EXHIBIT 10.4
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of August 8,
2006, by and among Protocall Technologies Incorporated, a Nevada corporation
with its headquarters located at 00 Xxxx Xxxxx, Xxxxxxx, XX 00000 (the
"Company"), and each of the undersigned (together with their respective
affiliates and any assignee or transferee of all of their respective rights
hereunder, the "Initial Investors").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and among the
parties hereto of even date herewith (the "Securities Purchase Agreement"), the
Company has agreed, upon the terms and subject to the conditions contained
therein, to issue and sell to the Initial Investors (i) secured convertible
notes in the aggregate principal amount of up to Two Million Dollars
($2,000,000) (the "Notes") that are convertible into shares of the Company's
common stock (the "Common Stock"), upon the terms and subject to the limitations
and conditions set forth in such Notes, (ii) warrants (the "Warrants") to
acquire an aggregate of 15,000,000 shares of Common Stock, upon the terms and
conditions and subject to the limitations and conditions set forth in the
Warrants; and
B. To induce the Initial Investors to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"1933 Act"), and applicable state securities laws;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and each of the
Initial Investors hereby agree as follows:
1. DEFINITIONS.
a. As used in this Agreement, the following terms shall have the following
meanings:
(i) "Investors" means the Initial Investors and any transferee or assignee
who agrees to become bound by the provisions of this Agreement in accordance
with Section 9 hereof.
(ii) "register," "registered," and "registration" refer to a registration
effected by preparing and filing a Registration Statement or Statements in
compliance with the 1933 Act and pursuant to Rule 415 under the 1933 Act or any
successor rule providing for offering securities on a continuous basis ("Rule
415"), and the declaration or ordering of effectiveness of such Registration
Statement by the United States Securities and Exchange Commission (the "SEC").
(iii) "Registration Price" means the lesser of (a) the Initial Market
Price (as defined in the Notes) and (b) the Conversion Price (as defined in the
Notes, provided that for purposes of this definition, the Applicable Percentage
(as defined in the Notes) shall be 60%).
(iv) "Registrable Securities" means the Conversion Shares issued or
issuable upon conversion or otherwise pursuant to the Notes and Additional Notes
(as defined in the Securities Purchase Agreement) including, without limitation,
Damages Shares (as defined in the Notes) issued or issuable pursuant to the
Notes, shares of Common Stock issued or issuable in payment of the Standard
Liquidated Damages Amount (as defined in the Securities Purchase Agreement),
shares issued or issuable in respect of interest or in redemption of the Notes
in accordance with the terms thereof) and any shares of capital stock issued or
issuable as a dividend on or in exchange for or otherwise with respect to any of
the foregoing.
(v) "Registration Statement" means a registration statement of the Company
under the 0000 Xxx.
b. Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Securities Purchase Agreement or
the Convertible Note.
2. REGISTRATION.
a. Mandatory Registration. The Company shall prepare, and, on or prior to
forty-five (45) days from the date of Closing (as defined in the Securities
Purchase Agreement) (the "Filing Date"), file with the SEC a Registration
Statement on Form S-3 (or, if Form S-3 is not then available, on such form of
Registration Statement as is then available to effect a registration of the
Registrable Securities, subject to the consent of the Initial Investors, which
consent will not be unreasonably withheld) covering the resale of the
Registrable Securities underlying the Notes issued or issuable pursuant to the
Securities Purchase Agreement, which Registration Statement, to the extent
allowable under the 1933 Act and the rules and regulations promulgated
thereunder (including Rule 416), shall state that such Registration Statement
also covers such indeterminate number of additional shares of Common Stock as
may become issuable upon conversion of or otherwise pursuant to the Notes to
prevent dilution resulting from stock splits, stock dividends or similar
transactions. The number of shares of Common Stock initially included in such
Registration Statement shall be no less than an amount equal to the sum of the
number of Conversion Shares that are then issuable upon conversion of the Notes
and Additional Notes (based on the Registration Price (as defined herein)),
without regard to any limitation on the Investor's ability to convert the Notes.
The Company acknowledges that the number of shares initially included in the
Registration Statement represents a good faith estimate of the maximum number of
shares issuable upon conversion of the Notes.
b. Underwritten Offering. If any offering pursuant to a Registration
Statement pursuant to Section 2(a) hereof involves an underwritten offering, the
Investors who hold a majority in interest of the Registrable Securities subject
to such underwritten offering, with the consent of a majority-in-interest of the
Initial Investors, shall have the right to select one legal counsel and an
investment banker or bankers and manager or managers to administer the offering,
which investment banker or bankers or manager or managers shall be reasonably
satisfactory to the Company.
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c. Payments by the Company. The Company shall use its best efforts to
obtain effectiveness of the Registration Statement as soon as practicable. If
(i) the Registration Statement(s) covering the Registrable Securities required
to be filed by the Company pursuant to Section 2(a) hereof is not filed by the
Filing Date or declared effective by the SEC on or prior to one hundred and
twenty (120) days from the date of Closing (as defined in the Securities
Purchase Agreement) (the "Effectiveness Deadline"), or (ii) after the
Registration Statement has been declared effective by the SEC, sales of all of
the Registrable Securities cannot be made pursuant to the Registration
Statement, or (iii) the Common Stock is not listed or included for quotation on
the Nasdaq Global Market ("Nasdaq"), the Nasdaq Capital Market ("Nasdaq
Capital"), the New York Stock Exchange (the "NYSE") or the American Stock
Exchange (the "AMEX") after being so listed or included for quotation after the
date hereof, or (iv) the Common Stock ceases to be traded on the
Over-the-Counter Bulletin Board (the "OTCBB") or any equivalent replacement
exchange prior to being listed or included for quotation on one of the
aforementioned markets, then the Company will make payments to the Investors in
such amounts and at such times as shall be determined pursuant to this Section
2(c) as partial relief for the damages to the Investors by reason of any such
delay in or reduction of their ability to sell the Registrable Securities (which
remedy shall not be exclusive of any other remedies available at law or in
equity). The Company shall pay to each holder of the Notes or Registrable
Securities an amount equal to the then outstanding principal amount of the Notes
(and, in the case of holders of Registrable Securities, the principal amount of
Notes from which such Registrable Securities were converted) ("Outstanding
Principal Amount"), multiplied by the Applicable Percentage (as defined below)
times the sum of: (i) the number of months (prorated for partial months) after
the Filing Date or the end of the aforementioned one hundred and twenty (120)
day period and prior to the date the Registration Statement is declared
effective by the SEC, provided, however, that there shall be excluded from such
period any delays which are solely attributable to changes required by the
Investors in the Registration Statement with respect to information relating to
the Investors, including, without limitation, changes to the plan of
distribution, or to the failure of the Investors to conduct their review of the
Registration Statement pursuant to Section 3(h) below in a reasonably prompt
manner; (ii) the number of months (prorated for partial months) that sales of
all of the Registrable Securities cannot be made pursuant to the Registration
Statement after the Registration Statement has been declared effective
(including, without limitation, when sales cannot be made by reason of the
Company's failure to properly supplement or amend the prospectus included
therein in accordance with the terms of this Agreement, but excluding any days
during an Allowed Delay (as defined in Section 3(f)); and (iii) the number of
months (prorated for partial months) that the Common Stock is not listed or
included for quotation on the OTCBB, Nasdaq, Nasdaq Capital, NYSE or AMEX or
that trading thereon is halted after the Registration Statement has been
declared effective. The term "Applicable Percentage" means two hundredths (.02).
(For example, if the Registration Statement becomes effective one (1) month
after the end of such one hundred and twenty (120) day period, the Company would
pay $5,000 for each $250,000 of Outstanding Principal Amount. If thereafter,
sales could not be made pursuant to the Registration Statement for an additional
period of one (1) month, the Company would pay an additional $5,000 for each
$250,000 of Outstanding Principal Amount.) Such amounts shall be paid in cash
or, at the Company's option, in shares of Common Stock priced at the Conversion
Price (as defined in the Notes, provided that for purposes of the calculation of
the Conversion Price pursuant to this Section 2(c), the Applicable Percentage
(as defined in the Notes) shall be 60%) on such payment date. For purposes of
this Agreement, all amounts paid to the Investors pursuant to this section shall
be capped at 6%.
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d. Piggy-Back Registrations. Subject to the last sentence of this Section
2(d), if at any time prior to the expiration of the Registration Period (as
hereinafter defined) the Company shall determine to file with the SEC a
Registration Statement relating to an offering for its own account or the
account of others under the 1933 Act of any of its equity securities (other than
on Form S-4 or Form S-8 or their then equivalents relating to equity securities
to be issued solely in connection with any acquisition of any entity or business
or equity securities issuable in connection with stock option or other bona
fide, employee benefit plans), the Company shall send to each Investor who is
entitled to registration rights under this Section 2(d) written notice of such
determination and, if within fifteen (15) days after the effective date of such
notice, such Investor shall so request in writing, the Company shall include in
such Registration Statement all or any part of the Registrable Securities such
Investor requests to be registered, except that if, in connection with any
underwritten public offering for the account of the Company the managing
underwriter(s) thereof shall impose a limitation on the number of shares of
Common Stock which may be included in the Registration Statement because, in
such underwriter(s)' judgment, marketing or other factors dictate such
limitation is necessary to facilitate public distribution, then the Company
shall be obligated to include in such Registration Statement only such limited
portion of the Registrable Securities with respect to which such Investor has
requested inclusion hereunder as the underwriter shall permit. Any exclusion of
Registrable Securities shall be made pro rata among the Investors seeking to
include Registrable Securities in proportion to the number of Registrable
Securities sought to be included by such Investors; provided, however, that the
Company shall not exclude any Registrable Securities unless the Company has
first excluded all outstanding securities, the holders of which are not entitled
to inclusion of such securities in such Registration Statement or are not
entitled to pro rata inclusion with the Registrable Securities; and provided,
further, however, that, after giving effect to the immediately preceding
proviso, any exclusion of Registrable Securities shall be made pro rata with
holders of other securities having the right to include such securities in the
Registration Statement other than holders of securities entitled to inclusion of
their securities in such Registration Statement by reason of demand registration
rights. No right to registration of Registrable Securities under this Section
2(d) shall be construed to limit any registration required under Section 2(a)
hereof. If an offering in connection with which an Investor is entitled to
registration under this Section 2(d) is an underwritten offering, then each
Investor whose Registrable Securities are included in such Registration
Statement shall, unless otherwise agreed by the Company, offer and sell such
Registrable Securities in an underwritten offering using the same underwriter or
underwriters and, subject to the provisions of this Agreement, on the same terms
and conditions as other shares of Common Stock included in such underwritten
offering. Notwithstanding anything to the contrary set forth herein, the
registration rights of the Investors pursuant to this Section 2(d) shall only be
available in the event the Company fails to timely file, obtain effectiveness or
maintain effectiveness of any Registration Statement to be filed pursuant to
Section 2(a) in accordance with the terms of this Agreement.
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e. Eligibility for Form X-0, XX-0 or S-1; Conversion to Form S-3. The
Company represents and warrants that it meets the requirements for the use of
Form X-0, XX-0 or S-1 for registration of the sale by the Initial Investors and
any other Investors of the Registrable Securities. The Company agrees to file
all reports required to be filed by the Company with the SEC in a timely manner
so as to remain eligible or become eligible, as the case may be, and thereafter
to maintain its eligibility, for the use of Form S-3. If the Company is not
currently eligible to use Form S-3, not later than five (5) business days after
the Company first meets the registration eligibility and transaction
requirements for the use of Form S-3 (or any successor form) for registration of
the offer and sale by the Initial Investors and any other Investors of
Registrable Securities, the Company shall file a Registration Statement on Form
S-3 (or such successor form) with respect to the Registrable Securities covered
by the Registration Statement on Form SB-2 or Form S-1, whichever is applicable,
filed pursuant to Section 2(a) (and include in such Registration Statement on
Form S-3 the information required by Rule 429 under the 0000 Xxx) or convert the
Registration Statement on Form SB-2 or Form S-1, whichever is applicable, filed
pursuant to Section 2(a) to a Form S-3 pursuant to Rule 429 under the 1933 Act
and cause such Registration Statement (or such amendment) to be declared
effective no later than thirty (30) days after filing. In the event of a breach
by the Company of the provisions of this Section 2(e), the Company will be
required to make payments pursuant to Section 2(c) hereof.
3. OBLIGATIONS OF THE COMPANY.
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
a. The Company shall prepare promptly, and file with the SEC not later
than the Filing Date, a Registration Statement with respect to the number of
Registrable Securities provided in Section 2(a), and thereafter use its best
efforts to cause such Registration Statement relating to Registrable Securities
to become effective as soon as possible after such filing but in no event later
than the Effectiveness Deadline, and keep the Registration Statement effective
pursuant to Rule 415 at all times until such date as is the earlier of (i) the
date on which all of the Registrable Securities have been sold and (ii) the date
on which the Registrable Securities (in the opinion of counsel to the Initial
Investors) may be immediately sold to the public without registration or
restriction (including, without limitation, as to volume by each holder thereof)
under the 1933 Act (the "Registration Period"), which Registration Statement
(including any amendments or supplements thereto and prospectuses contained
therein) shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein, or necessary to make the
statements therein not misleading.
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Registration
Statements and the prospectus used in connection with the Registration
Statements as may be necessary to keep the Registration Statements effective at
all times during the Registration Period, and, during such period, comply with
the provisions of the 1933 Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statements
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statements. In the event the number of
shares available under a Registration Statement filed pursuant to this Agreement
is insufficient to cover all of the Registrable Securities issued or issuable
upon conversion of the Notes, the Company shall amend the Registration
Statement, or file a new Registration Statement (on the short form available
therefor, if applicable), or both, so as to cover all of the Registrable
Securities, in each case, as soon as practicable, but in any event within
fifteen (15) days after the necessity therefor arises (based on the market price
of the Common Stock and other relevant factors on which the Company reasonably
elects to rely). The Company shall use its best efforts to cause such amendment
and/or new Registration Statement to become effective as soon as practicable
following the filing thereof, but in any event within thirty (30) days after the
date on which the Company reasonably first determines (or reasonably should have
determined) the need therefor. The provisions of Section 2(c) above shall be
applicable with respect to such obligation, with the one hundred and twenty
(120) days running from the day the Company reasonably first determines (or
reasonably should have determined) the need therefor.
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c. The Company shall furnish to each Investor whose Registrable Securities
are included in a Registration Statement and its legal counsel (i) promptly (but
in no event more than two (2) business days) after the same is prepared and
publicly distributed, filed with the SEC, or received by the Company, one copy
of each Registration Statement and any amendment thereto, each preliminary
prospectus and prospectus and each amendment or supplement thereto, and, in the
case of the Registration Statement referred to in Section 2(a), each letter
written by or on behalf of the Company to the SEC or the staff of the SEC, and
each item of correspondence from the SEC or the staff of the SEC, in each case
relating to such Registration Statement (other than any portion of any thereof
which contains information for which the Company has sought confidential
treatment), and (ii) promptly (but in no event more than two (2) business days)
after the Registration Statement is declared effective by the SEC, such number
of copies of a prospectus, including a preliminary 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. The Company will immediately notify each
Investor by facsimile of the effectiveness of each Registration Statement or any
post-effective amendment. The Company will promptly respond to any and all
comments received from the SEC (which comments shall promptly be made available
to the Investors upon request), with a view towards causing each Registration
Statement or any amendment thereto to be declared effective by the SEC as soon
as practicable, shall promptly file an acceleration request as soon as
practicable (but in no event more than two (2) business days) following the
resolution or clearance of all SEC comments or, if applicable, following
notification by the SEC that any such Registration Statement or any amendment
thereto will not be subject to review and shall promptly file with the SEC a
final prospectus pursuant to SEC Rule 424(b) as soon as practicable (but in no
event more than two (2) business days) following the effective date of the
Registration Statement. In the event of a breach by the Company of the
provisions of this Section 3(c), the Company will be required to make payments
pursuant to Section 2(c) hereof.
d. The Company shall use reasonable efforts to (i) register and qualify
the Registrable Securities covered by the Registration Statements under such
other securities or "blue sky" laws of such jurisdictions in the United States
as the Investors who hold a majority in interest of the Registrable Securities
being offered reasonably request, (ii) prepare and file in those jurisdictions
such amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; 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 3(d), (b) subject itself to general taxation in any such
jurisdiction, (c) file a general consent to service of process in any such
jurisdiction, (d) provide any undertakings that cause the Company undue expense
or burden, or (e) make any change in its charter or bylaws, which in each case
the Board of Directors of the Company determines to be contrary to the best
interests of the Company and its shareholders.
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e. In the event Investors who hold a majority-in-interest of the
Registrable Securities being offered in the offering (with the approval of a
majority-in-interest of the Initial Investors) select underwriters for the
offering, the Company shall enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering.
f. As promptly as practicable after becoming aware of such event, the
Company shall notify each Investor of the happening of any event, of which the
Company has knowledge, as a result of which the prospectus included in any
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, and use its best
efforts promptly to prepare a supplement or amendment to any Registration
Statement to correct such untrue statement or omission, and deliver such number
of copies of such supplement or amendment to each Investor as such Investor may
reasonably request; provided that, for not more than ten (10) consecutive
trading days (or a total of not more than twenty (20) trading days in any twelve
(12) month period), the Company may delay the disclosure of material non-public
information concerning the Company (as well as prospectus or Registration
Statement updating) the disclosure of which at the time is not, in the good
faith opinion of the Company, in the best interests of the Company (an "Allowed
Delay"); provided, further, that the Company shall promptly (i) notify the
Investors in writing of the existence of (but in no event, without the prior
written consent of an Investor, shall the Company disclose to such investor any
of the facts or circumstances regarding) material non-public information giving
rise to an Allowed Delay and (ii) advise the Investors in writing to cease all
sales under such Registration Statement until the end of the Allowed Delay. Upon
expiration of the Allowed Delay, the Company shall again be bound by the first
sentence of this Section 3(f) with respect to the information giving rise
thereto.
g. The Company shall use its best efforts to prevent the issuance of any
stop order or other suspension of effectiveness of any Registration Statement,
and, if such an order is issued, to obtain the withdrawal of such order at the
earliest possible moment and to notify each Investor who holds Registrable
Securities being sold (or, in the event of an underwritten offering, the
managing underwriters) of the issuance of such order and the resolution thereof.
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h. The Company shall permit a single firm of counsel designated by the
Initial Investors to review such Registration Statement and all amendments and
supplements thereto (as well as all requests for acceleration or effectiveness
thereof) a reasonable period of time prior to their filing with the SEC, and not
file any document in a form to which such counsel reasonably objects and will
not request acceleration of such Registration Statement without prior notice to
such counsel. The sections of such Registration Statement covering information
with respect to the Investors, the Investor's beneficial ownership of securities
of the Company or the Investors intended method of disposition of Registrable
Securities shall conform to the information provided to the Company by each of
the Investors.
i. The Company shall make generally available to its security holders as
soon as practicable, but not later than one hundred and twenty (120) days after
the close of the period covered thereby, an earnings statement (in form
complying with the provisions of Rule 158 under the 0000 Xxx) covering a
twelve-month period beginning not later than the first day of the Company's
fiscal quarter next following the effective date of the Registration Statement.
j. At the request of any Investor, the Company shall furnish, on the date
that Registrable Securities are delivered to an underwriter, if any, for sale in
connection with any Registration Statement or, if such securities are not being
sold by an underwriter, on the date of effectiveness thereof (i) an opinion,
dated as of such date, from counsel representing the Company for purposes of
such Registration Statement, in form, scope and substance as is customarily
given in an underwritten public offering, addressed to the underwriters, if any,
and the Investors and (ii) a letter, dated such date, from the Company's
independent certified public accountants in form and substance as is customarily
given by independent certified public accountants to underwriters in an
underwritten public offering, addressed to the underwriters, if any, and the
Investors.
k. Upon reasonable notice and during normal business hours, 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
Initial Investors, (iv) one firm of attorneys and one firm of accountants or
other agents retained by all other Investors, and (v) 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, including without limitation, records of conversions by other
holders of convertible securities issued by the Company and the issuance of
stock to such holders pursuant to the conversions (collectively, the "Records"),
as shall be reasonably deemed necessary by each Inspector to enable each
Inspector to exercise its due diligence responsibility, and cause the Company's
officers, directors and employees to supply all information which any Inspector
may reasonably request for purposes of such due diligence; provided, however,
that each Inspector shall hold in confidence and shall not make any disclosure
(except to an Investor) of any Record or other information which the Company
determines in good faith to be confidential, and of which determination the
Inspectors are so notified, unless (a) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration
Statement, (b) the release of such Records is ordered pursuant to a subpoena or
other order from a court or government body of competent jurisdiction, or (c)
the information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement. The
Company shall not be required to disclose any confidential information in such
Records to any Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and substance satisfactory to the Company)
with the Company with respect thereto, substantially in the form of this Section
3(k). 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 expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential. Nothing herein (or in any other confidentiality agreement between
the Company and any Investor) shall be deemed to limit the Investor's ability to
sell Registrable Securities in a manner which is otherwise consistent with
applicable laws and regulations.
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l. 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 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 notice to such Investor prior to making such disclosure, and
allow the Investor, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.
m. The Company shall (i) cause all the Registrable Securities covered by
the Registration Statement to be listed on each national securities exchange on
which securities of the same class or series issued by the Company are then
listed, if any, if the listing of such Registrable Securities is then permitted
under the rules of such exchange, or (ii) to the extent the securities of the
same class or series are not then listed on a national securities exchange,
secure the designation and quotation, of all the Registrable Securities covered
by the Registration Statement on Nasdaq or, if not eligible for Nasdaq, on
Nasdaq Capital or, if not eligible for Nasdaq or Nasdaq Capital, on the OTCBB
and, without limiting the generality of the foregoing, to arrange for at least
two market makers to register with the National Association of Securities
Dealers, Inc. ("NASD") as such with respect to such Registrable Securities.
n. The Company shall provide a transfer agent and registrar, which may be
a single entity, for the Registrable Securities not later than the effective
date of the Registration Statement.
o. The Company shall cooperate with the Investors who hold Registrable
Securities being offered and the managing underwriter or underwriters, if any,
to facilitate the timely preparation and delivery of certificates (not bearing
any restrictive legends) representing Registrable Securities to be offered
pursuant to 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 the Investors may reasonably request and registered in
such names as the managing underwriter or underwriters, if any, or the Investors
may request, and, within three (3) business days after a Registration Statement
which includes Registrable Securities is ordered effective by the SEC, the
Company shall deliver, and shall cause legal counsel selected by the Company to
deliver, to the transfer agent for the Registrable Securities (with copies to
the Investors whose Registrable Securities are included in such Registration
Statement) an instruction in the form attached hereto as Exhibit 1 and an
opinion of such counsel in the form attached hereto as Exhibit 2.
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p. At the request of the holders of a majority-in-interest of the
Registrable Securities, the Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to a
Registration Statement and any prospectus used in connection with the
Registration Statement as may be necessary in order to change the plan of
distribution set forth in such Registration Statement.
q. From and after the date of this Agreement, the Company shall not, and
shall not agree to, allow the holders of any securities of the Company to
include any of their securities in any Registration Statement under Section 2(a)
hereof or any amendment or supplement thereto under Section 3(b) hereof without
the consent of the holders of a majority-in-interest of the Registrable
Securities, except as set forth on Schedule 3(q) hereof.
r. The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Investors of Registrable Securities
pursuant to a Registration Statement.
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 three (3) business
days prior to the first anticipated filing date of the Registration Statement,
the Company shall notify each Investor of the information the Company requires
from each such Investor.
b. Each Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statements hereunder, unless such Investor has notified the Company in writing
of such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statements.
c. In the event Investors holding a majority-in-interest of the
Registrable Securities being registered (with the approval of the Initial
Investors) determine to engage the services of an underwriter, each Investor
agrees to enter into and perform such Investor's obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of the
Registrable Securities, unless such Investor has notified the Company in writing
of such Investor's election to exclude all of such Investor's Registrable
Securities from such Registration Statement.
10
d. 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(f) or 3(g),
such Investor will immediately discontinue 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(f) or 3(g) 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.
e. No Investor may participate in any underwritten registration hereunder
unless such Investor (i) agrees to sell such Investor's Registrable Securities
on the basis provided in any underwriting arrangements in usual and customary
form entered into by the Company, (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements, and (iii) agrees to pay its pro rata share of all underwriting
discounts and commissions and any expenses in excess of those payable by the
Company pursuant to Section 5 below.
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualification fees, printers and accounting fees, the
fees and disbursements of counsel for the Company, and the reasonable fees and
disbursements of one counsel selected by the Initial Investors pursuant to
Sections 2(b) and 3(h) hereof shall be borne by the Company and shall be
included in the fees paid to counsel under the Securities Purchase Agreement for
purposes of counsel selected by the Initial Investors.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the extent permitted by law, the Company will indemnify, hold
harmless and defend (i) each Investor who holds such Registrable Securities,
(ii) the directors, officers, partners, employees, agents and each person who
controls any Investor within the meaning of the 1933 Act or the Securities
Exchange Act of 1934, as amended (the "1934 Act"), if any, (iii) any underwriter
(as defined in the 0000 Xxx) for the Investors, and (iv) the directors,
officers, partners, employees and each person who controls any such underwriter
within the meaning of the 1933 Act or the 1934 Act, if any (each, an
"Indemnified Person"), against any
11
joint or several losses, claims, damages, liabilities or expenses (collectively,
together with actions, proceedings or inquiries by any regulatory or
self-regulatory organization, whether commenced or threatened, in respect
thereof, "Claims") to which any of them may become subject insofar as such
Claims arise out of or are based upon: (i) any untrue statement or alleged
untrue statement of a material fact in a Registration Statement or the omission
or alleged omission to state therein a material fact required to be stated or
necessary to make the statements therein not misleading; (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading; or (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities (the matters in the foregoing clauses (i) through (iii) being,
collectively, "Violations"). Subject to the restrictions set forth in Section
6(c) with respect to the number of legal counsel, the Company shall reimburse
the Indemnified Person, promptly as such expenses are incurred and are due and
payable, for any reasonable legal fees or other reasonable expenses incurred by
them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a): (i) shall not apply to a Claim arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company by any Indemnified Person
or underwriter for such Indemnified Person expressly for use in connection with
the preparation of such Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(c) hereof; (ii) shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of the Company, which consent shall not be unreasonably withheld; and
(iii) with respect to any preliminary prospectus, shall not inure to the benefit
of any Indemnified Person if the untrue statement or omission of material fact
contained in the preliminary prospectus was corrected on a timely basis in the
prospectus, as then amended or supplemented, such corrected prospectus was
timely made available by the Company pursuant to Section 3(c) hereof, and the
Indemnified Person was promptly advised in writing not to use the incorrect
prospectus prior to the use giving rise to a Violation and such Indemnified
Person, notwithstanding such advice, used it. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9.
b. In connection with any Registration Statement in which an Investor is
participating, each such Investor agrees severally and not jointly to indemnify,
hold harmless and defend, to the same extent and in the same manner 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, any underwriter and any other
shareholder selling securities pursuant to the Registration Statement or any of
its directors or officers or any person who controls such shareholder or
underwriter within the meaning of the 1933 Act or the 1934 Act (collectively and
together with an Indemnified Person, an "Indemnified Party"), against any Claim
to which any of them may
12
become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such
Claim arises out of or is based upon any Violation by such Investor, 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 expressly for use in connection with such Registration
Statement; and subject to Section 6(c) such Investor will reimburse any legal or
other expenses (promptly as such expenses are incurred and are due and payable)
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) 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 Agreement (including this Section 6(b) and
Section 7) for only that amount 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 Investors
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. Promptly after receipt by an Indemnified Person or Indemnified Party
under this Section 6 of notice of the commencement of any action (including any
governmental action), 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 indemnifying party shall pay for only one separate legal counsel
for the Indemnified Persons or the Indemnified Parties, as applicable, and such
legal counsel shall be selected by Investors holding a majority-in-interest of
the Registrable Securities included in the Registration Statement to which the
Claim relates (with the approval of a majority-in-interest of the Initial
Investors), if the Investors are entitled to indemnification hereunder, or the
Company, if the Company is entitled to indemnification hereunder, as applicable.
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
actually prejudiced in its ability to defend such action. The indemnification
required by this Section 6 shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as such expense,
loss, damage or liability is incurred and is due and payable.
13
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 such fraudulent misrepresentation, and (iii)contribution (together
with any indemnification or other obligations under this Agreement) by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investors 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 investors to sell securities of the Company
to the public without registration ("Rule 144"), the Company agrees to:
a. make and keep public information available, as those terms are
understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other documents
required of the Company under the 1933 Act and the 1934 Act so long as the
Company remains subject to such requirements (it being understood that nothing
herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the 1933 Act and
the 1934 Act, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested to permit the Investors to
sell such securities pursuant to Rule 144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
Subject to Section 8(g) of the Securities Purchase Agreement, the rights
under this Agreement shall be automatically assignable by the Investors to any
transferee of all or any portion of Registrable 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
14
transfer or assignment, furnished with written notice of (a) the name and
address of such transferee or assignee, and (b) the securities with respect to
which such registration rights are being transferred or assigned, (iii)
following such transfer or assignment, the further disposition of such
securities by the transferee or assignee is restricted under the 1933 Act and
applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence, the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein, (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement, and (vi) such transferee shall be an "accredited investor" as that
term defined in Rule 501 of Regulation D promulgated under the 1933 Act.
10. AMENDMENT OF REGISTRATION RIGHTS.
Subject to Section 8(e) of the Securities Purchase Agreement, provisions
of this Agreement may be amended and the observance thereof may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with written consent of the Company, each of the Initial
Investors (to the extent such Initial Investor still owns Registrable
Securities) and Investors who hold a majority interest of the Registrable
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 Registrable Securities
whenever such person or entity owns of record such Registrable Securities. If
the Company receives conflicting instructions, notices or elections from two or
more persons or entities with respect to the same Registrable Securities, the
Company shall act upon the basis of instructions, notice or election received
from the registered owner of such Registrable Securities.
b. Any notices required or permitted to be given under the terms hereof
shall be sent by certified or registered mail (return receipt requested) or
delivered personally or by courier (including a recognized overnight delivery
service) or by facsimile and shall be effective five days after being placed in
the mail, if mailed by regular United States mail, or upon receipt, if delivered
personally or by courier (including a recognized overnight delivery service) or
by facsimile, in each case addressed to a party. The addresses for such
communications shall be:
If to the Company:
Protocall Technologies Incorporated
00 Xxxx Xxxxx
Xxxxxxx, XX 00000
Attention: Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
15
With a copy to:
Xxxxxxxxx Xxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to an Investor: to the address set forth immediately below such Investor's
name on the signature pages to the Securities Purchase Agreement.
With a copy to:
Xxxxxxx Xxxxx Xxxxxxx & Xxxxxxxxx, LLP
0000 Xxxxxx Xxxxxx
00xx Xxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
d. THIS AGREEMENT SHALL BE ENFORCED, GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES
OF CONFLICT OF LAWS. THE PARTIES HERETO HEREBY SUBMIT TO THE EXCLUSIVE
JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED NEW YORK, NEW YORK WITH
RESPECT TO ANY DISPUTE ARISING UNDER THIS AGREEMENT, THE AGREEMENTS ENTERED INTO
IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. BOTH
PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE THAT SERVICE
OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY
RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW. BOTH PARTIES AGREE THAT A FINAL
NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER
LAWFUL MANNER. THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE ARISING UNDER
THIS AGREEMENT SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES, INCLUDING
ATTORNEYS' FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH
DISPUTE.
16
e. In the event that any provision of this Agreement is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any
provision hereof which may prove invalid or unenforceable under any law shall
not affect the validity or enforceability of any other provision hereof.
f. This Agreement, the Notes, the Warrants and the Securities Purchase
Agreement (including all schedules and exhibits thereto) constitute the entire
agreement among the parties hereto with respect to the subject matter hereof and
thereof. There are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein and therein. This Agreement and the
Securities Purchase Agreement supersede all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof and thereof.
g. Subject to the requirements of Section 9 hereof, this Agreement shall
be binding upon and inure to the benefit of the parties and their successors and
assigns.
h. The headings in this Agreement are for convenience of reference only
and shall not form part of, or affect the interpretation of, this Agreement.
i. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party. 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.
j. 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.
k. Except as otherwise provided herein, all consents and other
determinations to be made by the Investors pursuant to this Agreement shall be
made by Investors holding a majority of the Registrable Securities, determined
as if the all of the Notes then outstanding have been converted into for
Registrable Securities.
l. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to each Investor by vitiating the intent
and purpose of the transactions contemplated hereby. Accordingly, the Company
acknowledges that the remedy at law for breach of its obligations under this
Agreement will be inadequate and agrees, in the event of a breach or threatened
breach by the Company of any of the provisions under this Agreement, that each
Investor shall be entitled, in addition to all other available remedies in law
or in equity, and in addition to the penalties assessable herein, to an
injunction or injunctions restraining, preventing or curing any breach of this
Agreement and to enforce specifically the terms and provisions hereof, without
the necessity of showing economic loss and without any bond or other security
being required.
17
m. The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
18
IN WITNESS WHEREOF, the Company and the undersigned Initial Investors have
caused this Agreement to be duly executed as of the date first above written.
PROTOCALL TECHNOLOGIES INCORPORATED
--------------------------------------
Xxxxx Xxxxxx
Chief Executive Officer
AJW PARTNERS, LLC
By: SMS Group, LLC
--------------------------------------
Xxxxx X. Xxxxxxxx
Manager
AJW OFFSHORE, LTD.
By: First Street Manager II, LLC
--------------------------------------
Xxxxx X. Xxxxxxxx
Manager
AJW QUALIFIED PARTNERS, LLC
By: AJW Manager, LLC
------------------------------------
Xxxxx X. Xxxxxxxx
Manager
NEW MILLENNIUM CAPITAL PARTNERS, II, LLC
By: First Street Manager II, LLC
--------------------------------------
Xxxxx X. Xxxxxxxx
Manager
19
