities or "blue sky" laws of such jurisdictions in the United States as any
Investor reasonably requests, (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 quality the Securities for sale in
such jurisdictions; provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to (A) qualify to do business in
any jurisdiction where it would not otherwise be required to qualify but for
this Section 3d, (B) subject itself to general taxation in any such
jurisdiction, or (C) file a general consent to service of process in any such
jurisdiction. The Company shall promptly notify each Investor who holds
Securities of the receipt by the Company of any notification with respect to the
suspension of the registration or qualification of any of the Securities for
sale under the securities or "blue sky" laws of any jurisdiction in the United
States or its receipt of actual notice of the initiation or threatening of any
proceeding for such purpose.
e. As promptly as practicable after becoming aware of such event, the
Company shall notify each Investor in writing of the happening of any event, of
which the Company has knowledge, as a result of which the prospectus included in
a Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and promptly prepare a supplement or
amendment to the Registration Statement to correct such untrue statement or
omission, and deliver ten (10) copies of such supplement or amendment to each
Investor (or such other number of copies as such Investor may reasonably
request). The Company shall also promptly notify each Investor in writing (i)
when a prospectus or any prospectus supplement or post-effective amendment has
been filed, and when a Registration Statement or any post-effective amendment
has become effective (notification of such effectiveness shall be delivered to
each Investor by facsimile on the same day of such effectiveness and by
overnight mail) (ii) of any request by the SEC for amendments or supplements to
a Registration Statement or related prospectus or related information, (iii) of
the Company's reasonable determination that a post-effective amendment to a
Registration Statement would be appropriate.
f. The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration Statement,
or the suspension of the qualification of any of the Securities for sale in any
8
jurisdiction and, if such an order or suspension is issued, to obtain the
withdrawal of such order or suspension at the earliest possible moment and to
notify each Investor who holds Securities being sold (and, in the event of an
underwritten offering, the managing underwriters) of the issuance of such order
and the resolution thereof or its receipt of actual notice of the initiation or
threat of any proceeding for such purpose.
g. The Company shall permit the Investors a single firm of counsel or
such other counsel as thereafter designated as selling stockholders' counsel by
the Investors who hold a majority of the Securities then being sold, to review
and comment upon the Registration Statement(s) and all amendments and
supplements thereto at least three (3) days prior to their filing with the SEC,
and not file any document in a form to which such counsel reasonably objects.
The Company shall not submit a request for acceleration of the effectiveness of
a Registration Statement(s) or any amendment or supplement thereto without the
prior approval of such counsel, which consent shall not be unreasonably
withheld.
h. At the request of the Investor(s) who hold a majority of the Securities
being sold, the Company shall furnish, on the date that Securities are delivered
to an underwriter, if any, for sale in connection with the Registration
Statement (i) if required by an underwriter, 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 such underwriters, and (ii) an
opinion, dated as of such date, of 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 and the
Investor(s).
i. The Company shall make available for inspection by (i) any Investor,
(ii) any underwriter participating in any disposition pursuant to a Registration
Statement, (iii) one firm of attorneys and one firm of accountants or other
agents retained by the Investors, and (iv) one firm of attorneys retained by all
such underwriters (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 strict confidence
and shall not make any disclosure (except to an Investor) or use 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 or is otherwise required
under the 1933 Act, (B) the release of such Records is ordered pursuant to a
final, non-appealable subpoena or 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. Each Investor 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 Company, at its
9
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, the Records deemed confidential.
j. The Company shall hold in confidence and not make any disclosure of
information concerning an Investor 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 final,
non-appealable 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 an Investor is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt written notice to
such Investor and allow such investor, at the Investor's expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.
k. The Company shall use its best efforts to cause all the Securities
covered by a 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 Securities is then permitted
under the rules of such exchange, and to arrange for at least two market makers
to register with the National Association of Securities Dealers, Inc. as such
with respect to such Securities. The Company shall pay all fees and expenses in
connection with satisfying its obligations under this Section 3(i).
l. The Company shall cooperate with the Investors who hold Securities
being offered and, to the extent applicable, any managing underwriter or
underwriters, to facilitate the timely preparation and delivery of certificates
(not bearing any restrictive legend) representing the Securities to be offered
pursuant to a 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, if there is no managing underwriter or underwriters,
the Investor may reasonably request and registered in such names as the managing
underwriter or underwriters, if any, or the Investor may request. Not later than
the date on which any Registration Statement registering the resale of
Securities is declared effective, the Company shall deliver to its transfer
agent instructions, accompanied by any reasonably required opinion of counsel,
that permits sales of unlegended securities in a timely fashion that complies
with then mandated securities settlement procedures for regular way market
transactions.
m. The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Investors of Securities pursuant to a
Registration Statement.
n. The Company shall use its best efforts to cause the Securities
covered by the applicable Registration Statement to be registered with or
10
approved by such other governmental agencies or authorities as may be necessary
to consummate the disposition of such Securities.
o. The Company shall provide a transfer agent and registrar of all such
Securities not later than the effective date of such Registration Statement.
p. If requested by the managing underwriters or an Investor, the
Company shall immediately incorporate in a prospectus supplement or
post-effective amendment such information as the managing underwriters and the
Investor agree should be included therein relating to the sale and distribution
of Securities, including, without limitation, information with respect to the
number of Securities being sold to such underwriters, the purchase price being
paid therefore by such underwriters and with respect to any other terms of the
underwritten (or best efforts underwritten) offering of the Securities to be
sold in such offering; make all required filings of such prospectus supplement
or post-effective amendment as soon as notified of the matters to be
incorporated in such prospectus supplement or post-effective amendment; and
supplement or make amendments to any Registration Statement if requested by a
shareholder or any underwriter of such Securities.
q. The Company shall otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC in connection with any registration
hereunder.
4. OBLIGATIONS OF THE INVESTOR(S).
----------------------------------
a. At least seven (7) days prior to the first anticipated filing date
of the Registration Statement, the Company shall notify each Investor in writing
of the information the Company requires from each such Investor if such Investor
elects to have any of such Investor's Securities included in the Registration
Statement. Each Investor desiring to participate in a registration hereunder
shall furnish to the Company such information regarding itself, the Securities
held by it and the intended method of disposition of the Securities held by it
as shall be reasonably required to effect the registration of such Securities
and shall execute such documents in connection with such registration as the
Company may reasonably request.
b. Each Investor, by such Investor's acceptance of the Securities,
agrees to cooperate with the Company as reasonably requested by the Company in
connection with the preparation and filing of the Registration Statement(s)
hereunder, unless such Investor has notified the Company in writing of such
Investor's election to exclude all of such Investor's Securities from a
Registration Statement.
c. Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(e) or
3(f), such Investor will immediately discontinue the disposition of Securities
pursuant to the Registration Statement(s) covering such Securities until such
Investor's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3(e) and, if so directed by the Company, such Investor
11
shall deliver to the Company (at the expense of the Company) or destroy all
copies in such Investor's possession, of the prospectus covering such Securities
current at the time of receipt of such notice.
d. No Investor may participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell such Investor's Securities on
the basis provided in any underwriting arrangements approved by the Investor
entitled hereunder to approve such arrangements, (ii) completes and executes ail
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.
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
qualifications fees, printers and accounting fees, and fees and disbursements of
counsel for the Company shall be borne by the Company.
6. INDEMNIFICATION
---------------
In the event any Securities are included in a Registration Statement under
this Agreement:
a. To the fullest extent permitted by law, the Company will, and hereby
does, indemnify, hold harmless and defend each Investor who holds such
Securities, the directors, officers, partners, employees, agents and each
Person, if any, who controls any Investor within the meaning of the 1933 Act or
the Securities Exchange Act of 1934, as amended (the "1934 ACT"), and any
underwriter (as defined in the 0000 Xxx) for the Investor, and the directors and
officers of, and each Person, if any, who controls, any such underwriter within
the meaning of the 1933 Act or the 1934 Act (each, an "INDEMNIFIED PERSON"),
against any losses, claims, damages, liabilities, judgments, fines, penalties,
charges, costs, attorneys' fees, amounts paid in settlement or expenses, joint
or several, (collectively, "CLAIMS") incurred in investigating, preparing or
defending any action, claim, suit, inquiry, proceeding, investigation or appeal
taken from the foregoing by or before any court or governmental, administrative
or other regulatory agency, body or the SEC, whether pending or threatened,
whether or not an indemnified party is or may be a party thereto "INDEMNIFIED
DAMAGES"), to which any of them may become subject insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof
arise out of or are based upon: (i) any untrue statement or alleged untrue
statement of a material fact in a Registration Statement or any post-effective
amendment thereto or in any filing made in connection with the qualification of
the offering under the securities or other "blue sky" laws of any jurisdiction
in which Securities are offered ("BLUE SKY FILING"), or the omission or alleged
omission to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which the
statements therein were made, not misleading, (ii) any untrue statement or
alleged untrue statement of a material fact contained in any preliminary
prospectus if 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
12
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 pursuant to a Registration Statement (the matters in the foregoing
clauses (i) through (iii) being, collectively, "VIOLATIONS"), Subject to the
restrictions set forth in Section 6(d) with respect to the number of legal
counsel, the Company shall reimburse the Investor and each such underwriter or
controlling person, promptly as such expenses are incurred and are due and
payable, for any 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 the Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(c); (ii) with respect to any preliminary prospectus, shall
not inure to the benefit of any such person from whom the person asserting any
such Claim purchased the Securities that are the subject thereof (or to the
benefit of any person controlling such person) if the untrue statement or
mission of material fact contained in the preliminary prospectus was corrected
in the prospectus, as then amended or supplemented, if such prospectus was
timely made available by the Company pursuant to Section 3(c), 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; (iii) shall not be available to
the extent such Claim is based on a failure of the Investor to deliver or to
cause to be delivered the prospectus made available by the Company (i) and (iv)
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. 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
Investor pursuant to Section 9.
b. In connection with any Registration Statement in which an Investor
is participating, each such Investor agrees to severally and not jointly
indemnify, hold harmless and defend, to the same extent and in the same manner
as is set forth in Section 6(a), the Company, each of its directors, each of its
officers who signs the Registration Statement, each Person, if any, who controls
the Company within the meaning of the 1933 Act or the 1934 Act (collectively and
together with an Indemnified Person, an "INDEMNIFIED PARTY"), against any Claim
or Indemnified Damages to which any of them may become subject, under the 1933
Act, the 1934 Act or otherwise, insofar as such Claim or Indemnified Damages
arise out of or are based upon any Violation, in each case to the extent, and
only to the extent, that such Violation occurs in reliance upon and in
conformity with written information furnished to the Company by such Investor
13
expressly for use in connection with such Registration Statement; and, subject
to Section 6(d), such Investor will reimburse any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such Claim; provided, however, that the indemnity agreement contained in this
Section 6(b) and Section 7 shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of such
Investor, which consent shall not be unreasonably withheld; provided, further,
however, that the Investor shall be liable under this Section 6(b) for only that
amount of a Claim or Indemnified Damages as does not exceed the net proceeds to
such Investor as a result of the sale of Registrable Securities pursuant to such
Registration Statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the transfer of the Registrable Securities by the Investor
pursuant to Section 9. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(b) with
respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party 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.
c. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution, to the same extent as provided
above, with respect to information such persons so furnished in writing
expressly for inclusion in the Registration Statement.
d. Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action or
proceeding (including any governmental action or proceeding) involving a Claim
such Indemnified Person or Indemnified Party shall, if a Claim in respect
thereof is to be made against any Indemnifying Party under this Section 6,
deliver to the Indemnifying Party a written notice of the commencement thereof,
and the Indemnifying Party shall have the right to participate in, and, to the
extent the Indemnifying Party so desires, jointly with any other Indemnifying
Party similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the Indemnifying Party and the Indemnified Person or
the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses to be paid by the Indemnifying Party, if, in
the reasonable opinion of counsel retained by the Indemnifying Party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the Indemnifying Party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party represented by such counsel in such proceeding. The Company shall
pay reasonable fees for only one separate legal counsel for the Investor, and
such legal counsel shall be selected by the Investor holding a majority in
interest of the Registrable Securities included in the Registration Statement to
which the Claim relates. The Indemnified Party or Indemnified Person shall
cooperate fully with the Indemnifying Party in connection with any negotiation
or defense of any such action or claim by the Indemnifying Party and shall
furnish to the Indemnifying Party all information reasonably available to the
Indemnified Party or Indemnified Person, which relates to such action or claim.
14
The Indemnifying Party shall keep the Indemnified Party or Indemnified Person
fully apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. No Indemnifying Party shall be liable for any
settlement of any action, claim or proceeding effected without its written
consent, provided, however, that the Indemnifying Party shall not unreasonably
withhold, delay or condition its consent. No Indemnifying Party shall, without
the consent of the Indemnified Party or Indemnified Person, consent to entry of
any judgment or enter into any settlement or other compromise which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party or Indemnified Person of a release from ail liability
in respect to such claim or litigation. Following indemnification as provided
for hereunder, the Indemnifying Party shall be subrogated to all rights of the
Indemnified Party or Indemnified Person with respect to ail third parties, firms
or corporations relating to the matter for which indemnification has been made.
The failure to deliver written notice to the Indemnifying Party within a
reasonable time of the commencement of any such action shall not relieve such
Indemnifying Party of any liability to the Indemnified Person or Indemnified
Party under this Section 6, except to the extent that the Indemnifying Party is
prejudiced in its ability to defend such action.
e. 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 and when bills are received or Indemnified Damages are incurred.
f. The indemnity agreements contained herein shall be in addition to
(i) any cause of action or similar right of the Indemnified Party or Indemnified
Person against the indemnifying party or others, and (ii) any liabilities the
Indemnifying Party may be subject to pursuant to the law.
7. CONTRIBUTION.
-------------
To the extent any indemnification by an Indemnifying Party is prohibited or
limited by law, the Indemnifying Party 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; provided, however, that: (i) no
contribution shall be made under circumstances where the maker would not have
been liable for indemnification under the fault standards set forth in Section
6; (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 0000 Xxx) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of fraudulent misrepresentation; (iii) contribution by any seller of
Securities shall be limited in amount to the net amount of proceeds received by
such seller from the sale of' such Securities; and (iii) contribution by the
Company shall be limited as to the gross proceeds received from the sale of the
Securities.
15
8. REPORTS UNDER THE 1934 ACT.
-------------------------------
With a view to making available to the Investor 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 Investor 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 and the filing of such reports and
other documents is required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns 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 Investor to sell
such securities pursuant to Rule 144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
-------------------------------------
The rights to have the Company register Registrable Securities pursuant to
this Agreement shall be automatically assignable by an Investor to any
transferee of all or any portion of Securities if: (i) the Investor agrees in
writing with the transferee or assignee to assign such rights, and a copy of
such agreement is furnished to the Company within a reasonable time after such
assignment; (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) immediately
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; (v) such transfer shall have been made in accordance with the
applicable requirements of the Stock Purchase Agreement; (vi) such transferee
shall be an "accredited investor" as that term is defined in Rule 501 of
Regulation D promulgated under the 1933 Act; and (vii) in the event the
assignment occurs subsequent to the date of effectiveness of the Registration
Statement required to be filed pursuant to Section 2(a), the transferee agrees
to pay all reasonable expenses of amending or supplementing such Registration
Statement to reflect such assignment.
17
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 the written consent of the Company and Investors
who hold two-thirds of the Securities. Any amendment or waiver effected in
accordance with this Section 10 shall be binding upon each Investor and the
Company.
11. MISCELLANEOUS
-------------
a. A person or entity is deemed to be a holder of Securities whenever
such person or entity owns of record such Securities. If the Company receives
conflicting instructions, notices or elections from two or more persons or
entities with respect to the same Securities, the Company shall act upon the
basis of instructions, notice or election received from the registered owner of
such Securities.
b. Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Agreement must be in writing and
will be deemed to have been delivered (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile, provided a copy is mailed
by U.S. certified mail, return receipt requested; (iii) three (3) days after
being sent by U.S. certified mail, return receipt requested, or (d) one (1) day
after deposit with a nationally recognized overnight delivery, service, in each
case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
If to the Company:
Xxxxxxxxx.xxx
000 Xxxxxxx Xxxx Xxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
With Copy to:
Xxxxxxx X. Xxxxx, Esq.
Silicon Valley Law Group
000 Xxxxx 0xx Xxxxxx
Xxxxx 000
Xxx Xxxx, Xxxxxxxxxx 00000
If to an Investor, to its address and facsimile number on Schedule A, with
copies to such Investor's counsel as set forth on Schedule A. Each party shall
provide five (5) days' prior written notice to the other party of any change in
address or facsimile number.
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, 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 interpreted in accordance
with the laws of the State of California without regard to the principles of
conflict of laws. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
e. This Agreement and the Stock Purchase Agreement 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 Stock 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, this Agreement shall inure
to the benefit and of and be binding upon the permitted 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.
h. This Agreement may be executed in two or more identical
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.
18
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of the day and year first above written.
COMPANY: INVESTOR:
-------- ---------
XXXXXXXXX.XXX INTELLECT CAPITAL GROUP, LLC
By: /S/ Xxxx Xxxxxxxx By: /S/ Xxxxxx X. Xxxxxx
Name: Xxxx Xxxxxxxx Name: Xxxxxx X. Xxxxxx
Its: President Its: Chairman & CEO
19
SCHEDULE A
Investor's Name Address/Facsimile Number of Investor
---------------- ---------------------------------------
20
