REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and
entered into as of this 5th day of August, 1999, by and between Alliance
Equities, a Florida corporation ("AE"), and Xxxxxxxxx Communications, Inc., a
Nevada corporation (the "Company").
RECITAL
AE is purchasing Debentures from the Company that are convertible into
shares of the Company's common stock. The Company hereby grants AE certain
demand and incidental registration rights in connection with such shares.
NOW, THEREFORE, in consideration of the foregoing, the mutual promises
and covenants contained herein, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the parties hereby
agree as follows:
AGREEMENT
1. DEFINITIONS. Unless the context requires otherwise, the
following underlined terms shall have the following respective meanings:
1.1 AGREEMENT. This Registration Rights Agreement.
1.2 AE. Alliance Equities, a Florida corporation.
1.3 COMMON STOCK. The Company's common stock.
1.4 COMPANY. Xxxxxxxxx Communications, Inc., a Nevada
corporation.
1.5 DEBENTURES. The Company's 10% Convertible
Subordinated Debentures issued to AE pursuant to that certain Debenture Purchase
Agreement of even date herewith.
1.6 EXCHANGE ACT. The Securities Exchange Act of 1934, as
amended.
1.7 HOLDER. A holder of Shares.
1.8 REGISTRATION EXPENSES. All expenses of registration,
including but not limited to registration and filing fees, including filing fees
for NASDAQ and all stock exchanges on which the Common Stock is traded, fees and
expenses of complying with the Securities Laws, printing expenses, transfer
agent fees, and the fees and expenses of the Company's independent certified
public accountants, the Company's investment banker and underwriter, and the
Company's legal counsel, but excluding the Selling Holder's brokerage fees,
underwriting fees and discounts, transfer taxes, if any, and the fees and
expenses of the Selling Holder's legal counsel and other advisors.
1.9 SEC. The United States Securities and Exchange
Commission.
1.10 SECURITIES ACT. The Securities Act of 1933, as
amended.
1.11 SECURITIES LAWS. The Securities Act, the Exchange
Act, and all applicable state securities laws, and all rules and regulations
promulgated thereunder.
1.12 SELLING HOLDER. With respect to any registration
statement, any Holder whose Shares are included therein.
1.13 SHARES. Shares of Common Stock issued on conversion
of the Debentures.
2. GRANT OF REGISTRATION RIGHTS.
2.1 REGISTRATION RIGHTS. The Company hereby grants the
Holders unlimited incidental registration rights with respect to the Shares on
the terms and conditions set forth in Section 4 of this Agreement. The Company
hereby grants the Holders as a group four (4) demand registration rights on the
terms and conditions set forth in Section 3 of this Agreement.
2.2 EXPENSES. The Company shall pay all Registration
Expenses. The Selling Holders shall pay all brokerage fees, underwriting fees
and discounts, transfer taxes, if any, and the fees and expenses of the
Selling Holder's legal counsel in connection with the registration and sale
of the Shares. Except as provided in Section 5.2 of this Agreement, the
Selling Holders shall pay all Registration Expenses if they withdraw all
Shares from registration; provided that the Selling Holders shall retain all
registration rights under this Agreement.
2.3 TERM. The registration rights granted under this
Agreement shall terminate on the earliest of (i) the sale of all of the Shares
by the Holders, (ii) the receipt by the Holders of the written opinion of legal
counsel for the Company that the Shares may be publicly sold without the need
for compliance with the registration provisions of the Securities Laws, whether
under Rule 144 or otherwise, or (iii) the tenth (10th) anniversary of the date
hereof.
3. DEMAND REGISTRATION RIGHTS.
3.1 NOTICE OF DEMAND. If the Company receives a written
notice from Holders beneficially owning at least a majority of the outstanding
Shares, including Shares issuable on conversion of any unconverted portion of
the Debentures, demanding that the Company register such Holders' Shares, then
the Company shall give written notice of such demand to all Holders and will use
its commercial best efforts to include in a registration statement all Shares
requested to be so included by all Holders upon written notice to the Company
within fifteen (15) days after the date of the notice by the Company to the
Holders, as long as the total of all Shares for which registration is demanded
represents at least twenty percent (20%) of the total Shares issuable under the
Debentures.
3.2 REGISTRATION. Promptly after receipt of a demand for
registration as set forth in Section 3.1 of this Agreement, the Company shall
prepare and file with the SEC a registration statement, on the applicable form
deemed most appropriate by the Company, for all Shares for which registration is
demanded, and the Company shall use its commercial best efforts to cause such
registration statement to become effective as soon as practicable.
3.3 DEFERRAL OF REGISTRATION. If the Holders demand a
registration hereunder, the Company may defer filing such registration statement
with the SEC (i) for up to six (6) months after the effective date of a
registration statement that the Company had filed with the
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SEC or had been declared effective prior to the demand by the Holders, (ii)
for up to six (6) months if the Company is advised in writing by the lead
underwriter in an underwritten offering for the issuance and sale of shares
of Common Stock by the Company that in the reasonable judgment of such
underwriter the registration demanded hereunder will impair the ability to
complete the underwritten offering (the grounds for which shall be
confidentially disclosed to a Holder if requested and if the Holder agrees to
maintain the confidentiality of such disclosure), or (iii) for up to ninety
(90) days if the Company reasonably determines that a registered offering
would be detrimental to the Company (the grounds for which shall be
confidentially disclosed to a Holder if requested and if the Holder agrees to
maintain the confidentiality of such disclosure), provided that the Company
may not filed any registration statement with the SEC during such period.
4. INCIDENTAL REGISTRATION RIGHTS.
4.1 NOTICE OF REGISTRATION; REGISTRATION. Whenever the
Company proposes to file (but without any obligation to so file) a registration
statement under the Securities Act in connection with a public offering of
shares of Common Stock for cash (other than in connection with any merger,
acquisition, or other transaction under Rule 145 of the Securities Act, exchange
offer, dividend reinvestment plan, employee benefit plan, or stock option plan),
the Company shall give all Holders written notice of such intention at least
thirty (30) days prior to the anticipated filing date. The Company shall
include in such registration statement all Shares requested to be so included by
Selling Holders upon written notice to the Company within fifteen (15) days of
the Company's notice, and shall use its commercial best efforts to cause such
registration statement to become effective as soon as practicable. The Selling
Holders shall be required to sell the Shares on the same terms and conditions as
all other shares of Common Stock being offered in such registration statement.
4.2 HOLDBACK. If the Company is advised in writing by the
lead underwriter in an underwritten offering that in the reasonable judgment of
such underwriter the number of shares of Common Stock for which incidental
registration is requested pursuant to this Agreement or any other grant of
incidental registration rights by the Company cannot be sold without impairing
the ability to complete the pre-established plan for distribution of the shares
of Common Stock whose registration gave rise to the registration statement (the
grounds for which shall be confidentially disclosed to a Selling Holder if
requested and if the Selling Holder agrees to maintain the confidentiality of
such disclosure), then the number of Shares to be sold by each Selling Holder
shall be reduced by a number that is the product of the number of Shares
requested to be sold by such Selling Holder multiplied by a fraction, the
numerator of which is the total number of shares of Common Stock by which the
registration statement is to be reduced, and the denominator of which is the
total number of shares of Common Stock requested to be sold by the Selling
Holders and all other persons exercising incidental registration rights pursuant
to any grant of incidental registration rights by the Company. If the number of
Shares of a Selling Holder is reduced, then such Selling Holder may withdraw all
Shares from registration, and shall retain incidental registration rights for
all Shares so withdrawn or reduced.
4.3 UNDERWRITING AGREEMENT. In any underwritten offering,
the Company and the Selling Holders shall enter into an underwriting agreement
with the underwriter, reasonably satisfactory to the Company and the Selling
Holders, consistent with the provisions of this Agreement, and containing
customary terms, conditions, and indemnifications.
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4.4 WITHDRAWAL BY THE COMPANY. The Company shall retain
the absolute right to withdraw any registration statement prior to the effective
date thereof, even if the Company has given notice to the Holders pursuant to
Section 4.1 of this Agreement and the Selling Holders have requested inclusion
of Shares therein.
5. REGISTRATION PROCEDURES.
5.1 SELLING HOLDER INFORMATION. The Selling Holders shall
provide the Company with such information about the Selling Holders and their
intended manner of distribution of the Shares, and shall otherwise cooperate
with the Company and the underwriters as may be needed or helpful in the
reasonable opinion of the Company to complete the obligations of the Company
hereunder. If any Selling Holder fails to comply with this requirement for more
than ten (10) business days after the Company gives written notice of such
failure to comply to such Selling Holder, then the Company shall have no further
obligation to include such Selling Holder's Shares in the registration
statement.
5.2 CONSULTATION. The Company shall supply copies of any
registration statement and any amendment thereto to the Selling Holders prior
to filing the registration statement with the SEC, and shall reasonably consult
with the Selling Holders and their legal counsel with respect to the form and
content of such filing. The Company shall promptly amend such registration
statement to include such reasonable changes as a Selling Holder and its legal
counsel agree should be included therein. A Selling Holder may withdraw the
Selling Holder's Shares from the registration statement and retain all
registration rights under this Agreement in the event a requested change is
unreasonably refused by the Company.
5.3 PROVISION FOR PROSPECTUSES. The Company shall furnish
the Selling Holders with the number of copies of a summary prospectus or other
prospectus, including a preliminary prospectus in conformity with the
requirements of the Securities Act, and such other documents as the Selling
Holders may reasonably request in order to facilitate the public sale or other
disposition of the Shares.
5.4 STATE SECURITIES LAWS COMPLIANCE. The Company shall
register or qualify the Shares covered by the registration statement under the
Securities Laws of such states as the Selling Holders may reasonably request in
light of the costs of such registration or qualification for the Company
(provided that the Company shall not be required to either qualify to do
business in any state where it is not then so qualified, or consent to the
general service of process for all purposes in any state where it is not then
qualified to do business), and shall perform all other acts that may be
reasonably necessary or advisable to enable the Selling Holders to consummate
the public sale or other disposition of the Shares in such states.
5.5 AMENDMENTS. The Company shall prepare and file
promptly with the SEC such amendments and supplements to the registration
statement filed with the SEC in connection with such registration and the
prospectus used in connection therewith, as may be necessary to keep such
registration statement continuously effective and in compliance with the
Securities Act for up to nine (9) months, or until all Shares registered in such
registration statement have been sold, whichever is earlier.
5.6 PROSPECTUS DELIVERY. At any time when a sale or other
public disposition of shares of Common Stock pursuant to a registration
statement is subject to a prospectus delivery requirement, the Company shall
immediately notify the Selling Holders of the occurrence of
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any event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in light of the circumstances
then existing. Upon receipt of such a notice, the Selling Holders shall
immediately discontinue sales or other dispositions of Shares pursuant to
such registration statement. The Selling Holders may resume sales only upon
receipt of an amended prospectus or after the Selling Holders have been
advised by the Company that use of the previous prospectus may be legally
resumed.
5.7 OPINIONS. At the request of a Selling Holder, the
Company shall furnish on the date that the Shares are delivered to the
underwriter for sale in connection with an underwritten offering registration
pursuant to this Agreement (i) a letter from the legal counsel representing the
Company for the purposes of such registration giving the Selling Holders the
right to rely upon the opinion of such legal counsel delivered to the
underwriters acting on behalf of the Company in connection with such
registration insofar as such opinion relates to the Selling Holders, and (ii) a
letter from the independent certified public accountants of the Company giving
the Selling Holders the right to rely on the letter of such accountants
delivered to the underwriters acting on behalf of the Company in connection with
such registration.
5.8 STOP ORDERS. The Company shall immediately notify the
Selling Holders of the issuance by the SEC of any stop order or order suspending
the effectiveness of any registration statement, the issuance by any state
regulatory authority of any order suspending the registration or qualification
of the Shares for sale in such jurisdiction, or the initiation of any proceeding
for such purposes. The Company, with the reasonable cooperation of the Selling
Holders, shall use its commercial best efforts to contest any such proceeding or
to obtain the withdrawal of any such order at the earliest possible date.
5.9 REVIEW OF RECORDS. The Company shall make available
all financial and other records, pertinent corporate documents, and properties
of the Company for inspection by the Selling Holders or their legal counsel or
accountants may reasonably request, and shall cause the Company's officers,
directors, and employees to supply all information reasonably requested by any
such person in connection with any registration statement filed or to be filed
hereunder, so long as such person agrees to keep confidential all records,
information, or documents designated by the Company in writing as confidential.
5.10 COMPLIANCE WITH SECURITIES LAWS. In all actions taken
under this Agreement, the Company and the Selling Holders shall comply with all
provisions of the Securities Laws.
5.11 MARKET STAND-OFF. If requested by the Company, the
Holders will not sell or otherwise transfer any Shares, other than those Shares
included in a registration statement, during the one hundred eighty (180)-day
period following the effective date of a registration statement filed by the
Company under the Securities Act. The Company will make such request only if so
advised by its investment banking firm, or by the underwriter in an underwritten
offering. The Company may impose stop transfer instructions with respect to the
Shares subject to the foregoing restrictions until the end of such one hundred
eighty (180)-day period.
6. REPORTS UNDER THE EXCHANGE ACT. With the view to making the
benefits of Rule 144 under the Securities Act available to the Holders, the
Company shall:
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6.1 PUBLIC INFORMATION. Ensure that there is adequate
current public information (as set forth in Rule 144(c)) available with respect
to the Company;
6.2 TIMELY FILING. Timely file with the SEC all reports
and other documents required to be filed by the Company under the Securities
Act, the Exchange Act, and the rules and regulations promulgated thereunder; and
6.3 DELIVERIES UPON REQUEST. Promptly furnish to a Holder
upon request (i) a written statement by the Company that it has complied with
these covenants, (ii) a copy of the most recent annual or quarterly report of
the Company, and (iii) such other reports and documents filed by the Company as
may be reasonably requested by such Holder.
7. INDEMNIFICATION.
7.1 THE COMPANY'S INDEMNIFICATION. The Company shall
indemnify, defend, save, and hold each Selling Holder harmless from and against
any and all liabilities, claims, damages, demands, expenses, and losses,
including but not limited to interest, penalties, court costs, reasonable
attorneys' fees, and settlements approved by the Company, which approval shall
not be unreasonably withheld, resulting from any untrue statement of a material
fact contained in any registration statement or in any other document filed with
the SEC pursuant to this Agreement, or any omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as the same may have been based upon (i)
information furnished in writing to the Company by such Selling Holder, any
agent for such Selling Holder, an underwriter, or another selling shareholder
for inclusion in such registration statement or other document, or (ii) the
circumstances set forth in Section 7.2(b) of this Agreement.
7.2 THE SELLING HOLDER'S INDEMNIFICATION. Each Selling
Holder shall indemnify, defend, save, and hold the Company and its officers,
directors, and controlling persons (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) harmless from and against any
and all liabilities, claims, damages, demands, expenses, and losses, including
but not limited to interest, penalties, court costs, reasonable attorneys' fees,
and settlements approved by such Selling Holder, which approval shall not be
unreasonably withheld, resulting from (a) any untrue statement of a material
fact contained in any registration statement or in any other document filed with
the SEC pursuant to this Agreement, or any omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, based upon or arising from any information furnished in writing
to the Company by such Selling Holder or any agent for such Selling Holder for
inclusion in the registration statement or other document, or (b) any untrue
statement of a material fact contained in any prospectus, or any omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, if (1) a later prospectus shall correct
the untrue statement or omission that is the basis of the liability, claim,
damage, demand, expense, or loss for which indemnification is sought, (2) a copy
of the later prospectus had not been sent or given to the purchaser at or prior
to confirmation of sale to such purchaser and the Selling Holder shall have been
under an obligation to deliver such later prospectus, (3) there would have been
no liability but for such failure to deliver such later prospectus by the
Selling Holder, and (4) the Company had notified the Selling Holder prior to the
confirmation of sale that the earlier prospectus had been or would be replaced
by the later prospectus.
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7.3 CONTRIBUTION. If the indemnification provided for in
this Section 7 from an indemnifying party is unavailable to an indemnified party
hereunder in respect to any liability, claim, damage, demand, expense, or loss
referred to herein, then the indemnifying party in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such liability, claim, damage, demand, expense,
or loss 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 that resulted in such liability, claim, damage, demand,
expense, or loss, as well as any other relevant equitable consideration. The
relative fault of such indemnifying party and indemnified party shall be
determined by reference to, among other things, whether the untrue statement of
a material fact or the omission to state a material fact relates to information
supplied by such indemnifying party or indemnified party and the parties'
relative intent, knowledge, access to information, and opportunity to correct or
prevent such untrue statement or omission. The amount paid or payable by a party
as a result of the liabilities, claims, damages, demands, expenses, and losses
referred to above shall be deemed to include any court costs, attorneys' fees,
and other expenses reasonably incurred by such party in connection with
investigating or defending any action, suit, or proceeding. The parties hereto
agree that it would not be just and equitable if contribution pursuant to this
Section 7.3 were determined by pro rata allocation or by any other method of
allocation that does not take into account the equitable considerations referred
to in this Section 7.3. 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 is not also guilty of such fraudulent
misrepresentation.
8. GENERAL PROVISIONS.
8.1 AMENDMENT. All amendments, modifications, or waivers
of this Agreement shall be in writing and shall be made only with the written
consent of the Company and the Holders of a majority of the outstanding Shares.
Any amendment, modification, or waiver effected in accordance with this Section
8.1 shall be binding upon AE and all Holders.
8.2 WAIVER. Any waiver of any right, power, or privilege
hereunder must be in writing and signed by the party or parties being charged
with the waiver. No delay on the part of any party or parties hereto in
exercising any right, power, or privilege hereunder shall operate as a waiver of
any other right, power, or privilege hereunder, nor shall any single or partial
exercise of any right, power, or privilege hereunder preclude any other or
further exercise thereof or the exercise of any other right, power, or
privilege.
8.3 NOTICES. All notices or other communications required
or permitted to be given pursuant to this Agreement shall be in writing and
shall be delivered personally or sent by overnight courier, by telecopier with
confirmation by first class mail, or by certified mail, return receipt
requested. Notices delivered personally or sent by overnight courier or
telecopier with confirmation by first class mail shall be effective on the date
first received, while notices sent by certified mail, return receipt requested,
shall be deemed to have been received and to be effective three (3) business
days after deposit into the mails. Notices shall be given to the parties at the
following respective addresses, or to such other addresses as any party shall
designate in writing:
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If to the Company: Xx. Xxxx Xxxxxxxxx
President
Xxxxxxxxx Communications, Inc.
0000 Xxxxxx Xxxxxxxxx
Xxxxx X-0
Xxxxx Xxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
With a copy to: Xxxxxx X. Xxxxxx, Xx., Esq.
Xxxxxx Coffee Nojima, LLP
00000 Xxxxxxxx Xxxxxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
If to any Holder: at the address set forth in the Company's records.
8.4 SUCCESSORS AND ASSIGNS. This Agreement and each of
its provisions shall be binding upon and shall inure to the benefit of the
parties hereto and their respective administrators, successors, and assigns.
Notwithstanding the immediately preceding sentence, no Holder may assign any of
its rights or obligations hereunder without the prior written consent of the
Company, which consent the Company may not unreasonably withhold.
8.5 LAW GOVERNING. This Agreement has been negotiated,
executed, and delivered and shall be performed in the State of California and
shall be governed by and construed and enforced in accordance with the laws of
the State of California, without regard for its conflict of laws rules. The
parties hereby irrevocably submit to the exclusive jurisdiction of the courts of
the State of California and any United States District Court situated in the
State of California for the purposes of construing and enforcing this Agreement.
8.6 ATTORNEYS' FEES. In any suit to interpret or enforce
the terms and provisions of this Agreement, the prevailing party shall be
entitled to recover court costs and attorneys' fees, in addition to any other
remedy or recovery to which such party may be entitled.
8.7 COUNTERPARTS. This Agreement may be executed in two
or more counterparts, including by facsimile transmission, all of which together
shall constitute a single instrument.
8.8 SEVERABILITY OF PROVISIONS. In the event any one or
more of the provisions of this Agreement shall for any reason be held to be
invalid, illegal, or unenforceable in any respect, such invalidity, illegality,
or unenforceability shall not affect any other provision hereof, and this
Agreement shall be construed as if such invalid, illegal, or unenforceable
provision had never been contained herein.
8.9 CONSTRUCTION. The headings in the sections and
paragraphs of this Agreement are for convenience only and shall not constitute a
part hereof. Whenever the context so requires, the masculine shall include the
feminine and the neuter, the singular shall include the plural, and conversely.
The terms and all parts of this Agreement shall in all cases be interpreted
simply and according to their plain meaning and neither for nor against any
party hereto.
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IN WITNESS WHEREOF, the parties have duly executed and delivered
this Agreement as of the date first written above.
Alliance Equities Xxxxxxxxx Communications, Inc.
By _________________________ By: _________________________
Xxxxxxx Xxxxxxx Xxxx Xxxxxxxxx
President President
