REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT dated this 27th day of September, 2000
(this "Agreement"), between Xxxxxx.xxx, Inc., a Delaware corporation, with
principal executive offices located at 000 Xxxxxxxx Xxxxx, Xxxxx 000, Xxxxxxxx,
Xxxxxxxxxx 00000 (the "Company"), and the other signatories hereto (the "Initial
Investors").
W I T N E S S E T H
WHEREAS, upon the terms and subject to the conditions of the Securities
Purchase Agreement dated as of a date even herewith, between the Initial
Investors and the Company (the "Securities Purchase Agreement"), the Company has
agreed to issue and sell to the Initial Investors (I) 1,200 shares of Series B
Convertible Preferred Stock, $0.01 par value ("Preferred Stock") which, upon the
terms and subject to the conditions of the Certificate of Designations of
Rights, Preferences and Privileges and Restrictions of Series B Convertible
Preferred Stock (the "Certificate of Designations") are convertible into shares
of common stock, $0.01 par value, of the Company ("Common Stock") and (ii)
warrants ("Warrants") to purchase 545,450 shares of Common Stock; and
WHEREAS, to induce the Initial Investors to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide with respect to
the Common Stock issued or issuable upon conversion of the Preferred Stock and
exercise of the Warrants certain registration rights under the Securities Act;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. DEFINITIONS.
(a) As used in this Agreement, the following terms shall have the
meanings:
(i) "AFFILIATE" of any specified Person means any other
Person who directly, or indirectly through one or more intermediaries,
is in control of, is controlled by, or is under common control with,
such specified Person. For purposes of this definition, control of a
Person means the power, directly or indirectly, to direct or cause the
direction of the management and policies of such Person whether by
contract, securities, ownership or otherwise; and the terms
"controlling" and "controlled" have the respective meanings correlative
to the foregoing.
(ii) "COMMISSION" means the Securities and Exchange
Commission.
(iii) "EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended, and the rules and regulations of the Commission
thereunder, or any similar successor statute.
(iv) "INVESTORS" means the Initial Investors and any
transferee or assignee of Registrable Securities who agrees to become
bound by all of the terms and provisions of this Agreement in
accordance with Section 8 hereof.
(v) "MARKET PRICE" on any date of determination means the
closing bid price of a share of Common Stock on such day as reported on
the Nasdaq SmallCap Market ("NASDAQ") or, if such security is not
listed or admitted to trading on the NASDAQ, on the principal national
security exchange or quotation system on which such security is quoted
or listed or admitted to trading (including the OTC Bulletin Board),
or, if not quoted or listed or admitted to trading on any national
securities exchange or quotation system, the closing bid price of such
security on the over-the-counter market on the day in question as
reported by the Pink Sheets LLC, or a similar generally accepted
reporting service, or if not so available, in such manner as furnished
by any NASDAQ member firm of the National Association of Securities
Dealers, Inc. selected from time to time by the Board of Directors of
the Company for that purpose, or a price determined in good faith by
the Board of Directors of the Company as being equal to the fair market
value thereof, as the case may be.
(vi) "PERSON" means any individual, partnership,
corporation, limited liability company, joint stock company,
association, trust, unincorporated organization, or a government or
agency or political subdivision thereof.
(vii) "PROSPECTUS" means the prospectus (including" without
limitation, any preliminary prospectus and any final prospectus filed
pursuant to Rule 424(b) under the Securities Act, including any
prospectus that discloses information previously omitted from a
prospectus filed as part of an effective registration statement in
reliance on Rule 430A under the Securities Act) included in the
Registration Statement, as amended or supplemented by any prospectus
supplement with respect to the terms of the offering of any portion of
the Registrable Securities covered by the Registration Statement and by
all other amendments and supplements to such prospectus, including all
material incorporated by reference in such prospectus and all documents
filed after the date of such prospectus by the Company under the
Exchange Act and incorporated by reference therein.
(viii) "REGISTRABLE SECURITIES" means the Common Stock
issued or issuable (i) upon conversion of the Preferred Stock or (iii)
upon exercise of the Warrants; provided, however, a share of Common
Stock shall cease to be a Registrable Security for purposes of this
Agreement when it no longer is a Restricted Security.
(ix) "REGISTRATION STATEMENT" means a registration
statement of the Company filed on an appropriate form under the
Securities Act providing for the registration of, and the sale on a
continuous or delayed basis by the holders of, all of the Registrable
Securities pursuant to Rule 415 under the Securities Act, including the
Prospectus contained therein and forming a part thereof, any amendments
to such registration statement and supplements to such Prospectus, and
all exhibits and other material incorporated by reference in such
registration statement and Prospectus.
(x) "RESTRICTED SECURITY" means any share of Common
Stock issued or issuable upon conversion of the Preferred Stock or
exercise of the Warrants, except any such share that (i) has been
registered pursuant to an effective registration statement under the
Securities Act and sold in a manner contemplated by the Prospectus
included in the Registration Statement, (ii) has been transferred in
compliance with the resale provisions of Rule 144 under the Securities
Act (or any successor provision thereto) or is transferable pursuant to
paragraph (k) of Rule 144 under the Securities Act (or any successor
provision thereto), or (iii) otherwise has been
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transferred and a new share of Common Stock not subject to transfer
restrictions under the Securities Act has been delivered by or on
behalf of the Company.
(xi) "SECURITIES ACT" means the Securities Act of 1933,
as amended, and the rules and, regulations of the Commission
thereunder, or any similar successor statute.
(b) All capitalized terms used and not defined herein have the
respective meaning assigned to them in the Securities Purchase Agreement.
2. REGISTRATION.
(A) FILING AND EFFECTIVENESS OF REGISTRATION STATEMENT. The
Company shall prepare and file with the Commission by not later than 30 days
after the Closing Date (as defined in the Securities Purchase Agreement), a
Registration Statement relating to the offer and sale of the Registrable
Securities and shall use its best efforts to cause the Commission to declare
such Registration Statement effective under the Securities Act as promptly as
practicable but not later than 90 days after the Closing Date, assuming for
purposes hereof a Conversion Price (as defined in the Certificate of
Designations) of $0.25 per share. The Company shall not include any other
securities in the Registration Statement relating to the offer and sale of the
Registrable Securities. The Company shall notify the Initial Investors by
written notice that such Registration Statement has been declared effective by
the Commission within one business day of such declaration by the Commission.
(B) REGISTRATION DEFAULT. If the Registration Statement covering
the Registrable Securities or the Additional Registrable Securities (as defined
in Section 2 (d) hereof) required to be filed by the Company pursuant to Section
2(a) or 2(d) hereof, as the case may be, is not (i) filed with the Commission
within 30 days after the Closing Date or (ii) declared effective by the
Commission within 90 days after the Closing Date, or if the Commission notifies
the Company in writing that it will not review the Registration Statement and
the Registration Statement is not declared effective not later than seven
business days thereafter (any of which, without duplication, an "Initial Date"),
then the Company shall make the payments to the Initial Investors as provided in
the next sentence as liquidated damages and not as a penalty. The amount to be
paid by the Company to the Initial Investors (pro rated on a daily basis) shall
be determined as of each Computation Date, and such amount shall be equal to two
percent (2%) (the "Liquidated Damage Rate") of the Purchase Price per share of
Preferred Stock (as defined in the Securities Purchase Agreement) from the
Initial Date to the first Computation Date and in the event of late filing,
three percent (3%) of the purchase price per share of Preferred Stock for every
thirty (30) day period thereafter until the Registration Statement has been
filed and in the event of late effectiveness, two percent (2%) of the purchase
price per share of Preferred Stock for every thirty (30) day period thereafter
until the Registration Statement has been declared effective. The full amount of
liquidated damages shall be paid by the Company to the Initial Investors by wire
transfer of immediately available funds within three days after each Computation
Date. The Company may pay the liquidation damages in additional shares of Common
Stock based upon the Market Price (so defined in the Certificate of
Designations), as determined on the date of payment.
As used in this Section 2 (b), "Computation Date" means the date which
is 30 days after the Initial Date and, if the Registration Statement required to
be filed by the Company pursuant to Section 2(a) has not theretofore been
declared effective by the Commission, each date which is 30 days after the
previous Computation Date until such Registration Statement is so declared
effective.
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Notwithstanding the above, if an additional Registration Statement
covering the Additional Registrable Securities (as defined in Section 2(d)
hereof) required to be filed by the Company pursuant to Section 2(d) hereof is
not filed with the Commission within 30 days after a request from the Initial
Investors, the Company shall be in default of this Registration Rights
Agreement.
If the Company does not remit the damages to the Holder as set forth
above, the Company will pay the Holder reasonable costs of collection, including
attorneys fees, in addition to the liquidated damages. The registration of the
Securities pursuant to this provision shall not affect or limit Holder's other
rights or remedies as set forth in this Agreement.
(C) ELIGIBILITY FOR USE OF FORM S-3. The Company agrees that at
such time as it meets all the requirements for the use of Securities Act
Registration Statement on Form S-3 it shall file all reports and information
required to be filed by it with the Commission in a timely manner and take all
such other action so as to maintain such eligibility for the use of such form.
(D) ADDITIONAL REGISTRATION STATEMENT. If the number of shares
included in the Registration Statement is not sufficient due to a decrease in
the Market Price of the Common Stock, as reasonably determined by the Initial
Investors, the Company shall, upon request from the Initial Investors, file an
additional Registration Statement with the Commission for such additional number
of Registrable Securities as would be issuable upon conversion of the Preferred
Stock at the time of such request (the "Additional Registrable Securities"), in
addition to those previously registered. The Company shall, prepare and file
with the Commission, not later than the 30th day after such a request from the
Initial Investors, a Registration Statement relating to the offer and sale of
such Additional Registrable Securities and shall use its best efforts to cause
the Commission to declare such Registration Statement effective under the
Securities Act as promptly as practicable but not later than 90 days after the
filing thereof, or within seven business days after being advised by the
Commission that the Registration Statement will not be reviewed. The Company
shall not include any other securities in the Registration Statement relating to
the offer and sale of such additional Registrable Securities.
(E) PIGGY-BACK REGISTRATIONS. (i) If the Company proposes to
register any of its warrants, Common Stock or any other shares of common stock
of the Company under the Securities Act (other than a registration (A) on Form
S-8 or S-4 or any successor or similar forms, (B) relating to Common Stock or
any other shares of common stock of the Company issuable upon exercise of
employee share options or in connection with any employee benefit or similar
plan of the Company or (C) in connection with a direct or indirect acquisition
by the Company of another Person or any transaction with respect to which Rule
145 (or any successor provision) under the Securities Act applies), whether or
not for sale for its own account, it will each such time, give prompt written
notice at least 20 days prior to the anticipated filing date of the registration
statement relating to such registration to the Initial Investors, which notice
shall set forth such Initial Investors' rights under this Section 2(e) and shall
offer the Initial Investors the opportunity to include in such registration
statement such number of Registrable Securities as the Initial Investors may
request. Upon the written request of an Initial Investors made within ten (10)
days after the receipt of notice from the Company (which request shall specify
the number of Registrable Securities intended to be disposed of by such Initial
Investors), the Company will use its best efforts to effect the registration
under the Securities Laws of all Registrable Securities that the Company has
been so requested to register by the Initial Investors, to the extent requisite
to permit the disposition of the Registrable Securities so to be registered;
provided, however, that (A) if such registration involves a public offering, the
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Initial Investors must sell their Registrable Securities to the underwriters
selected as provided in Section 2(f) hereof on the same terms and conditions as
apply to the Company and (B) if, at any time after giving written notice of its
intention to register any Registrable Securities pursuant to this
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Section 2 and prior to the effective date of the registration statement filed in
connection with such registration, the Company shall determine for any reason
not to register such Registrable Securities, the Company shall give written
notice to the Initial Investors and, thereupon, shall be relieved of its
obligation to register any Registrable Securities in connection with such
registration. The Company's obligations under this Section 2(e) shall terminate
on the date that the registration statement to be filed in accordance with
Section 2(a) is declared effective by the Commission.
(ii) If a registration pursuant to this Section 2(e) involves a public
offering and the managing underwriter thereof advises the Company that, in its
view, the number of shares of Common Stock, Warrants or other shares of Common
Stock that the Company and the Initial Investors intend to include in such
registration exceeds the largest number of shares of Common Stock or Warrants
(including any other shares of Common Stock or Warrants of the Company) that can
be sold without having an adverse effect on such public offering (the "Maximum
Offering Size"), the Company will include in such registration, only that number
of shares of Common Stock or Warrants, as applicable, such that the number of
Registrable Securities registered does not exceed the Maximum Offering Size,
with the difference between the number of shares in the Maximum Offering Size
and the number of shares to be issued by the Company to be allocated (after
including all shares to be issued and sold by the Company) among the Company and
the Initial Investors pro rata on the basis of the relative number of
Registrable Securities offered for sale under such registration by each of the
Company and the Initial Investors.
If as a result of the proration provisions of this Section 2 (e)(ii),
any Initial Investors is not entitled to include all such Registrable Securities
in such registration, such Initial Investors may elect to withdraw its request
to include any Registrable Securities in such registration. With respect to
registrations pursuant to this Section 2(e), the number of securities required
to satisfy any underwriters, over-allotment option shall be allocated pro rata
among the Company and the Initial Investors on the basis of the relative number
of securities otherwise to be included by each of them in the registration with
respect to which such over-allotment option relates.
(F) UNDERWRITTEN OFFERING. If the offering pursuant to a
Registration Statement contemplated by Section 2(e) hereof involves an
underwritten offering, the Investors who hold a majority-in-interest of the
Registrable Securities subject to such underwritten offering shall have the
right to select one legal counsel to represent their interests, and an
investment banker (or bankers) and manager (or managers) to administer the
offering, subject to the consent of the Company (which consent shall not be
unreasonably withheld). The Investors who hold the Registrable Securities to be
included in such underwriting shall pay all underwriting discounts and
commissions of such investment banker (or bankers) and manager (or managers) so
selected in accordance with this Section 2(f) with respect to their Registrable
Securities.
3. OBLIGATIONS OF THE COMPANY. In connection with the registration
of the Registrable Securities, the Company shall:
(a) Promptly (i) prepare and file with the Commission such
amendments (including post-effective amendments) to the Registration Statement
and supplements to the Prospectus as may be necessary to keep the Registration
Statement continuously effective and in compliance with the provisions of the
Securities Act applicable thereto so as to permit the Prospectus forming part
thereof to be current and useable by Investors for resales of the Registrable
Securities for a period of three years (such period to be extended by a period
equal to any change in the Mandatory Conversion Date (as defined in the
Certificate of Designations) from the date on which the Registration Statement
is first declared effective by the Commission (the "Effective Time") or such
shorter period that will terminate when all the Registrable Securities covered
by the Registration Statement have been sold pursuant
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thereto in accordance with the plan of distribution provided in the Prospectus,
transferred pursuant to Rule 144 under the Securities Act or otherwise
transferred in a manner that results in the delivery of new securities not
subject to transfer restrictions under the Securities Act (the "Registration
Period") and (ii) take all lawful action such that each of (A) the Registration
Statement and any amendment thereto does not, when it becomes effective, contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, not misleading
and (B) the Prospectus forming part of the Registration Statement, and any
amendment or supplement thereto, does not at any time during the Registration
Period include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Notwithstanding the foregoing provisions of this Section 3(a), the
Company may, during the Registration Period, suspend the use of the Prospectus
for a period not to exceed 20 days (whether or not consecutive) in any 12-month
period if the Board of Directors of the Company determines in good faith that
because of pending mergers or other business combination transactions, the
planned acquisition or divestiture of assets, pending material corporate
developments and similar events, it is in the best interests of the Company to
suspend such use, and prior to or contemporaneously with suspending such use,
the Company provides the Investors with written notice of such suspension, which
notice need not specify the nature of the event giving rise to such suspension.
At the end of any such suspension period, the Company shall provide the
Investors with written notice of the termination of such suspension;
(b) During the Registration Period, comply with the provisions of
the Securities Act with respect to the Registrable Securities of the Company
covered by the Registration Statement until such time as all of such Registrable
Securities have been disposed of in accordance with the intended methods of
disposition by the Investors as set forth in the Prospectus forming part of the
Registration Statement or are no longer Registrable Securities;
(c)(i) Prior to the filing with the Commission of any Registration
Statement (including any amendments thereto) and the distribution or delivery of
any Prospectus (including any supplements thereto), provide draft copies thereof
to the Investors and reflect in such documents all such comments as the
Investors (and their counsel) reasonably may propose with regard to Holder
ownership and the Plan of Distribution included therein and (ii) furnish to each
Investor whose Registrable Securities are included in the Registration Statement
and its legal counsel identified to the Company, (A) promptly after the same is
prepared and publicly distributed, filed with the Commission, or received by the
Company, one copy of the Registration Statement, each Prospectus, and each
amendment or supplement thereto, and (B) such number of copies of the Prospectus
and all amendments and supplements thereto and such other documents, as such
Investor may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Investor;
(d)(i) Register or qualify the Registrable Securities covered by the
Registration Statement under such securities or "blue sky" laws of such
jurisdictions as the Investors who hold a majority-in-interest of the
Registrable Securities being offered reasonably request, (ii) prepare and file
in such jurisdictions such amendments (including posteffective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof at all times during the Registration Period,
(iii) take all such other lawful actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the Registration
Period, and (iv) take all such other lawful actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (A) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(d),(B) subject itself to general taxation in any such jurisdiction or
(C) file a general consent to service of process in any such jurisdiction;
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(e) As promptly as practicable after becoming aware of such
event, notify each Investor of the occurrence of any event, as a result of which
the Prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, and
promptly prepare an amendment to the Registration Statement and supplement to
the Prospectus to correct such untrue statement or omission, and deliver a
number of copies of such supplement and amendment to each Investor as such
Investor may reasonably request;
(f) As promptly as practicable after becoming aware of such
event, notify each Investor who holds Registrable Securities being sold (or, in
the event of an underwritten offering, the managing underwriters) of the
issuance by the Commission of any stop order or other suspension of the
effectiveness of the Registration Statement at the earliest possible time and
take all lawful action to effect the withdrawal, recession or removal of such
stop order or other suspension;
(g(i) Cause all the Registrable Securities covered by the
Registration Statement to be listed on the principal national securities
exchange, and included in an inter-dealer quotation system of a registered
national securities association, on or in which securities of the same class or
series issued by the Company are then listed or included;
(h) Maintain a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date of the
Registration Statement;
(i) Cooperate with the Investors who hold Registrable Securities
being offered to facilitate the timely preparation and delivery of certificates
for the Registrable Securities to be offered pursuant to the Registration
Statement and enable such certificates for the Registrable Securities to be in
such denominations or amounts, as the case may be, as the Investors reasonably
may request and registered in such names as the Investor may request; and,
within three business days after a Registration Statement which includes
Registrable Securities is declared effective by the Commission, deliver and
cause legal counsel selected by the Company to deliver to the transfer agent for
the Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) an appropriate
instruction and, to the extent necessary, an opinion of such counsel;
(j) Take all such other lawful actions reasonably necessary to
expedite and facilitate the disposition by the Investors of their Registrable
Securities in accordance with the intended methods therefor provided in the
Prospectus which are customary under the circumstances;
(k) If required, make generally available to its security holders
as soon as practicable, but in any event not later than 18 months after (i) the
effective date (as defined in Rule 158(c) under the Securities Act) of the
Registration Statement, and (ii) the effective date of each post-effective
amendment to the Registration Statement, as the case may be, an earnings
statement of the Company and its subsidiaries complying with Section 11(a) of
the Securities Act and the rules and regulations of the Commission thereunder
(including, at the option of the Company, Rule 158);
(1) In the event of an underwritten offering, promptly include
or incorporate in a Prospectus supplement or post-effective amendment to the
Registration Statement such information as the managers reasonably agree should
be included therein and to which the Company does not reasonably object and make
all required filings of such Prospectus supplement or post-effective amendment
as soon as practicable after it is notified of the matters to be included or
incorporated in such Prospectus supplement or post-effective amendment;
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(m) Enter into such customary agreements (including an
underwriting agreement in customary form in the event of an underwritten
offering) and take such other lawful and reasonable action to expedite and
facilitate the registration and disposition of the Registrable Securities, and
in connection therewith, if an underwriting agreement is entered into, use its
best efforts to cause the same to contain indemnification provisions and
procedures substantially identical to those set forth in this Agreement;
(n)(i) Make reasonably available for inspection by Investors, any
underwriter participating in any disposition pursuant to the Registration
Statement, and any attorney, accountant or other agent retained by such
Investors or any such underwriter all relevant financial and other records,
pertinent corporate documents and properties of the Company and its
subsidiaries, and (ii) cause the Company's officers, directors and employees to
supply all information reasonably requested by such Investors or any such
underwriter, attorney, accountant or agent in connection with the Registration
Statement, in each case, as is customary for similar due diligence examinations;
provided, however, that all records, information and documents that are
designated in writing by the Company, in good faith, as confidential,
proprietary or containing any material nonpublic information shall be kept
confidential by such Investors and any such underwriter, attorney, accountant or
agent (pursuant to an appropriate confidentiality agreement in the case of any
such holder or agent), unless such disclosure is made pursuant to judicial
process in a court proceeding (after first giving the Company an opportunity
promptly to seek a protective order or otherwise limit the scope of the
information sought to be disclosed) or is required by law, or such records,
information or documents become available to the public generally or through a
third party not in violation of an accompanying obligation of confidentiality;
and provided further that, if the foregoing inspection and information gathering
would otherwise disrupt the Company's conduct of its business, such inspection
and information gathering shall, to the maximum extent possible, be coordinated
on behalf of the Investors and the other parties entitled thereto by one firm of
counsel designed by and on behalf of the majority in interest of Investors and
other parties;
(o) In connection with any underwritten offering, make such
representations and warranties to the Investors participating in such
underwritten offering and to the managers, in form, substance and scope as are
customarily made by the Company to underwriters in secondary underwritten
offerings;
(p) In connection with any underwritten offering, obtain opinions
of counsel to the Company (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the managers) addressed to the
underwriters, covering such matters as are customarily covered in opinions
requested in secondary underwritten offerings;
(q) In connection with any underwritten offering, obtain "cold
comfort" letters and updates thereof from the independent public accountants of
the Company (and, if necessary, from the independent public accountants of any
subsidiary of the Company or of any business acquired by the Company, in each
case for which financial statements and financial data are, or are required to
be, included in the Registration Statement), addressed to each underwriter
participating in such underwritten offering (if such underwriter has provided
such letter, representations or documentation, if any, required for such cold
comfort letter to be so addressed), in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
secondary underwritten offerings;
(r) In connection with any underwritten offering, deliver such
documents and certificates as may be reasonably required by the managers, if
any; and
(s) In the event that any broker-dealer registered under the
Exchange Act shall be an "Affiliate" (as defined in Rule 2729(b)(1) of the rules
and regulations of the National Association of Securities Dealers, Inc. (the
"NASD Rules") (or any successor provision thereto)) of the Company or has a
"conflict
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of interest" (as defined in Rule 2720(b)(7) of the NASD Rules (or any successor
provision thereto)) and such broker-dealer shall underwrite, participate as a
member of an underwriting syndicate or selling group or assist in the
distribution of any Registrable Securities covered by the Registration
Statement, whether as a holder of such Registrable Securities or as an
underwriter, a placement or sales agent or a broker or dealer in respect
thereof, or otherwise, the Company shall assist such broker-dealer in complying
with the requirements of the NASD Rules, including, without limitation, by (A)
engaging a "qualified independent underwriter" (as defined in Rule 2720(b)(15)
of the NASD Rules (or any successor provision thereto)) to participate in the
preparation of the Registration Statement relating to such Registrable
Securities, to exercise usual standards of due diligence in respect thereof and
to recommend the public offering price of such Registrable Securities, (B)
indemnifying such qualified independent underwriter to the extent of the
indemnification of underwriters provided in Section 5 hereof, and (C) providing
such information to such broker-dealer as may be required in order for such
broker-dealer to comply with the requirements of the NASD Rules.
4. OBLIGATIONS OF THE INVESTORS. In connection with the
registration of the Registrable Securities, the Investors shall have the
following obligations:
(a) It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor shall
promptly 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. As
least seven days prior to the first anticipated filing date of the Registration
Statement, the Company shall promptly notify each Investor of the information
the Company requires from each such Investor (the "Requested Information") if
such Investor elects to have any of its Registrable Securities included in the
Registration Statement. If at least two business days prior to the anticipated
filing date the Company has not received the Requested Information from an
Investor (a "Non-Responsive Investor"), then the Company may file the
Registration Statement without including Registrable Securities of such
Non-Responsive Investor and have no further obligations to the Non-Responsive
Investor;
(b) Each Investor by its acceptance of the Registrable Securities
agrees to cooperate with the Company in connection with the preparation and
filing of the Registration Statement hereunder, unless such Investor has
notified the Company in writing of its election to exclude all of its
Registrable Securities from the Registration Statement; and
(c) Each Investor agrees that, upon receipt of any notice from
the Company of the occurrence of any event of the kind described in Section 3(e)
or 3(f), it shall immediately discontinue its disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 3(e) and, if so directed by the
Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the Prospectus covering such
Registrable Securities current at the time of receipt of such notice.
5. EXPENSES OF REGISTRATION. All expenses, other than
underwriting discounts and commissions, incurred in connection with
registrations, filings or qualifications pursuant to Section 3, but including,
without limitation, all registration, listing, and qualifications. fees,
printing and engraving fees, accounting fees, and the fees and
9
disbursements of counsel for the Company and the reasonable fees and
disbursements of one firm of counsel to the holders of a majority in interest of
the Registrable Securities (which fees and disbursements shall not exceed
$7,500) shall be borne by the Company.
6. INDEMNIFICATION AND CONTRIBUTION.
(a) Indemnification by the Company. The Company shall indemnify
-------------------------------
and hold harmless each Investor and each underwriter, if any, which facilitates
the disposition of Registrable Securities, and each of their respective officers
and directors and each person who controls such Investor or underwriter within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act (each such person being sometimes hereinafter referred to as an "Indemnified
Person") from and against any losses, claims, damages or liabilities, joint or
several, to which such Indemnified Person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement or an omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, or arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Prospectus or an omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and the Company hereby
agrees to reimburse such Indemnified Person for all reasonable legal and other
expenses incurred by them in connection with investigating or defending any such
action or claim as and when such expenses are incurred; provided, however, that
the Company shall not be liable to any such Indemnified Person in any such case
to the extent that any such loss, claim, damage or liability arises out of or is
based upon (i) an untrue statement or alleged untrue statement made in, or an
omission or alleged omission from, such Registration Statement or Prospectus in
reliance upon and in conformity with written information furnished to the
Company by such Indemnified Person expressly for use therein or (ii) in the case
of the occurrence of an event of the type specified in Section 3(e), the use by
the Indemnified Person of an outdated or defective Prospectus after the Company
has provided to such Indemnified Person an updated Prospectus correcting the
untrue statement or alleged untrue statement or omission or alleged omission
giving rise to such loss, claim, damage or liability.
(b) Indemnification by the Investors and Underwriters. Each
------------------------------------------------------
Investor agrees, as a consequence of the inclusion of any of its Registrable
Securities in a Registration Statement, and each underwriter, if any, which
facilitates the disposition of Registrable Securities shall agree, as a
consequence of facilitating such disposition of Registrable Securities,
severally and not jointly, to (i) indemnify and hold harmless the Company, its
directors (including any person who, with his or her consent, is named in the
Registration Statement as a director nominee of the Company), its officers who
sign any Registration Statement and each person, if any, who controls the
Company within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act, against any losses, claims, damages or liabilities to
which the Company or such other persons may become subject, under the Securities
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an untrue statement
or alleged untrue statement of a material fact contained in such Registration
Statement or Prospectus or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, in the case of the Prospectus), not misleading, in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company by such
holder or underwriter expressly for use therein, and (ii) reimburse the Company
for any legal or other expenses incurred by the Company in connection with
investigating or defending any such action or claim as such expenses are
incurred.
10
(c) Notice of Claims, etc. Promptly after receipt by a party
----------------------
seeking indemnification pursuant to this Section 6 (an "Indemnified Party") of
written notice of any investigation, claim, proceeding or other action in
respect of which indemnification is being sought (each, a "Claim"), the
Indemnified Party promptly shall notify the party against whom indemnification
pursuant to this Section 6 is being sought (the "Indemnifying Party") of the
commencement thereof; but the omission to so notify the Indemnifying Party shall
not relieve it from any liability that it otherwise may have to the Indemnified
Party, except to the extent that the Indemnifying Party is materially prejudiced
and forfeits substantive rights and defenses by reason of such failure. In
connection with any Claim, the Indemnifying Party shall be entitled to assume
the defense thereof. Notwithstanding the assumption of the defense of any Claim
by the Indemnifying Party, the Indemnified Party shall have the right to employ
separate legal counsel and to participate in the defense of such Claim, and the
Indemnifying Party shall bear the reasonable fees, out-of-pocket costs and
expenses of such separate legal counsel to the Indemnified Party if (and only
if): (x) the Indemnifying Party shall have agreed to pay such fees, costs and
expenses, (y) the Indemnified Party and the Indemnifying Party shall reasonably
have concluded that representation of the Indemnified Party by the Indemnifying
Party by the same legal counsel would not be appropriate due to actual or, as
reasonably determined by legal counsel to the Indemnified Party, (i) potentially
differing interests between such parties in the conduct of the defense of such
Claim, or (ii) if there may be legal defenses available to the Indemnified Party
that are in addition to or disparate from those available to the Indemnifying
Party and which can not be presented by counsel to the Indemnifying Party, or
(z) the Indemnifying Party shall have failed to employ legal counsel reasonably
satisfactory to the Indemnified Party within a reasonable period of time after
notice of the commencement of such Claim. If the Indemnified Party employs
separate legal counsel in circumstances other than as described in clauses (x),
(y) or (z) above, the fees, costs and expenses of such legal counsel shall be
borne exclusively by the Indemnified Party. Except as provided above, the
Indemnifying Party shall not, in connection with any Claim in the same
jurisdiction, be liable for the fees and expenses of more than one firm of
counsel for the Indemnified Party (together with appropriate local counsel). The
Indemnifying Party shall not, without the prior written consent of the
Indemnifying Party (which consent shall not unreasonably be withheld), settle or
compromise any Claim or consent to the entry of any judgment that does not
include an unconditional release of the Indemnifying Party from all liabilities
with respect to such Claim or judgment.
(d) Contribution. If the indemnification provided for in this
------------
Section 6 is unavailable to or insufficient to hold harmless an Indemnified
Person under subsection (a) or (b) above in respect of any losses, claims,
damages or liabilities (or actions in respect thereof) referred to therein, then
each Indemnifying Party shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and the Indemnified Party in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by
such Indemnified Party or by such Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 6 (d) were determined by
pro rata allocation (even if the Investors or any underwriters were treated as
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in this Section 6(d).
The amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
shall be deemed to include any legal or other fees or expenses
11
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The obligations of the Investors and any
underwriters in this Section 6(d) to contribute shall be several in proportion
to the percentage of Registrable Securities registered or underwritten, as the
case may be, by them and not joint.
(e) Notwithstanding any other provision of Section 6(d), in no
event shall any (i) Investor be required to undertake liability to any person
under Section 6(d) for any amounts in excess of the dollar amount of the
proceeds to be received by such Investor from the sale of such Investor's
Registrable Securities (after deducting any fees, discounts and commissions
applicable thereto) pursuant to any Registration Statement under which such
Registrable Securities are to be registered under the Securities Act and (ii)
underwriter be required to undertake liability to any Person hereunder for any
amounts in excess of the aggregate discount, commission or other compensation
payable to such underwriter with respect to the Registrable Securities
underwritten by it and distributed pursuant to the Registration Statement;
provided, however, in the event of fraud by the Investor (in the case of (i)
above) or underwriter (in the case of (ii) above), there shall be no such dollar
amount limitation.
(f) The obligations of the Company under this Section 6 shall
be in addition to any liability which the Company may otherwise have to any
Indemnified Person and the obligations of any Indemnified Person under this
Section 6 shall be in addition to any liability which such Indemnified Person
may otherwise have to the Company. The remedies provided in this Section 6 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to an indemnified party at law or in equity.
7. RULE 144. With a view to making available to the Investors
the benefits of Rule 144 under the Securities Act or any other similar rule or
regulation of the Commission that may at any time permit the Investors to sell
securities of the Company to the public without registration ("Rule 144"), the
Company agrees to use its best efforts to:
(a) comply with the provisions of paragraph (c) (1) of Rule 144;
and
(b) file with the Commission in a timely manner all reports and
other documents required to be filed by the Company pursuant to Section 13 or
15(d) under the Exchange Act; and, if at any time it is not required to file
such reports but in the past had been required to or did file such reports, it
will, upon the request of any Holder, make available other information as
required by, and so long as necessary to permit sales of, its Registrable
Securities pursuant to Rule 144.
8. ASSIGNMENT. The rights to have the Company register
Registrable Securities pursuant to this Agreement shall be automatically
assigned by the Investors to any permitted transferee of all or any portion of
such securities (or all or any portion of any Preferred Stock or Warrant of the
Company which is convertible into such securities) of Registrable Securities
only if: (a) the Investor agrees in writing with the transferee or assignee to
assign such rights, and a copy of such agreement is furnished to the Company
within a reasonable time after such assignment, (b) the Company is, within a
reasonable time after such transfer or assignment, furnished with written notice
of (i) the name and address of such transferee or assignee and (ii) the
securities with respect to which such registration rights are being transferred
or assigned, (c) immediately following such transfer or assignment, the
securities so transferred or assigned to the transferee or assignee constitute
Restricted Securities, and (d) at or before the time the Company received the
written notice contemplated by clause (b) of this sentence the
12
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein.
9. AMENDMENT AND WAIVER. Any provision of this Agreement may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively) , only with the
written consent of the Company and Investors who hold a majority-interest of the
Registrable Securities. Any amendment or waiver effected in accordance with this
Section 9 shall be binding upon each Investor and the Company.
10. MISCELLANEOUS.
(a) A person or entity shall be deemed to be a holder of
Registrable Securities whenever such person or entity owns of record such
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more persons or entities with respect to the
same Registrable Securities, the Company shall act upon the basis of
instructions, notice or election received from the registered owner of such
Registrable Securities.
(b) Except as may be otherwise provided herein, any notice or
other communication or delivery required or permitted hereunder shall be in
writing and shall be delivered personally or sent by certified mail, postage
prepaid, or by a nationally recognized overnight courier service, and shall be
deemed given when so delivered personally or by overnight courier service, or,
if mailed, three (3) days after the date of deposit in the United States mails,
as follows:
(1) if to the Company, to:
Xxxxxx.xxx, Inc.
000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxxx
(2) if to the Initial Investors, as set forth in the signature
pages of the Securities Purchase Agreement.
(3) if to any other Investor, at such address as such Investor
shall have provided in writing to the Company.
The Company, the Initial Investors or any Investor may change the foregoing
address by notice given pursuant to this Section 10(c).
(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 governed by and interpreted in
accordance with the laws of the State of California. Each of the parties
consents to the jurisdiction of the federal courts whose districts encompass any
part of the City of San Francisco or the state courts of the State of California
sitting in the City of San Francisco in connection with any dispute arising
under this Agreement and hereby waives, to the maximum extent permitted by law,
any objection including any objection based on forum non conveniens, to the
bringing of any such proceeding in such jurisdictions.
13
(e) The remedies provided in this Agreement are cumulative and
not exclusive of any remedies provided by law. If any term, provision, covenant
or restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provision, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their best efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
(f) The Company shall not enter into any agreement with respect
to its securities that constitutes a breach of any of the provisions hereof.
Except as previously disclosed to the Investors, the Company is not currently a
party to any agreement granting any registration rights with respect to any of
its securities to any person which conflicts with the Company's obligations
hereunder or gives any other party the right to include any securities in any
Registration Statement filed pursuant hereto. The Company shall not file any
registration statement after the date hereof for the resale of any of its
securities at any time prior to the 30th day of the filing of the Registration
Statement, nor shall the Company cause any registration statement for the resale
of its securities to become effective prior to the 30th day after the date the
Registration Statement is declared effective.
(g) This Agreement, the Securities Purchase Agreement, the
Certificate of Designations and the Warrants constitute the entire agreement
among the parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement, the Securities Purchase Agreement, the
Certificate of Designations
14
and the Warrants supersede all prior agreements and undertakings among the
parties hereto with respect to the subject matter hereof.
(h) Subject to the requirements of Section 8 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
(i) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
(j) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning thereof.
(k) The Company acknowledges that any failure by the Company to
perform its obligations under Section 3, or any delay in such performance could
result in direct damages to the Investors and the Company agrees that, in
addition to any other liability the Company may have by reason of any such
failure or delay, the Company shall be liable for all direct damages caused by
such failure or delay.
(l) This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement. A facsimile transmission of this signed Agreement shall
be legal and binding on all parties hereto.
15
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
XXXXXX.XXX, INC.
By:/s/XXXXXXX X. XXXXXX
------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President and CEO
BUYER
Name:Alborz Select Opportunities Fund
By:/s/Xxx Xxxxxxxx
------------------------------------
Name: Xxx Xxxxxxxx
Title: Investment Manager
BUYER
Name:Xxxxxx Moustaffa
----------------------------------
By:/s/Xxxxxx Moustaffa
------------------------------------
Name:
Title:
BUYER
Name:Target Growth Fund Ltd.
----------------------------------
By:/s/Xxxxxx Xxxxxxx
------------------------------------
Name: Xxxxxx Xxxxxxx
Title: President
BUYER
Name:IIG Equity Opportunities Fund Ltd.
----------------------------------
16
By:/s/Xxxxxx XxXxxxxxx
------------------------------------
Name: Xxxxxx XxXxxxxxx
Title: Senior Director
BUYER
Name:/s/Xxxxx Xxxxx
----------------------------------
By:Xxxxx Xxxxx
------------------------------------
Name: Xxxxx Xxxxx
Title:
BUYER
Name:/s/Xxxxxx Xxxxxxx
----------------------------------
By:
------------------------------------
Name: Xxxxxx Xxxxxxx
Title:
BUYER
Name/s/Magnolia Drive Investment Corp.
-----------------------------------
By:/s/Xxxxxxx Xxxxxx
------------------------------------
Name: Xxxxxxx Xxxxxx
Title: President
17
