REGISTRATION RIGHTS AGREEMENT
THIS AGREEMENT is made as of October 6, 1997, by and among CITADEL
COMPUTER SYSTEMS INCORPORATED, a Delaware corporation (the "COMPANY") and
CORESTAFF, INC., a Delaware corporation (the "INVESTOR").
RECITALS
A. The Company and the Investor are parties to a Purchase Agreement
of even date herewith (the "PURCHASE AGREEMENT"). In order to induce the
Investor to enter into the Purchase Agreement, the Company has agreed to
provide the registration rights set forth in this Agreement. The execution and
delivery of this Agreement is a condition to the Closing under the Purchase
Agreement.
B. Unless otherwise provided in this Agreement, capitalized terms
used herein shall have the meanings set forth in SECTION 8 hereof.
AGREEMENT
The parties hereto agree as follows:
1. DEMAND REGISTRATIONS.
(a) REQUESTS FOR REGISTRATION. At any time after the first
anniversary of the date hereof, the holders of a majority of the Registrable
Securities may request registration under the Securities Act of all or any
portion of their Registrable Securities on Form X-0, XX-0 or any similar
long-form registration ("LONG-FORM REGISTRATIONS"), and the holders of a
majority of the Registrable Securities may request registration under the
Securities Act of all or any portion of their Registrable Securities on Form
S-2 or S-3) or any similar short-form registration ("SHORT-FORM REGISTRATIONS")
if available. All registrations requested pursuant to this SECTION 1(a) are
referred to herein as "DEMAND REGISTRATIONS". Each request for a Demand
Registration shall specify the approximate number of Registrable Securities
requested to be registered and the anticipated per share price range for such
offering. Within ten days after receipt of any such request, the Company shall
give written notice of such requested registration to all other holders of
Registrable Securities and shall include in such registration all Registrable
Securities with respect to which the Company has received written requests for
inclusion therein within 15 days after the receipt of the Company's notice.
(b) LONG-FORM REGISTRATIONS. The holders of Registrable
Securities shall be entitled to request (i) one (1) Long-Form Registration in
which the Company shall pay all Registration Expenses ("COMPANY-PAID LONG-FORM
REGISTRATIONS") and (ii) an unlimited number of Long-Form Registrations each in
which the holders of Registrable Securities shall pay
their share of the Registration Expenses as set forth in SECTION 5 hereof.
Each such Long Form Registration shall be for at least $1,000,000 of the
Registrable Securities or 25% of such Registrable Securities. A registration
shall not count as one of the permitted Long-Form Registrations until it has
become effective and no Company-paid Long-Form Registration shall count as
one of the permitted Long-Form Registrations unless the holders of
Registrable Securities are able to register and sell at least 75% of the
Registrable Securities requested to be included in such registration (unless
such registration is a shelf registration, in which event the holders of
Registrable Securities have been able to register at least 75% of the
Registrable Securities requested to be included in such registration);
provided that in any event the Company shall pay all Registration Expenses in
connection with any registration initiated as a Company-paid Long-Form
Registration whether or not it has become effective and whether or not such
registration has counted as one of the permitted Company-paid Long-Form
Registrations.
(c) SHORT-FORM REGISTRATIONS. In addition to the Long-Form
Registrations provided pursuant to SECTION 1(b), the holders of at least 40% of
the Registrable Securities shall be entitled to request an unlimited number of
Short-Form Registrations in which the Company shall pay all Registration
Expenses. Demand Registrations shall be Short-Form Registrations whenever the
Company is permitted to use any applicable short form.
(d) PRIORITY ON DEMAND REGISTRATIONS. The Company shall not
include in any Demand Registration any securities which are not Registrable
Securities without the prior written consent of the holders of a majority of
the Registrable Securities included in such registration. If a Demand
Registration is an underwritten offering and the managing underwriters advise
the Company in writing that in their opinion the number of Registrable
Securities and, if permitted hereunder, other securities requested to be
included in such offering exceeds the number of Registrable Securities and
other securities, if any, which can be sold in an orderly manner in such
offering within a price range acceptable to the holders of a majority of the
Registrable Securities to be included in such registration therein, without
adversely affecting the marketability of the offering, the Company shall
include in such registration prior to the inclusion of any securities which are
not Registrable Securities (i) first, the number of Registrable Securities
requested to be included held by the Investor or its permitted transferees
which in the opinion of such underwriters can be sold in an orderly manner
within the price range of such offering, pro rata among the respective holders
thereof on the basis of the amount of Registrable Securities owned by each such
holder and (ii) second, other registrable securities of the Company included
therein, pro rata among such holders on the basis of the amount of Registrable
Securities owned by each such holder. Without the consent of the Company and
the holders of a majority of the registrable securities included in such
registration, any Persons other than holders of Registrable Securities who
participate in Demand Registrations which are not at the Company's expense must
pay their share of the Registration Expenses as provided in SECTION 5 hereof.
(e) RESTRICTIONS ON LONG-FORM REGISTRATIONS. The Company shall
not be obligated to effect any Long-Form Registration within 180 days after the
effective date of a previous Long-Form Registration or a previous registration
in which the holders of Registrable Securities were given piggyback rights
pursuant to SECTION 2 and in which there was no reduction
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in the number of Registrable Securities requested to be included.
Notwithstanding the foregoing, in the event that all Registrable Securities
are eligible for immediate resale under Rule 144(k), the holders shall sell
such Shares under Rule 144 and shall not be entitled to any Long-Form
Registration. The Company may postpone for up to 180 days the filing or the
effectiveness of a registration statement for a Demand Registration if the
Company and the holders of a majority of the Registrable Securities agree
that such Demand Registration would reasonably be expected to have a material
adverse effect on any proposal or plan by the Company or any of its
Subsidiaries to engage in any acquisition of assets (other than in the
ordinary course of business) or any merger, consolidation, tender offer,
reorganization or similar transaction; provided that in such event, the
holders of Registrable Securities initially requesting such Demand
Registration shall be entitled to withdraw such request and, if such request
is withdrawn, such Demand Registration shall not count as one of the
permitted Demand Registrations hereunder and the Company shall pay all
Registration Expenses in connection with such registration. The Company may
delay a Demand Registration hereunder only once in any twelve-month period.
(f) SELECTION OF UNDERWRITERS. The holders of a majority of
the Registrable Securities included in any Demand Registration/Long-Form
Registration shall have the right to select the investment banker(s) and
manager(s) to administer the offering.
(g) OTHER REGISTRATION RIGHTS. Except as provided in this
Agreement, the Company shall not grant to any Persons the right to request the
Company to register any equity securities of the Company, or any securities
convertible or exchangeable into or exercisable for such securities, without
the prior written consent of the holders of a majority of the Registrable
Securities.
2. PIGGYBACK REGISTRATIONS.
(a) RIGHT TO PIGGYBACK. Whenever the Company proposes to
register any of its securities under the Securities Act (other than pursuant to
a Demand Registration) and the registration form to be used may be used for the
registration of Registrable Securities (a "PIGGYBACK REGISTRATION"), the
Company shall give prompt written notice (in any event within three business
days after its receipt of notice of any exercise of demand registration rights
other than under this Agreement) to all holders of Registrable Securities of
its intention to effect such a registration and shall include in such
registration all Registrable Securities with respect to which the Company has
received written requests for inclusion therein within 25 days after the
receipt of the Company's notice.
(b) PIGGYBACK EXPENSES. The Registration Expenses of the
holders of Registrable Securities shall be paid by the Company in all Piggyback
Registrations.
(c) PRIORITY ON PRIMARY REGISTRATIONS. If a Piggyback
Registration is an underwritten primary registration on behalf of the Company,
and the managing underwriters advise the Company in writing that in their
opinion the number of securities requested to be included in such registration
exceeds the number which can be sold in an orderly manner in such offering
within a price range acceptable to the Company, the Company shall include in
such
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registration (i) first, the securities the Company proposes to sell, (ii)
second, the Registrable Securities requested to be included in such
registration, pro rata among the holders of such Registrable Securities on
the basis of the number of shares owned by each such holder, and (iii) third,
other securities requested to be included in such registration; PROVIDED,
HOWEVER, that in any Piggyback Registration other than the Initial Public
Offering of the Company's Common Stock, the holders of Registrable Securities
shall be permitted to include in any such registration on pro rata basis not
less than 25% of the number of shares of Common Stock proposed to be sold in
such offering, unless the holders of a majority of the Registrable Securities
requesting such Piggyback Registration agree in writing to reduce such
position or to waive their rights under this proviso.
(d) PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback
Registration is an underwritten secondary registration on behalf of holders of
the Company's securities, and the managing underwriters advise the Company in
writing that in their opinion the number of securities requested to be included
in such registration exceeds the number which can be sold in an orderly manner
in such offering within a price range acceptable to the holders of a majority
of the Registrable Securities to be included in such registration, the Company
shall include in such registration (i) first, the securities requested to be
included therein by the holders requesting such registration, (ii) second, the
Registrable Securities requested to be included in such registration, pro rata
among the holders of such Registrable Securities on the basis of the number of
shares owned by each such holder, and (iii) third, other securities requested
to be included in such registration.
(e) SELECTION OF UNDERWRITERS. If any Piggyback Registration
is an underwritten offering, the selection of investment banker(s) and
manager(s) for the offering must be approved by the holders of a majority of
the Registrable Securities included in such Piggyback Registration. Such
approval shall not be unreasonably withheld or delayed.
(f) OTHER REGISTRATIONS. If the Company has previously filed a
registration statement with respect to Registrable Securities pursuant to
SECTION 1 or pursuant to this SECTION 2, and if such previous registration has
not been withdrawn or abandoned, the Company shall not file or cause to be
effected any other registration of any of its equity securities or securities
convertible or exchangeable into or exercisable for its equity securities under
the Securities Act (except on Form X-0, Xxxx X-0 or any successor form),
whether on its own behalf or at the request of any holder or holders of such
securities, until a period of at least 180 days has elapsed from the effective
date of such previous registration, unless a shorter period of time is approved
by the holders of a majority of the Registrable Securities included in such
previous registration, or unless such registration is a "shelf registration" on
Form S-3 that the holders of Registrable Securities have requested to be kept
effective for a period of more than 180 days.
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3. HOLDBACK AGREEMENTS.
(a) Each holder of Registrable Securities shall not effect any
public sale or distribution (including sales pursuant to Rule 144) of equity
securities of the Company, or any securities convertible into or exchangeable
or exercisable for such securities, during the seven days prior to and the
180-day period beginning on the effective date of any underwritten Demand
Registration or any underwritten Piggyback Registration in which Registrable
Securities are included (except as part of such underwritten registration),
unless the underwriters managing the registered public offering otherwise
agree.
(b) The Company (i) shall not effect any public sale or
distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days prior to
and during the 180-day period beginning on the effective date of any
underwritten Demand Registration or any underwritten Piggyback Registration
(except as part of such underwritten registration or pursuant to registrations
on Form S-4, Form S-8 or any successor form), unless the underwriters managing
the registered public offering otherwise agree, and (ii) shall cause each
holder of its Common Stock, or any securities convertible into or exchangeable
or exercisable for Common Stock, purchased from the Company at any time after
the date of this Agreement (other than in a registered public offering) to
agree not to effect any public sale or distribution (including sales pursuant
to Rule 144) of any such securities during such period (except as part of such
underwritten registration, if otherwise permitted), unless the underwriters
managing the registered public offering otherwise agree.
4. REGISTRATION PROCEDURES. Whenever the holders of Registrable
Securities have requested that any Registrable Securities be registered
pursuant to this Agreement, the Company shall use its best efforts to effect
the registration and the sale of such Registrable Securities in accordance with
the intended method of disposition thereof, and pursuant thereto the Company
shall as expeditiously as possible:
(a) prepare and file with the Securities and Exchange
Commission a registration statement with respect to such Registrable Securities
and use its best efforts to cause such registration statement to become
effective (provided that before filing a registration statement or prospectus
or any amendments or supplements thereto, the Company shall furnish to the
counsel selected by the holders of a majority of the Registrable Securities
covered by such registration statement copies of all such documents proposed to
be filed, which documents shall be subject to the review and comment of such
counsel);
(b) notify each holder of Registrable Securities of the
effectiveness of each registration statement filed hereunder and prepare and
file with the Securities and Exchange Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective for a period of not less than 180 days and comply with the provisions
of the Securities Act with respect to the disposition of all securities covered
by such registration statement during such period in accordance with the
intended methods of disposition by the sellers thereof set forth in
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such registration statement; PROVIDED, HOWEVER, that if the Company is
eligible to use Form S-3, the holders of Registrable Securities may require
the Company to keep such registration effective as a "shelf registration" for
a period of up to two (2) years;
(c) furnish to each seller of Registrable Securities such
number of copies of such registration statement, each amendment and supplement
thereto, the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;
(d) use its best efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as any seller reasonably requests and do any and all other acts
and things which may be reasonably necessary or advisable to enable such seller
to consummate the disposition in such jurisdictions of the Registrable
Securities owned by such seller (provided that the Company shall not be
required to (i) qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this subparagraph, (ii)
subject itself to taxation in any such jurisdiction or (iii) consent to general
service of process in any such jurisdiction);
(e) notify each seller of such Registrable Securities, at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and, at the request of any such seller, the Company shall
prepare a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not contain an untrue statement of a material fact or omit to state any
fact necessary to make the statements therein not misleading;
(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed and, if not so listed, to be listed on the NASD automated quotation
system and, if listed on the NASD automated quotation system, use its best
efforts to secure designation of all such Registrable Securities covered by
such registration statement as a NASDAQ "national market system security"
within the meaning of Rule 11Aa2-1 of the Securities and Exchange Commission
or, failing that, to secure NASDAQ authorization for such Registrable
Securities and, without limiting the generality of the foregoing, to arrange
for at least two market makers to register as such with respect to such
Registrable Securities with the NASD;
(g) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such registration
statement;
(h) enter into such customary agreements (including
underwriting agreements in customary form) and take all such other actions as
the holders of a majority of the Registrable Securities being sold or the
underwriters, if any, reasonably request in order to
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expedite or facilitate the disposition of such Registrable Securities
(including effecting a stock split or a combination of shares);
(i) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent retained by
any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement;
(j) otherwise use its best efforts to comply with all
applicable rules and regulations of the Securities and Exchange Commission, and
make available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months beginning with
the first day of the Company's first full calendar quarter after the effective
date of the registration statement, which earnings statement shall satisfy the
provisions of SECTION 11(a) of the Securities Act and Rule 158 thereunder;
(k) permit any holder of Registrable Securities which holder,
in its sole and exclusive judgment, might be deemed to be an underwriter or a
controlling person of the Company, to participate in the preparation of such
registration or comparable statement and to require the insertion therein of
material, furnished to the Company in writing, which in the reasonable judgment
of such holder and its counsel should be included;
(l) in the event of the issuance of any stop order suspending
the effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any common stock included in such registration statement for sale in any
jurisdiction, the Company shall use its best efforts promptly to obtain the
withdrawal of such order;
(m) use its best efforts to cause such Registrable Securities
covered by such registration statement to be registered with or approved by
such other governmental agencies or authorities as may be necessary to enable
the sellers thereof to consummate the disposition of such Registrable
Securities;
(n) obtain a cold comfort letter from the Company's independent
public accountants in customary form and covering such matters of the type
customarily covered by cold comfort letters as the holders of a majority of the
Registrable Securities being sold reasonably request (provided that such
Registrable Securities constitute at least 10% of the securities covered by
such registration statement); and
(o) If the offering is underwritten and at the request of any
seller of Registrable Securities, use its best efforts to furnish on the date
that Registrable Securities are delivered to the underwriters for sale pursuant
to such registration an opinion dated such date of counsel representing the
Company for the purposes of such registration, addressed to the
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underwriters and to such seller, stating that such registration statement has
become effective under the Securities Act and that (i) to the best knowledge
of such counsel, no stop order suspending the effectiveness thereof has been
issued and no proceedings for that purpose have been instituted or are
pending or contemplated under the Securities Act, (ii) the registration
statement, the related prospectus and each amendment or supplement thereof
comply as to form in all material respects with the requirements of the
Securities Act (except that such counsel need not express any opinion as to
financial statements contained therein) and (iii) to such other effects as
reasonably may be requested by counsel for the underwriters or by such seller
or its counsel.
5. REGISTRATION EXPENSES.
(a) All expenses incident to the Company's performance of or
compliance with this Agreement, including without limitation all registration
and filing fees, fees and expenses of compliance with securities or blue sky
laws, printing expenses, messenger and delivery expenses, fees and
disbursements of custodians, and fees and disbursements of counsel for the
Company and all independent certified public accountants, underwriters
(excluding discounts and commissions) and other Persons retained by the Company
(all such expenses being herein called "REGISTRATION EXPENSES"), shall be borne
as provided in this Agreement, except that the Company shall, in any event, pay
its internal expenses (including, without limitation, all salaries and expenses
of its officers and employees performing legal or accounting duties), the
expense of any annual audit or quarterly review, the expense of any liability
insurance and the expenses and fees for listing the securities to be registered
on each securities exchange on which similar securities issued by the Company
are then listed or on, the NASD automated quotation system.
(b) In connection with each Demand Registration and each
Piggyback Registration, the Company shall reimburse the holders of Registrable
Securities included in such registration for the reasonable fees and
disbursements (up to $5,000) of one counsel chosen by the holders of a majority
of the Registrable Securities included in such registration for the purpose of
rendering a legal opinion on behalf of such holders in connection with any
underwritten Demand Registration or Piggyback Registration.
(c) To the extent Registration Expenses are not required to be
paid by the Company, each holder of securities included in any registration
hereunder shall pay those Registration Expenses allocable to the registration
of such holder's securities so included, and any Registration Expenses not so
allocable shall be payable by all sellers of securities included in such
registration in proportion to the aggregate selling price of the securities to
be so registered.
6. INDEMNIFICATION.
(a) The Company agrees to indemnify, to the extent permitted by
law, each holder of Registrable Securities, its officers and directors and each
Person who controls such holder (within the meaning of the Securities Act)
against all losses, claims, damages, liabilities and expenses caused by any
untrue or alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or any amendment
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thereof or supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as the same are caused by or contained in any
information furnished in writing to the Company by such holder expressly for
use therein or by such holder's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto after the
Company has furnished such holder with a sufficient number of copies of the
same. In connection with an underwritten offering, the Company shall indemnify
such underwriters, their officers and directors and each Person who controls
such underwriters (within the meaning of the Securities Act) to the same extent
as provided above with respect to the indemnification of the holders of
Registrable Securities.
(b) In connection with any registration statement in which a
holder of Registrable Securities is participating, each such holder shall
furnish to the Company in writing such information and affidavits as the
Company reasonably requests for use in connection with any such registration
statement or prospectus and, to the extent permitted by law, shall indemnify
the Company, its directors and officers and each Person who controls the
Company (within the meaning of the Securities Act) against any losses, claims,
damages, liabilities and expenses resulting from any untrue or alleged untrue
statement of material fact contained in the registration statement, prospectus
or preliminary prospectus or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be stated therein
or necessary to make the statements therein not misleading, but only to the
extent that such untrue statement or omission is contained in any information
or affidavit so furnished in writing by such holder; provided that the
obligation to indemnify shall be individual, not joint and several, for each
holder and shall be limited to the net amount of proceeds received by such
holder from the sale of Registrable Securities pursuant to such registration
statement.
(c) Any Person entitled to indemnification hereunder shall (i)
give prompt written notice to the indemnifying party of any claim with respect
to which it seeks indemnification (provided that the failure to give prompt
notice shall not impair any Person's right to indemnification hereunder to the
extent such failure has not prejudiced the indemnifying party) and (ii) unless
in such indemnified party's reasonable judgment a conflict of interest between
such indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party shall not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent shall not
be unreasonably withheld). An indemnifying party who is not entitled to, or
elects not to, assume the defense of a claim shall not be obligated to pay the
fees and expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable
judgment of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to
such claim.
(d) The indemnification provided for under this Agreement shall
remain in full force and effect regardless of any investigation made by or on
behalf of the indemnified party or any officer, director or controlling Person
of such indemnified party and
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shall survive the transfer of securities. The Company also agrees to make
such provisions, as are reasonably requested by any indemnified party, for
contribution to such party in the event the Company's indemnification is
unavailable for any reason.
7. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person may
participate in any registration hereunder unless such Person:
(a) in the case of a registration which is underwritten, agrees
to sell such Person's securities on the basis provided in any underwriting
arrangements approved by the Person or Persons entitled hereunder to approve
such arrangements; PROVIDED, HOWEVER, that no holder of Registrable Securities
included in any underwritten registration shall be required to make any
representations or warranties to the Company or the underwriters (other than
representations and warranties regarding such holder and such holder's intended
method of distribution) or to undertake any indemnification obligations to the
Company or the underwriters with respect thereto, except as otherwise provided
in SECTION 6 hereof;
(b) as expeditiously as possible, notifies the Company, at any
time when a prospectus relating to such Person's Registrable Securities is
required to be delivered under the Securities Act, of the happening of any
event as a result of which such prospectus contains an untrue statement of a
material fact or omits any fact necessary to make the statements therein not
misleading;
(c) complies with all reasonable requests made by the Company
or its counsel with respect to the registration of such Person's Registrable
Securities, including, without limitation, providing access to all relevant
books and records; and
(d) completes, executes and delivers all questionnaires, powers
of attorney, indemnities, underwriting agreements and other usual and customary
documents necessary or appropriate with respect to the offering of such
Person's Registrable Securities, and in the case of a registration which is
underwritten, necessary or appropriate under the terms of such underwriting
arrangements (subject to the provision in PARAGRAPH (a) above).
8. DEFINITIONS.
(a) The term "INITIAL PUBLIC OFFERING" shall mean the first
registered public offering of the Company's Common Stock by the Company after
the date hereof under the Securities Act with net proceeds to the Company of
not less than $5 million.
(b) "REGISTRABLE SECURITIES" means (i) any Common Stock issued
to the Investor pursuant to the Purchase Agreement or upon exercise of the
Warrants, (ii) any other Common Stock issued or issuable with respect to the
securities referred to in clause (i) by way of a stock dividend or stock split
or in connection with an exchange or combination of shares, recapitalization,
merger, consolidation or other reorganization, and (iii) any other shares of
Common Stock held by the Investor. As to any particular Registrable
Securities, such securities shall cease to be Registrable Securities when they
have been distributed to the public pursuant to
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a offering registered under the Securities Act or are eligible to be
immediately sold to the public through a broker, dealer or market maker in
compliance with Rule 144(k) under the Securities Act (or any similar rule
then in force). For purposes of this Agreement, a Person shall be deemed to
be a holder of Registrable Securities whenever such Person has the right to
acquire such Registrable Securities (upon conversion or exercise in
connection with a transfer of securities or otherwise, but disregarding any
restrictions or limitations upon the exercise of such right), whether or not
such acquisition has actually be effected.
(b) Unless otherwise stated, other capitalized terms contained
herein have the meanings set forth in the Purchase Agreement.
9. MISCELLANEOUS.
(a) NO INCONSISTENT AGREEMENTS. The Company shall not
hereafter enter into any agreement with respect to its securities which is
inconsistent with or violates the rights granted to the holders of Registrable
Securities in this Agreement.
(b) ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. The Company
shall not take any action, or permit any change to occur, with respect to its
securities which would adversely affect the ability of the holders of
Registrable Securities to include such Registrable Securities in a registration
undertaken pursuant to this Agreement or which would adversely affect the
marketability of such Registrable Securities in any such registration
(including, without limitation, effecting a stock split or a combination of
shares).
(c) REMEDIES. Any Person having rights under any provision of
this Agreement shall be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and
to exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction (without posting
any bond or other security) for specific performance and for other injunctive
relief in order to enforce or prevent violation of the provisions of this
Agreement.
(d) AMENDMENTS AND WAIVERS. Except as otherwise provided
herein, the provisions of this Agreement may be amended or waived only upon the
prior written consent of the Company and holders of at least 75% of the
Registrable Securities.
(e) SUCCESSORS AND ASSIGNS. All covenants and agreements in
this Agreement by or on behalf of any of the parties hereto shall bind and
inure to the benefit of the respective successors and assigns of the parties
hereto whether so expressed or not. In addition, whether or not any express
assignment has been made, the provisions of this Agreement which are for the
benefit of purchasers or holders of Registrable Securities are also for the
benefit of, and enforceable by, any subsequent holder of registrable
Securities.
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(f) SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
(g) COUNTERPARTS. This Agreement may be executed
simultaneously in two or more counterparts, any one of which need not contain
the signatures of more than one party, but all such counterparts taken together
shall constitute one and the same Agreement.
(h) DESCRIPTIVE HEADINGS. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of
this Agreement.
(i) GOVERNING LAW. The corporate law of the State of Delaware
shall govern all issues and questions concerning the relative rights of the
Company and its stockholders. All other issues and questions concerning the
construction, validity, interpretation and enforcement of this Agreement and
the exhibits and schedules hereto shall be governed by, and construed in
accordance with, the laws of the State of Texas, without giving effect to any
choice of law or conflict of law rules or provisions (whether of the State of
Texas or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Texas.
(j) NOTICES. All notices, demands or other communications to
be given or delivered under or by reason of the provisions of this Agreement
shall be in writing and shall be deemed to have been given when delivered
personally to the recipient, sent to the recipient by reputable overnight
courier service (charges prepaid) or 48 hours after deposited in the United
States mail, first class, to the recipient by postage prepaid or by facsimile.
Such notices, demands and other communications shall be sent to the Investor
and each other holder at the addresses indicated on the Schedule of Holders and
to the Company at the address of its corporate headquarters or to such other
address or to the attention of such other person as the recipient party has
specified by prior written notice to the sending party.
(k) NEW PARTIES. During the term of this Agreement, the
Company may, with the consent of the Company's Board of Directors and the
holders of more than 60% of the Registrable Securities, add new Persons as
parties to this Agreement by executing a supplemental signature page hereto,
and the SCHEDULE OF HOLDERS attached hereto as EXHIBIT A shall be revised and
updated accordingly.
(l) TERMINATION OF REGISTRATION RIGHTS. All registration
rights granted hereunder will expire at such time as 75% of the Registrable
Securities originally issued by the Company to the Investor (including those
issuable upon exercise of the Warrants) have been sold to the public (either in
an offering registered under the Securities Act or pursuant to Rule 144
promulgated under the Securities Act), and the average daily trading volume of
the Common Stock over the six-month period immediately preceding the
termination is at least one-quarter of one percent (1/4%) of the Company's
outstanding Common Stock.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
CITADEL COMPUTER SYSTEMS
INCORPORATED
By: /s/ XXXXXX X. XXXXXXX
----------------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: President and Chief Executive Officer
CORESTAFF, INC.
By: /s/ XXXXX X. XXXXXXX
----------------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Senior Vice President
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EXHIBIT A TO
REGISTRATION RIGHTS AGREEMENT
SCHEDULE OF HOLDERS
INVESTOR:
CORESTAFF, INC.
0000 Xxxx Xxx Xxxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxxxx
Senior Vice President, General Counsel
and Secretary
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