REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is dated this 12th day of August, 1999
(this "Agreement") between Interactive Flight Technologies, Inc., a Delaware
corporation, with principal offices located at 000 X. 00xx Xxxxxx, Xxxxxxx,
Xxxxxxx 00000 (the "Company"), and the undersigned (the "Initial Investors").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of that certain
Securities Purchase Agreement dated August 9, 1999, between the Initial
Investors and the Company (the "Securities Purchase Agreement"), the Company has
agreed to issue to the Initial Investors in the aggregate 105,000 shares of its
Class A Common Stock (the "Common Stock"); and
WHEREAS, to induce the Initial Investors to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide with respect to
the Common Stock issued certain registration rights under the Securities Act (as
hereinafter defined);
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Definitions.
(a) As used in this Agreement, the following terms shall have the
following respective meanings:
(i) "Commission" means the Securities and Exchange Commission.
(ii) "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder, or any
similar successor statute.
(iii) "Investors" means the Initial Investors and any transferee or
assignee of Registrable Securities who agrees to become bound by all of the
terms and provisions of this Agreement in accordance with Section 8 hereof.
(iv) "Person" means any individual, partnership, corporation,
limited liability company, joint stock company, association, trust,
unincorporated organization, or a government or agency or political subdivision
thereof.
(v) "Prospectus" means the prospectus (including, without
limitation, any preliminary prospectus and any final prospectus filed pursuant
to Rule 424(b) under the Securities Act, including any prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance on Rule 430A under the Securities Act)
included in the Registration Statement, as amended or supplemented by any
prospectus supplement with respect to the terms of the offering of any portion
of the Registrable Securities covered by the Registration Statement and by all
other amendments and supplements to such prospectus, including all material
incorporated by reference in such prospectus and all documents filed after the
date of such prospectus by the Company under the Exchange Act and incorporated
by reference therein.
(vi) "Registrable Securities" means the Common Stock issued or
issuable pursuant to the Securities Purchase Agreement; provided, however, a
share of Common Stock shall cease to be a Registrable Security for purposes of
this Agreement when it no longer is a Restricted Security.
(vii) "Registration Statement" means a registration statement of the
Company filed on an appropriate form under the Securities Act providing for the
registration of, and the sale on a continuous or delayed basis by the holders
of, all of the Registrable Securities pursuant to Rule 415 under the Securities
Act, including the Prospectus contained therein and forming a part thereof, any
amendments to such registration statement and supplements to such Prospectus,
and all exhibits and other material incorporated by reference in such
registration statement and Prospectus.
(viii) "Restricted Security" means any share of Common Stock issued
or issuable pursuant to the Securities Purchase Agreement except any such share
that (i) has been registered pursuant to an effective registration statement
under the Securities Act and sold in a manner contemplated by the Prospectus
included in the Registration Statement, (ii) has been transferred in compliance
with the resale provisions of Rule 144 under the Securities Act (or any
successor provision thereto) or is transferable pursuant to paragraph (k) of
Rule 144 under the Securities Act (or any successor provision thereto), or (iii)
otherwise has been transferred and a new share of Common Stock not subject to
transfer restrictions under the Securities Act has been delivered by or on
behalf of the Company.
(ix) "Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the Commission thereunder, or any similar
successor statute.
(b) All capitalized terms used and not defined herein have the
respective meaning assigned to them in the Securities Purchase Agreement.
2. Registration.
(a) Filing and Effectiveness of Registration Statement. The Company
shall use its best efforts to prepare and file with the Commission not later
than December 31, 1999, a Registration Statement relating to the offer and sale
of the Registrable
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Securities, and shall use its best efforts to cause the Commission to declare
such Registration Statement effective under the Securities Act as promptly as
practicable after filing. The Company shall notify the Initial Investors by
written notice that such Registration Statement has been declared effective by
the Commission promptly after such declaration by the Commission.
Notwithstanding the foregoing provisions of this Section 2(a), the Company may
defer such filing one time for a period not to exceed 30 days if the Board of
Directors of the Company determines in good faith that because of valid business
reasons, including pending mergers or other business combination transactions,
the planned acquisition or divestiture of assets, pending material corporate
developments and similar events, it is in the best interests of the Company to
defer such filing. In such event, the Company shall provide the Investors with
written notice of such deferral, which notice need not specify the nature of the
event giving rise to such deferral.
(b) Eligibility for Use of Form S-3. The Company represents and warrants
that it meets the requirements for use of Form S-3 for registration of the sale
by the Initial Investors, and the Company shall file all reports and information
required to be filed by it with the Commission in a timely manner and take all
such other action so as to maintain such eligibility for the use of such form.
(c) Piggyback Obligation. (i) If the Company, after the date of this
Agreement, proposes to register any of its warrants or any other shares of
common stock of the Company under the Securities Act (other than a registration
(A) on Form S-8 or S-4 or any successor or similar forms, (B) relating to Common
Shares or any other shares of common stock of the Company issuable upon exercise
of employee share options or in connection with any employee benefit or similar
plan of the Company, (C) in connection with a direct or indirect acquisition by
the Company of another Person or any transaction with respect to which Rule 145
(or any successor provision) under the Securities Act applies, or (D) on behalf
of the Shaar Fund, Ltd. and its permitted successors and assigns), whether or
not for sale for its own account, it will each such time, give prompt written
notice at least twenty (20) days prior to the anticipated filing date of the
registration statement relating to such registration to the Investors, which
notice shall set forth such Investors' rights under this Section 2(c) and shall
offer the Investors the opportunity to include in such registration statement
such number of Registrable Securities owned by such Investors as the Investors
may request. Upon the written request of an Investor made within ten (10) days
after the receipt of notice from the Company (which request shall specify the
number of Registrable Securities intended to be disposed of by such Investor),
the Company will use its best efforts to effect the registration under the
Securities Act of all Registrable Securities that the Company has been so
requested to register by the Investors, to the extent requisite to permit the
disposition of the Registrable Securities so to be registered; provided,
however, that (A) if such registration involves an underwritten offering, the
Investors who elect to participate in such offering must sell their Registrable
Securities to the underwriters selected as provided in Section 2(c)(ii) hereof
on the same terms and conditions as apply to the Company and the other
prospective sellers (if any) and (B) if, at any time after giving written notice
of its intention to register any securities pursuant to this Section 2(c) and
prior to the effective date of the registration statement filed in connection
with such registration, the Company shall determine for any reason not to
register such securities, the Company shall give written notice to the Investors
and, thereupon, shall be relieved of its obligation to register any securities
in connection with such registration. The Company's obligations under this
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Section 2(c) shall terminate on the date that the registration statement to be
filed in accordance with Section 2(a) is declared effective by the Commission.
(ii) If a registration pursuant to this Section 2(c) involves an
underwritten offering and the managing underwriter thereof advises the Company
that, in its view, the number of warrants or other shares of Common Stock that
the Company and the Investors and all other prospective sellers holding
registration rights intend to include in such registration exceeds the largest
number of shares of Common Stock or warrants that can be sold without having an
adverse effect on such offering (the "Maximum Offering Size"), the Company will
include in such registration, only that number of shares of common stock or
warrants, as applicable, such that the number of Registrable Securities
registered does not exceed the Maximum Offering Size, with the difference
between the number of shares in the Maximum Offering Size and the number of
shares to be issued by the Company and by the Shaar Fund, Ltd. (if any) in the
aggregate to be allocated among the Investors and such other prospective sellers
(other than the Company and the Shaar Fund, Ltd.) pro rata on the basis of the
relative number of Registrable Securities to be offered for sale under such
registration by each of the Investors and such other prospective sellers (other
than the Company and the Shaar Fund, Ltd.).
If as a result of the proration provisions of this Section 2(c)(ii), any
Investor is not entitled to include all such Registrable Securities in such
registration, any such Investor may elect to withdraw its request to include any
Registrable Securities in such registration. With respect to registrations
pursuant to this Section 2(c), the number of securities required to satisfy any
underwriters' over-allotment option shall be allocated pro rata among the
Company, the Investors, the Shaar Fund, Ltd., and the other prospective sellers
on the basis of the relative number of securities otherwise to be included by
each of them in the registration with respect to which such over-allotment
option relates.
3. Obligations of the Company. In connection with any required registration
of the Registrable Securities under this Agreement, the Company shall:
(a) Promptly (i) prepare and file with the Commission such amendments
(including post-effective amendments) to the Registration Statement and
supplements to the Prospectus as may be necessary to keep the Registration
Statement continuously effective and in compliance with the provisions of the
Securities Act applicable thereto so as to permit the Prospectus forming part
thereof to be current and useable by Investors for resales of the Registrable
Securities for a period of two (2) years from the date on which the Registration
Statement is first declared effective by the Commission (the "Effective Time")
or such shorter period that will terminate when all the Registrable Securities
covered by the Registration Statement have been sold pursuant thereto in
accordance with the plan of distribution provided in the Prospectus, redeemed by
the Company, transferred pursuant to Rule 144 under the Securities Act or
otherwise transferred in a manner that results in the delivery of new securities
not subject to transfer restrictions under the Securities Act (the "Registration
Period") and (ii) take all lawful action such that each of (A) the Registration
Statement and any amendment thereto does not, when it becomes effective, contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, not misleading
and (B) the Prospectus forming part of the Registration
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Statement, and any amendment or supplement thereto, does not at any time during
the Registration Period include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Notwithstanding the foregoing provisions of this Section 3(a),
the Company may, during the Registration Period, suspend the use of the
Prospectus for a period not to exceed 60 days (whether or not consecutive) in
any 12-month period if the Board of Directors of the Company determines in good
faith that because of valid business reasons, including pending mergers or other
business combination transactions, the planned acquisition or divestiture of
assets, pending material corporate developments and similar events, it is in the
best interests of the Company to suspend such use, and prior to or
contemporaneously with suspending such use the Company provides the Investors
with written notice of such suspension, which notice need not specify the nature
of the event giving rise to such suspension. At the end of any such suspension
period, the Company shall provide the Investors with written notice of the
termination of such suspension.
(b) During the Registration Period, comply with the provisions of the
Securities Act with respect to Registrable Securities covered by the
Registration Statement until such time as all of such Registrable Securities
have been disposed of in accordance with the intended methods of disposition by
the Investors as set forth in the Prospectus forming part of the Registration
Statement;
(c) (i) Prior to the filing with the Commission of any Registration
Statement (including any amendments thereto) and the distribution or delivery of
any Prospectus (including any supplements thereto), provide (A) draft copies
thereof to the Investors and reflect in such documents all such comments as the
Investors (and their counsel) reasonably may propose and (B) to the Investors a
copy of the accountant's consent letter to be included in the filing and (ii)
furnish to each Investor whose Registrable Securities are included in the
Registration Statement and its legal counsel identified to the Company, (A)
promptly after the same is prepared and publicly distributed, filed with the
Commission, or received by the Company, one copy of the Registration Statement,
each Prospectus, and each amendment or supplement thereto, and (B) such number
of copies of the Prospectus and all amendments and supplements thereto and such
other documents, as such Investor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Investor;
(d) (i) Register or qualify the Registrable Securities covered by the
Registration Statement under such securities or "blue sky" laws of such
jurisdictions as the Investors who hold a majority-in-interest of the
Registrable Securities being offered reasonably request, (ii) prepare and file
in such jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof at all times during the Registration Period,
(iii) take all such other lawful actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the Registration
Period, and (iv) take all such other lawful actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (A) qualify to do business in any
jurisdiction where it would not
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otherwise be required to qualify but for this Section 3(d), (B) subject itself
to general taxation in any such jurisdiction or (C) file a general consent to
service of process in any such jurisdiction;
(e) As promptly as practicable after becoming aware of such event,
notify each Investor of the occurrence of any event, as a result of which the
Prospectus included in the Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, and
promptly prepare an amendment to the Registration Statement and supplement to
the Prospectus to correct such untrue statement or omission, and deliver a
number of copies of such supplement and amendment to each Investor as such
Investor may reasonably request;
(f) As promptly as practicable after becoming aware of such event,
notify each Investor who holds Registrable Securities being sold (or, in the
event of an underwritten offering, the managing underwriters) of the issuance by
the Commission of any stop order or other suspension of the effectiveness of the
Registration Statement at the earliest possible time and take all lawful action
to effect the withdrawal, recession or removal of such stop order or other
suspension;
(g) Cause all the Registrable Securities covered by the Registration
Statement to be listed on the principal national securities exchange or included
in an inter-dealer quotation system of a registered national securities
association, on or in which securities of the same class or series issued by the
Company are then listed or included;
(h) Maintain a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date of the
Registration Statement;
(i) Cooperate with the Investors who hold Registrable Securities being
offered to facilitate the timely preparation and delivery of certificates for
the Registrable Securities to be offered pursuant to the Registration Statement
and enable such certificates for the Registrable Securities to be in such
denominations or amounts, as the case may be, as the Investors reasonably may
request and registered in such names as the Investor may request; and, within
three (3) business days after a Registration Statement which includes
Registrable Securities is declared effective by the Commission, deliver and
cause legal counsel selected by the Company to deliver to the transfer agent for
the Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) an appropriate
instruction and, to the extent necessary, an opinion of such counsel;
(j) Take all such other lawful actions reasonably necessary to expedite
and facilitate the disposition by the Investors of their Registrable Securities
in accordance with the intended methods therefor provided in the Prospectus
which are customary under the circumstances;
(k) Make generally available to its security holders as soon as
practicable, but in any event not later than eighteen (18) months after (i) the
effective date (as
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defined in Rule 158(c) under the Securities Act) of the Registration Statement,
and (ii) the effective date of each post-effective amendment to the Registration
Statement, as the case may be, an earnings statement of the Company and its
subsidiaries complying with Section 11(a) of the Securities Act and the rules
and regulations of the Commission thereunder (including, at the option of the
Company, Rule 158);
(l) In the event of an underwritten offering, promptly include or
incorporate in a Prospectus supplement or post-effective amendment to the
Registration Statement such information as the managers reasonably agree should
be included therein and to which the Company does not reasonably object and make
all required filings of such Prospectus supplement or post-effective amendment
as soon as practicable after it is notified of the matters to be included or
incorporated in such Prospectus supplement or post-effective amendment;
(m) (i) Make reasonably available for inspection by any underwriter
participating in any disposition pursuant to the Registration Statement, and any
attorney, accountant or other agent retained by any such underwriter all
relevant financial and other records, pertinent corporate documents and
properties of the Company and its subsidiaries, and (ii) cause the Company's
officers, directors and employees to supply all information reasonably requested
by such underwriter, attorney, accountant or agent in connection with the
Registration Statement, in each case, as is customary for similar due diligence
examinations; provided, however, that all records, information and documents
that are designated in writing by the Company, in good faith, as confidential,
proprietary or containing any material non-public information shall be kept
confidential by such underwriter, attorney, accountant or agent (pursuant to an
appropriate confidentiality agreement in the case of any such holder or agent),
unless such disclosure is made pursuant to judicial process in a court
proceeding (after first giving the Company an opportunity promptly to seek a
protective order or otherwise limit the scope of the information sought to be
disclosed) or is required by law, or such records, information or documents
become available to the public generally or through a third party not in
violation of an accompanying obligation of confidentiality; and provided further
that, if the foregoing inspection and information gathering would otherwise
disrupt the Company's conduct of its business, such inspection and information
gathering shall, to the maximum extent possible, be coordinated by parties
entitled thereto by one firm of counsel designed by and on behalf of the
majority in interest of Investors and other parties;
(n) In connection with any underwritten offering, make such
representations and warranties to the Investors participating in such
underwritten offering and to the managers, in form, substance and scope as are
customarily made by the Company to underwriters in secondary underwritten
offerings;
(o) In connection with any underwritten offering, obtain opinions of
counsel to the Company (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the managers) addressed to the
underwriters, covering such matters as are customarily covered in opinions
requested in secondary underwritten offerings (it being agreed that the matters
to be covered by such opinions shall include, without limitation, as of the date
of the opinion and as of the Effective Time of the Registration Statement or
most recent post-effective amendment thereto, as the case may be, the absence
from the Registration
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Statement and the Prospectus, including any documents incorporated by reference
therein, of an untrue statement of a material fact or the omission of a material
fact required to be stated therein or necessary to make the statements therein
(in the case of the Prospectus, in light of the circumstances under which they
were made) not misleading, subject to customary limitations);
(p) In connection with any underwritten offering, obtain "cold comfort"
letters and updates thereof from the independent public accountants of the
Company (and, if necessary, from the independent public accountants of any
subsidiary of the Company or of any business acquired by the Company, in each
case for which financial statements and financial data are, or are required to
be, included in the Registration Statement), addressed to each underwriter
participating in such underwritten offering (if such underwriter has provided
such letter, representations or documentation, if any, required for such cold
comfort letter to be so addressed), in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
secondary underwritten offerings;
(q) In connection with any underwritten offering, deliver such documents
and certificates as may be reasonably required by the managers, if any; and
(r) In the event that any broker-dealer registered under the Exchange
Act shall be an "Affiliate" (as defined in Rule 2729(b)(1) of the rules and
regulations of the National Association of Securities Dealers, Inc. (the "NASD
Rules") (or any successor provision thereto)) of the Company or has a "conflict
of interest" (as defined in Rule 2720(b)(7) of the NASD Rules (or any successor
provision thereto)) and such broker-dealer shall underwrite, participate as a
member of an underwriting syndicate or selling group or assist in the
distribution of any Registrable Securities covered by the Registration
Statement, whether as a holder of such Registrable Securities or as an
underwriter, a placement or sales agent or a broker or dealer in respect
thereof, or otherwise, the Company shall assist such broker-dealer in complying
with the requirements of the NASD Rules, including, without limitation, by (A)
engaging a "qualified independent underwriter" (as defined in Rule 2720(b)(15)
of the NASD Rules (or any successor provision thereto)) to participate in the
preparation of the Registration Statement relating to such Registrable
Securities, to exercise usual standards of due diligence in respect thereof and
to recommend the public offering price of such Registrable Securities, (B)
indemnifying such qualified independent underwriter to the extent of the
indemnification of underwriters provided in Section 5 hereof, and (C) providing
such information to such broker-dealer as may be required in order for such
broker-dealer to comply with the requirements of the NASD Rules.
4. Obligations of the Investors. In connection with the registration of the
Registrable Securities, the Investors shall have the following obligations:
(a) It shall be a condition precedent to the obligations of the Company
to complete the registration pursuant to this Agreement with respect to the
Registrable Securities of a particular Investor that such Investor shall furnish
to the Company such information regarding itself, the Registrable Securities
held by it and the intended method of disposition of the Registrable Securities
held by it as shall be reasonably required to effect the registration of such
Registrable Securities and shall execute such documents in connection with such
registration as the Company may reasonably request. At least seven (7) days
prior to the first
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anticipated filing date of the Registration Statement, the Company shall notify
each Investor of the information the Company requires from each such Investor
(the "Requested Information") if such Investor elects to have any of its
Registrable Securities included in the Registration Statement. If at least two
(2) business days prior to the anticipated filing date the Company has not
received the Requested Information from an Investor (a "Non-Responsive
Investor"), then the Company may file the Registration Statement without
including Registrable Securities of such Non-Responsive Investor and have no
further obligations to the Non-Responsive Investor with respect to such
Registration Statement;
(b) Each Investor by its acceptance of the Registrable Securities agrees
to cooperate with the Company in connection with the preparation and filing of
the Registration Statement hereunder, unless such Investor has notified the
Company in writing of its election to exclude all of its Registrable Securities
from the Registration Statement; and
(c) Each Investor agrees that, upon receipt of any notice from the
Company of the occurrence of any event of the kind described in Section 3(e) or
3(f) or of a notice pursuant to Section 3(a), it shall immediately discontinue
its disposition of Registrable Securities pursuant to the Registration Statement
covering such Registrable Securities until such Investor's receipt of the copies
of the supplemented or amended Prospectus contemplated by Section 3(e) or of
receipt of notice from the Company pursuant to Section 3(a), as applicable, and,
if so directed by the Company, such Investor shall deliver to the Company (at
the expense of the Company) or destroy (and deliver to the Company a certificate
of destruction) all copies in such Investor's possession, of the Prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
5. Expenses of Registration. All expenses, other than underwriting
discounts and commissions, incurred in connection with registrations, filings or
qualifications pursuant to Section 2, but including, without limitation, all
registration, listing, and qualifications fees, printing and engraving fees,
accounting fees, and the fees and disbursements of counsel for the Company shall
be borne by the Company. The Investors shall be responsible for payment of their
share of any underwriting discounts or commissions and for expenses of their
counsel.
6. Indemnification and Contribution.
(a) Indemnification by Company. The Company shall indemnify and hold
harmless each Investor and each underwriter, if any, which facilitates the
disposition of Registrable Securities and each of their respective officers and
directors and each person who controls such Investor or underwriter within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
(each such person being sometimes hereinafter referred to as an "Indemnified
Person") from and against any losses, claims, damages or liabilities, joint or
several, to which such Indemnified Person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement or an omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, not misleading, or arise out of or are based upon an untrue statement
or alleged untrue statement of a
9
material fact contained in any Prospectus or an omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading; and the Company hereby agrees to reimburse such
Indemnified Person for all reasonable legal and other expenses incurred by them
in connection with investigating or defending any such action or claim as and
when such expenses are incurred; provided, however, that the Company shall not
be liable to any such Indemnified Person in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon (i) an
untrue statement or alleged untrue statement made in, or an omission or alleged
omission from, such Registration Statement or Prospectus in reliance upon and in
conformity with written information furnished to the Company by such Indemnified
Person expressly for use therein or (ii) in the case of the occurrence of an
event of the type specified in Section 3(e) or of the delivery of a notice
pursuant to Section 3(a) or 3(f), the use by the Indemnified Person of an
outdated or defective Prospectus after the Company has provided to such
Indemnified Person an updated Prospectus correcting the untrue statement or
alleged untrue statement or omission or alleged omission giving rise to such
loss, claim, damage or liability.
(b) Indemnification by the Investors and Underwriters. Each Investor
agrees, as a consequence of the inclusion of any of its Registrable Securities
in a Registration Statement, and each underwriter, if any, which facilitates the
disposition of Registrable Securities shall agree, as a consequence of
facilitating such disposition of Registrable Securities, severally and not
jointly, to (i) indemnify and hold harmless the Company, its directors
(including any person who, with his or her consent, is named in the Registration
Statement as a director nominee of the Company), its officers who sign any
Registration Statement and each person, if any, who controls the Company within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act, against any losses, claims, damages or liabilities to which the
Company or such other persons may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in such Registration Statement or
Prospectus or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein (in light of the circumstances under which they were
made, in the case of the Prospectus), not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by such holder or
underwriter expressly for use therein, and (ii) reimburse the Company for any
legal or other expenses incurred by the Company in connection with investigating
or defending any such action or claim as such expenses are incurred.
(c) Notice of Claims, etc. Promptly after receipt by a party seeking
indemnification pursuant to this Section 6 (an "Indemnified Party") of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the party against whom indemnification pursuant to this
Section 6 is being sought (the "Indemnifying Party") of the commencement
thereof; but the omission to so notify the Indemnifying Party shall not relieve
it from any liability that it otherwise may have to the Indemnified Party,
except to the extent that the Indemnifying Party is materially prejudiced and
forfeits substantive rights and defenses by
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reason of such failure. In connection with any Claim the Indemnifying Party
shall be entitled to assume the defense thereof. Notwithstanding the assumption
of the defense of any Claim by the Indemnifying Party, the Indemnified Party
shall have the right to employ separate legal counsel and to participate in the
defense of such Claim at the reasonable cost and expense of the Indemnifying
Party if the Indemnified Party and the Indemnifying Party shall reasonably have
concluded that representation of the Indemnified Party and the Indemnifying
Party by the same legal counsel would not be appropriate due to actual or, as
reasonably determined by legal counsel to the Indemnified Party, potentially
differing interests between such parties in the conduct of the defense of such
Claim, or if there may be legal defenses available to the Indemnified Party that
are in addition to or disparate from those available to the Indemnifying Party,
or the Indemnifying Party shall have failed to employ legal counsel reasonably
satisfactory to the Indemnified Party within a reasonable period of time after
notice of the commencement of such Claim. Except as provided above, the
Indemnifying Party shall not, in connection with any Claim in the same
jurisdiction, be liable for the fees and expenses of more than one firm of
counsel for the Indemnified Party (together with appropriate local counsel). The
Indemnifying Party shall not, without the prior written consent of the
Indemnifying Party (which consent shall not unreasonably be withheld), settle or
compromise any Claim or consent to the entry of any judgment that does not
include an unconditional release of the Indemnifying Party from all liabilities
with respect to such Claim or judgment.
(d) Contribution. If the indemnification provided for in this Section 6
is unavailable to or insufficient to hold harmless an Indemnified Person under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
Indemnifying Party shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and the Indemnified Party in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by
such Indemnified Party or by such Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 6(d) were determined by
pro rata allocation (even if the Investors or any underwriters were treated as
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in this Section 6(d).
The amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
shall be deemed to include any legal or other fees or expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The obligations of the Investors and any underwriters in this
Section 6(d) to contribute shall be
11
several in proportion to the percentage of Registrable Securities registered or
underwritten, as the case may be, by them and not joint.
(e) Limitations on Indemnification. Notwithstanding any other provision
of this Section 6, in no event shall any (i) Investor be required to undertake
liability to any person under this Section 6 for any amounts in excess of the
dollar amount of the proceeds to be received by such Investor from the sale of
such Investor's Registrable Securities (after deducting any fees, discounts and
commissions applicable thereto) pursuant to any Registration Statement under
which such Registrable Securities are to be registered under the Securities Act
and (ii) underwriter be required to undertake liability to any Person hereunder
for any amounts in excess of the aggregate discount, commission or other
compensation payable to such underwriter with respect to the Registrable
Securities underwritten by it and distributed pursuant to the Registration
Statement.
(f) Non-Exclusive Obligations. The obligations of the Company under this
Section 6 shall be in addition to any liability which the Company may otherwise
have to any Indemnified Person and the obligations of any Indemnified Person
under this Section 6 shall be in addition to any liability which such
Indemnified Person may otherwise have to the Company. The remedies provided in
this Section 6 are not exclusive and shall not limit any rights or remedies
which may otherwise be available to an indemnified party at law or in equity.
7. Rule 144. With a view to making available to the Investors the benefits
of Rule 144 under the Securities Act or any other similar rule or regulation of
the Commission that may at any time permit the Investors to sell securities of
the Company to the public without registration ("Rule 144"), the Company agrees
to use reasonable commercial efforts to:
(a) comply with the provisions of paragraph (c)(1) of Rule 144; and
(b) file with the Commission in a timely manner all reports and other
documents required to be filed by the Company pursuant to Section 13 or 15(d)
under the Exchange Act; and, if at any time it is not required to file such
reports but in the past had been required to or did file such reports, it will,
upon the request of any Holder, make available other information as required by,
and so long as necessary to permit sales of, its Registrable Securities pursuant
to Rule 144.
8. Assignment. The rights to have the Company register Registrable
Securities pursuant to this Agreement shall be automatically assigned by the
Investors to any permitted transferee of all or any portion of such Registrable
Securities only if: (a) the Investor agrees in writing with the transferee or
assignee to assign such rights, and a copy of such agreement is furnished to the
Company within a reasonable time after such assignment, (b) the Company is,
within a reasonable time after such transfer or assignment, furnished with
written notice of (i) the name and address of such transferee or assignee and
(ii) the securities with respect to which such registration rights are being
transferred or assigned, (c) immediately following such transfer or assignment,
the securities so transferred or assigned to the transferee or assignee
constitute Restricted Securities, and (d) at or before the time the Company
received
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the written notice contemplated by clause (b) of this sentence, the transferee
or assignee agrees in writing with the Company to be bound by all of the
provisions contained herein.
9. Amendment and Waiver. Any provision of this Agreement may be amended and
the observance thereof may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and Investors who hold a majority-in-interest of the
Registrable Securities. Any amendment or waiver effected in accordance with this
Section 9 shall be binding upon each Investor and the Company.
10. Miscellaneous.
(a) A person or entity shall be deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) If, after the date hereof and prior to the Commission declaring the
Registration Statement to be filed pursuant to Section 2(a) effective under the
Securities Act, the Company grants to any Person any registration rights with
respect to any Company securities which are more favorable to such other Person
than those provided in this Agreement, then the Company forthwith shall grant
(by means of an amendment to this Agreement or otherwise) identical registration
rights to all Investors hereunder.
(c) Except as may be otherwise provided herein, any notice or other
communication or delivery required or permitted hereunder shall be in writing
and shall be delivered personally or sent by certified mail, postage prepaid, or
by a nationally recognized overnight courier service, and shall be deemed given
when so delivered personally or by overnight courier service, or, if mailed,
three (3) days after the date of deposit in the United States mails, as follows:
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(1) if to the Company, to:
The address set forth on Page 1 of this Agreement
with a copy to:
Mesirov Xxxxxx Xxxxx Xxxxxx & Xxxxxxxx, LLP
0000 Xxxxxx Xxxxxx
00xx Xxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Attn: Xxxxxx X. Xxxx, Esquire
2) if to the Initial Investors, to:
XCEL Capital, LLC
0000 Xxxxxxxxxx Xxxxx Xxxxxxx
Xxxxx 000
Xxxxxxx, XX 00000
and
Xxxxxx Xxxxxx
0000 X. Xxxxxx
Xxx Xxxxx
Xxxxxx, XX 00000
3) if to any other Investor, at such address as such
Investor shall have provided in writing to the Company.
The Company, the Initial Investors or any Investor may change the foregoing
address by notice given pursuant to this Section 10(c).
(d) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(e) This Agreement shall be governed by and interpreted in accordance
with the laws of the Commonwealth of Pennsylvania. Each of the parties consents
to the jurisdiction of the Federal courts whose districts encompass any part of
the City of Philadelphia, Pennsylvania or the state courts of the Commonwealth
of Pennsylvania sitting in the City of Philadelphia in connection with any
dispute arising under this Agreement and hereby waives, to the maximum extent
permitted by law, any objection including any objection based on forum non
conveniens, to the bringing of any such proceeding in such jurisdictions.
(f) The remedies provided in this Agreement are cumulative and not
exclusive of any remedies provided by law. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provision,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve
14
the same or substantially the same result as that contemplated by such term,
provision, covenant or restriction. It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
(g) The Company shall not enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the holders of
Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof. Without limiting the generality of the foregoing, without the
written consent of the Holders of a majority in interest of the Registrable
Securities, the Company shall not grant to any person the right to request it to
register any of its securities under the Securities Act unless the rights so
granted are not otherwise in conflict or inconsistent with the provisions of
this Agreement. The restrictions on the Company's rights to grant registration
rights under this paragraph shall terminate on the date the Registration
Statement to be filed pursuant to Section 2(a) is declared effective by the
Commission.
(h) This Agreement and the Securities Purchase Agreement, between the
Company and the Initial Investors constitute the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement and the Securities Purchase Agreement,
supersede all prior agreements and undertakings among the parties hereto with
respect to the subject matter hereof.
(i) Subject to the requirements of Section 8 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.
(j) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(k) The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning thereof.
(l) The Company acknowledges that any failure by the Company to perform
its obligations under Section 2, or any delay in such performance could result
in direct damages to the Investors and the Company agrees that, in addition to
any other liability the Company may have by reason of any such failure or delay,
the Company shall be liable for all direct damages caused by such failure or
delay.
(m) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same
15
agreement. A facsimile transmission of this signed Agreement shall be legal and
binding on all parties hereto.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
INTERACTIVE FLIGHT TECHNOLOGIES, INC.
By:
---------------------------------
Name:
Title:
XCEL CAPITAL, LLC
By:
---------------------------------
Name:
Title: Managing Member
(SEAL)
--------------------------------
XXXXXX XXXXXX
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