REGISTRATION RIGHTS AGREEMENT
EXHIBIT
10.2
This
REGISTRATION
RIGHTS AGREEMENT
(this
“Agreement”)
is
made and entered into by and between Debt Resolve, Inc., a Delaware corporation,
with its principal executive offices located at 000 Xxxxxxxxxxx Xxxxxx, Xxxxx
X0, Xxxxx Xxxxxx, Xxx Xxxx 00000 (the “Company”),
and
each of the purchasers set forth on the counterpart signature pages hereto
(the
“Purchasers”),
and
is dated with respect to each of the Purchasers as of the date noted on each
such Purchaser’s counterpart signature page.
WHEREAS,
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 Purchasers (i) 15% senior secured convertible
promissory notes, or 15% senior secured promissory notes in the case of one
Purchaser, of the Company in the aggregate principal amount of up to Four
Million Dollars ($4,000,000), which includes a $1,000,000 over-allotment option
(together with any note(s) issued in replacement thereof or as a dividend
thereon or otherwise with respect thereto in accordance with the terms thereof,
the “Notes”),
a
portion of which Notes is convertible into shares of common stock, par value
$.001 per share, of the Company (the “Common
Stock”),
and
(ii) warrants to purchase shares of Common Stock of the Company (the
“Warrants”);
WHEREAS,
the
Company proposes to conduct an initial public offering of shares of its Common
Stock (the “IPO”);
and
WHEREAS,
in
order to induce the Purchasers to purchase the Notes and Warrants, 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 Purchasers hereby agree as
follows:
1. Definitions.
As
used
in this Agreement, the following capitalized terms shall have the following
meanings. Capitalized terms used but not otherwise defined herein shall have
the
respective meanings set forth in the Securities Purchase Agreement.
“Purchasers”
means
the Purchasers and any transferee or assignee who agrees to become bound by
the
provisions of this Agreement in accordance with Section 9 hereof.
“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”).
“Registrable
Securities”
means:
(i) the shares of Common Stock issuable upon conversion of the Notes, (ii)
the
shares of Common Stock issuable upon exercise of the Warrants and (ii) any
shares of capital stock issued or issuable as a dividend on or in exchange
for
or otherwise with respect to the foregoing, the Notes or the
Warrants.
“Registration
Statement”
means
a
registration statement of the Company under the 1933 Act which the Company
may
or is obligated to file hereunder.
2. Registration.
(a) Mandatory
Registration.
The
Company shall, in connection with the IPO and with the same Registration
Statement utilized by the Company for the IPO, effect a registration of the
Registrable Securities covering the resale of all Registrable Securities
underlying the Notes issued or otherwise 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 the Notes to prevent dilution resulting from stock splits,
stock dividends or similar transactions. The Company acknowledges that the
number of Registrable Securities initially to be included in the Registration
Statement for the Registrable Securities shall represent a good faith estimate
of the maximum number of shares issuable upon conversion of the Notes.
Notwithstanding
the foregoing agreement to register all Registrable Securities in connection
with the IPO, if, in connection with IPO, 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)’ sole and
absolute 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 Purchaser has requested
inclusion hereunder as the underwriter shall permit. Any exclusion of
Registrable Securities shall be made pro rata among the Purchasers seeking
to
include Registrable Securities in proportion to the number of Registrable
Securities sought to be included by such Purchasers; 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.
If
a
Registration Statement registering of all the Registrable Securities is not
declared effective by October 31, 2006, the Company shall pay, in cash, and
in
addition to any other remedies available in law or equity, liquidated damages
to
each of the Purchasers in an amount equal to (i) one and one-half percent (1.5%)
of each Purchaser’s subscription amount for the first 30 days (or part thereof)
after July 31, 2006 and (ii) an additional one and one-half percent (1.5%)
of
each Purchaser’s subscription amount for any subsequent 30-day period (or part
thereof), thereafter, subject to a maximum aggregate penalty of ten percent
(10%) of each Purchaser’s subscription amount. Such payments shall be made on
the first business day of each month, commencing November 1, 2006, until such
Registration Statement is declared effective and all pro rate portions of such
payments for the month in which such Registration Statement is declared
effective shall be paid within five (5) business days of the declaration of
effectiveness.
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(b) Piggy-Back
Registrations.
In the
event that all Registrable Securities are not registered for resale in
connection with the IPO, should the Company, after the IPO and at any time
prior
to the expiration of the Registration Period (as hereinafter defined), 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 Purchaser who is entitled to
registration rights under this Section 2(b) written notice of such determination
and, if within twenty (20) days after the effective date of such notice (as
provided for in Section 11(b) hereof), such Purchaser shall so request in
writing, the Company shall include in such Registration Statement all or any
part of the Registrable Securities such Purchaser 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)’ sole and absolute
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 Purchaser has requested inclusion
hereunder as the underwriter shall permit. Any exclusion of Registrable
Securities shall be made pro rata among the Purchasers seeking to include
Registrable Securities in proportion to the number of Registrable Securities
sought to be included by such Purchasers; 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(b) shall be
construed to limit any registration required under Section 2(a) hereof. If
an
offering in connection with which a Purchaser is entitled to registration under
this Section 2(b) is an underwritten offering, then each Purchaser 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.
3. Obligations
of the Company.
In
connection with the registration of the Registrable Securities, the Company
shall have the following obligations:
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(a) The
Company shall, promptly following the date hereof, use its best efforts prepare
and file with the SEC a Registration Statement for the IPO which shall include
the Registrable Securities as provided for in Section 2(a) hereof. Upon
effectiveness, the Company shall keep such 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
Purchasers) 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”).
Such
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 (it being agreed that
the foregoing shall not apply to
statements made or statements omitted in reliance upon and in conformity with
information furnished in writing to the Company by one or more Purchasers
specifically for use in the Registration Statement).
(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.
(c) The
Company shall furnish to each Purchaser whose Registrable Securities are
included in a Registration Statement and one legal counsel designated by the
Purchasers: (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 Purchaser may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Purchaser. The
Company will promptly notify each Purchaser by facsimile of the effectiveness
of
each Registration Statement or any post-effective amendment. The Company will
promptly (but in no event more than twenty (20) business days) respond to any
and all comments received from the SEC (which comments shall promptly be made
available to the Purchasers 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 as soon as practicable (but in no event more than two (2)
business days) following receipt by the Company from the SEC of an order
declaring the Registration Statement effective.
4
(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
Purchasers 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 stockholders.
(e) As
promptly as practicable after becoming aware of such event, the Company shall
notify each Purchaser 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 Purchaser as such Purchaser may reasonably
request; provided,
however,
that,
for not more than fifteen (15) consecutive trading days (or a total of not
more
than thirty (30) 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”);
and
provided,
further,
that
the Company shall promptly: (i) notify the Purchasers in writing of the
existence of (but in no event, without the prior written consent of a Purchaser,
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 Purchasers 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(e) (but excluding the provisos therein) with respect to the
information giving rise thereto.
5
(f) 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 Purchaser 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.
(g) The
Company shall permit a single firm of counsel designated by the Purchasers
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 Purchasers, the Purchaser’s beneficial ownership of securities of
the Company or the Purchasers intended method of disposition of Registrable
Securities shall conform to the information provided to the Company by each
of
the Purchasers.
(h) The
Company shall make generally available to its security holders as soon as
practicable, but not later than ninety (90) 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.
(i) At
the
request of the holders of a majority-in-interest of the Registrable Securities,
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 Purchasers and
(ii) a letter, dated such date, from the Company’s independent registered
public accounting firm 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
Purchasers.
(j) The
Company shall make available for inspection by: (i) any Purchaser,
(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 Purchasers and (iv) one firm of
attorneys retained by all such underwriters (collectively, the “Inspectors”)
all
pertinent financial and other records, and pertinent corporate documents and
properties of the Company, 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 a Purchaser) 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(j). Each Purchaser 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 Purchaser) shall be deemed
to limit the Purchaser’s ability to sell Registrable Securities in a manner
which is otherwise consistent with applicable laws and regulations.
6
(k) The
Company shall hold in confidence and not make any disclosure of information
concerning a Purchaser 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 a
Purchaser is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to such Purchaser prior
to making such disclosure, and allow the Purchaser, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.
(l) The
Company shall cause all the Registrable Securities covered by the Registration
Statement to be listed on each national securities exchange or quotation system
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 system.
(m) 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.
(n) The
Company shall cooperate with the Purchasers 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 Purchasers may reasonably request and registered
in
such names as the managing underwriter or underwriters, if any, or the
Purchasers may request. 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 Purchasers whose Registrable Securities are included in such Registration
Statement) a customary instruction letter and opinion of such counsel to
facilitate the timely preparation and delivery of certificates (not bearing
any
restrictive legends) representing Registrable Securities.
7
(o) 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.
(p) 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.
(q) The
Company shall take all other reasonable actions necessary to expedite and
facilitate disposition by the Purchasers of Registrable Securities pursuant
to a
Registration Statement.
4. Obligations
of the Purchasers.
In
connection with the registration of the Registrable Securities, the Purchasers
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 Purchaser that such Purchaser 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 Purchaser of the information the Company requires from each
such Purchaser.
(b) Each
Purchaser, by such Purchaser’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 Purchaser has notified the Company in writing of such
Purchaser’s election to exclude all of such Purchaser’s Registrable Securities
from the Registration Statements.
8
(c) In
the
event Purchasers holding a majority-in-interest of the Registrable Securities
being registered (with the approval of the Purchasers) determine to engage
the
services of an underwriter, each Purchaser agrees to enter into and perform
such
Purchaser’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 Purchaser has notified
the Company in writing of such Purchaser’s election to exclude all of such
Purchaser’s Registrable Securities from such Registration
Statement.
(d) Each
Purchaser agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3(e) or 3(f), such
Purchaser will immediately discontinue disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until such Purchaser’s receipt of the copies of the supplemented or amended
prospectus contemplated by Section 3(e) or 3(f) and, if so directed by the
Company, such Purchaser 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 Purchaser’s possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such
notice.
(e) No
Purchaser may participate in any underwritten registration hereunder unless
such
Purchaser: (i) agrees to sell such Purchaser’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 (including, without limitation, all “blue sky” fees and
expenses and the fees associated with the review of any Registration Statement
and related offering by the National Association of Securities Dealers, Inc.),
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 Purchasers pursuant to Sections 2(b) and 3(j) hereof shall be borne by
the
Company.
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 Purchaser who holds such Registrable Securities, (ii) the
directors, officers, partners, employees, agents and each person who controls
any Purchaser 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 Purchasers,
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 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, rule or regulation, 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;
(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 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
Purchasers pursuant to Section 9.
9
(b) In
connection with any Registration Statement in which a Purchaser is
participating, each such Purchaser 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 stockholder selling securities pursuant to the Registration
Statement or any of its directors or officers or any person who controls such
stockholder 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 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 Purchaser, 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 Purchaser expressly for
use
in connection with such Registration Statement; and subject to Section 6(c)
such
Purchaser 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 Purchaser, which consent shall not be
unreasonably withheld; provided,
further,
however,
that
the Purchaser 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
Purchaser 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 Purchasers
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.
10
(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 Purchasers 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 Purchasers), if the
Purchasers 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.
11
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 Purchasers 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) use
its
best efforts to 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 Purchaser so long as such Purchaser 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 and (ii) such other information as may be reasonably requested to
permit the Purchasers to sell such securities pursuant to Rule 144 without
registration.
9. Assignment
of Registration Rights.
The
rights under this Agreement shall be automatically assignable by the Purchasers
to any transferee of all or any portion of Registrable Securities if:
(i) the Purchaser agrees in writing with the transferee or assignee to
assign such rights, and a copy of such agreement is furnished to the Company
promptly after such assignment, (ii) the Company is, promptly after such
transfer or assignment, furnished with written notice of (a) the name and
address of such transferee or assignee, and (b) the securities with respect
to which such registration rights are being transferred or assigned, (iii)
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.
12
10. Amendment
of Registration Rights.
The
terms and 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 and
Purchasers 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 Purchaser 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:
(i) If
to the
Company:
Debt
Resolve, Inc.
000
Xxxxxxxxxxx Xxxxxx, Xxxxx Xxxxx
Xxxxx
Xxxxxx, Xxx Xxxx 00000
Attention:
Xxxxx X. Xxxxxxxxx
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
With
a
copy to:
Xxxxxxxxx
Traurig LLP
MetLife
Building
000
Xxxx
Xxxxxx, 00xx Xxxxx
Xxx
Xxxx,
XX 00000
Attention:
Xxxxxxx X. Xxxxxxx, Esq.
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
(ii) If
to a
Purchaser: To
the
address and fax number set forth immediately below such Purchaser’s name on the
signature pages to the Securities Purchase Agreement.
13
With
copy
to:
Capital
Growth Financial, Inc.
000
XX
Xxxxxx Xxxxxxxxx, Xxxxx #000
Xxxx
Xxxxx, XX 00000
Attention:
Xxxx Xxxxxx
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
and
Maxim
Group LLC
000
Xxxxxxxxx Xxxxxx
Xxx
Xxxx,
XX 00000
Attention:
Xxxxxxxx X. Xxxxxx
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
Each
party shall provide notice to the other party of any change in
address.
(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 CONFLICTS OF
LAW.
(e) THE
PARTIES HERETO HEREBY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE NEW YORK
STATE
OR UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK WITH RESPECT
TO
ANY DISPUTE ARISING UNDER THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY. THE PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM
TO
THE MAINTENANCE OF SUCH SUIT OR PROCEEDING. THE 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 A PARTY’S RIGHT TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW. THE 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.
(f) THE
PARTY
OR PARTIES WHICH DO 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.
14
(g) EACH
PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.
(h) 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.
(i) This
Agreement and the other Transaction Documents (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.
(j) 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.
(k) The
headings in this Agreement are for convenience of reference only and shall
not
form part of, or affect the interpretation of, this Agreement.
(l) This
Agreement may be executed in one or more counterparts (with the Purchasers
each
executing the counterpart in the form of Annex
A
hereto),
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.
(m) 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.
(n) Except
as
otherwise provided herein, all consents and other determinations to be made
by
the Purchasers pursuant to this Agreement shall be made by Purchasers holding
a
majority of the Registrable Securities, determined as if the all of the Notes
then outstanding have been converted into Registrable Securities.
15
(o) The
Company acknowledges that a breach by it of its obligations hereunder will
cause
irreparable harm to each Purchaser 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 Purchaser
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.
(p) 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; signature pages
follow.]
16
IN
WITNESS WHEREOF,
the
undersigned Purchasers and the Company have caused this Agreement to be duly
executed as of the date first above written.
| DEBT RESOLVE, INC. | ||
| |
|
|
| By: | /s/ Xxxxx X. Xxxxxxxxx | |
|
Name:
Xxxxx X. Xxxxxxxxx
Title:
Co-chairman, President and CEO
|
||
|
PURCHASERS:
The Purchasers executing the Signature Page in
the form
attached hereto as Annex
A
and delivering the same to the Company or its agents shall be deemed
to
have executed this Agreement and agreed to the terms
hereof.
|
||
17
Annex
A
Purchaser
Counterpart Signature Page
The
undersigned, desiring to: enter into this Registration Rights Agreement dated
as
of _________________ ___, 2006 (the “Agreement”),
between the undersigned, Debt Resolve, Inc., a Delaware corporation (the
“Company”),
and
the other parties thereto, in or substantially in the form furnished to the
undersigned, hereby agrees to join the Agreement as a party thereto, with all
the rights and privileges appertaining thereto, and to be bound in all respects
by the terms and conditions thereof.
IN
WITNESS WHEREOF,
the
undersigned has executed the Agreement as of _________________ ___,
2006.
|
PURCHASER:
|
||
|
Name
and Address, Fax No. and Social
Security No./EIN of Purchaser: |
||
|
|
||
|
|
||
|
|
||
|
|
||
| Fax No.: _______________________________________ | ||
|
Soc.
Sec. No./EIN:
________________________________
|
||
|
If
a partnership, corporation, trust or other business
entity:
|
||
| By: | ||
|
Name:
Title:
|
||
|
If
an individual:
|
||
|
Signature
|
||
18
