EXHIBIT 10.2
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of November
22, 1999, among XXXXXXXXXXXXXXX.XXX, a Nevada corporation (the "Company"), and
XXXX CAPITAL GROWTH FUND II, L.P., a Delaware limited partnership (the "Security
Holder")
1. Introduction.
(a) Securities Purchase Agreement. The Company and the Security
Holder have today executed that certain Securities Purchase Agreement (the
"Securities Purchase Agreement"), pursuant to which the Company has agreed,
among other things, to issue an aggregate of 1,142,857 shares (the "Initial
Shares") of the common stock of the Company, par value $.001 per share, (the
"Common Stock") to the Security Holder or their successors, assigns or
transferees (collectively, the "Holders"). In addition, pursuant to the terms of
the Securities Purchase Agreement and the transactions contemplated thereby, the
Company has entered into an agreement (the "Warrant Agreement") whereby the
Company has issued to the Security Holder warrants (the "Warrants") exercisable
for an aggregate of 350,000 shares of Common Stock (the "Warrant Shares"). The
number of Warrant Shares is subject to adjustment upon the occurrence of stock
splits, recapitalizations and similar events occurring after the date hereof, as
set forth in the Warrant Agreement.
(b) Definition of Securities. The Initial Shares and the Warrant
Shares (whether the Warrant Shares have been exercised and issued or are
currently exercisable by the holder of the Warrants pursuant to the terms and
conditions of the Warrant Agreement) are collectively herein referred to as the
"Securities."
(c) National Market Representation. The Company represents and
warrants that the Company's Common Stock is currently eligible for trading on
the Nasdaq SmallCap Market ("National Market") under the symbol "POSO." Certain
capitalized terms used in this Agreement are defined in Section 3 hereof;
references to sections shall be to sections of this Agreement.
2. Registration under Securities Act, etc.
2.1 Registration Upon Demand.
(a) Registration of Registrable Securities. At any time after six
months from the date of this Agreement and before the termination of this
Agreement, the holders of 51% of the Registrable Securities currently
outstanding and/or exercisable may deliver to the Company a written request that
the Registrable Securities be registered pursuant to the terms of this Agreement
(a "Registration Request"). Within thirty-one (31) days after a Registration
Request, the Company shall prepare and file a registration statement to effect
the registration under the Securities Act of all, but not less than all, of the
Registrable Securities which relate (or, because of the indeterminable number
thereof, which could reasonably be deemed to relate) to the Securities; all to
the extent requisite to permit the public disposition of such Registrable
Securities so to be registered. The Company shall use its best efforts to cause
the Registration Statement which is the subject of this Section 2.1(a) (the
"Registration Statement") to be declared effective by the Commission upon the
earlier to occur of (i) 120 days after the date of the Registration Request,
(ii) 90 days following the filing of the Registration Statement contemplated by
this Section 2.1, or (iii) ten (10) business days after receipt of a "no review"
or similar letter from the Commission (the "Required Effectiveness Date").
Nothing contained herein shall be
--------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT - Page 1
deemed to limit the number of Registrable Securities to be registered by the
Company hereunder. As a result, should the Registration Statement not relate to
the maximum number of Registrable Securities acquired by (or potentially
acquirable by) the holders thereof upon exercise of the Warrants described in
Section 1 above, the Company shall be required to promptly file a separate
registration statement (utilizing Rule 462 promulgated under the Exchange Act,
where applicable) relating to such Registrable Securities which then remain
unregistered. The provisions of this Agreement shall relate to such separate
registration statement as if it were an amendment to the Registration Statement.
(b) Registration Statement Form. Registrations under this Section
2.1 shall be on Form S-3 or such other appropriate registration form of the
Commission as shall permit the disposition of such Registrable Securities in
accordance with the intended method or methods of disposition specified by the
Security Holder; provided, however, such intended method of disposition shall
not include an underwritten offering of the Registrable Securities.
(c) Expenses. The Company will pay all Registration Expenses in
connection with any registration required by this Section 2.1.
(d) Effective Registration Statement. A registration requested
pursuant to this Section 2.1 shall not be deemed to have been effected (i)
unless a registration statement with respect thereto has become effective within
the time period specified herein, provided that a registration which does not
become effective after the Company has filed a registration statement with
respect thereto solely by reason of the refusal to proceed of any holder of
Registrable Securities (other than a refusal to proceed based upon the advice of
counsel in the form of a letter signed by such counsel and provided to the
Company relating to a disclosure matter unrelated to such holder) shall be
deemed to have been effected by the Company unless the holders of the
Registrable Securities shall have elected to pay all Registration Expenses in
connection with such registration, (ii) if, after it has become effective, such
registration becomes subject to any stop order, injunction or other order or
extraordinary requirement of the Commission or other governmental agency or
court for any reason or (iii) if, after it has become effective, such
registration ceases to be effective for more than an aggregate of ninety (90)
days.
(e) Plan of Distribution. The Company hereby agrees that the
Registration Statement shall include a plan of distribution section reasonably
acceptable to the Security Holder and substantially in the form annexed hereto;
provided, however, such plan of distribution section shall be modified by the
Company so as to not provide for the disposition of the Registrable Securities
on the basis of an underwritten offering.
2.2 Incidental Registration. (a) Right to Include Registrable
Securities. If at any time after the date hereof but before the fifth
anniversary of the date hereof, the Company proposes to register any of its
securities under the Securities Act (other than by a registration in connection
with an acquisition in a manner which would not permit registration of
Registrable Securities for sale to the public, on Form S-8, or any successor
form thereto, on Form S-4, or any successor form thereto and other than pursuant
to Section 2.1), on an underwritten basis (either best-efforts or firm-
commitment), then, the Company will each such time give prompt written notice to
all Holders of its intention to do so and of such Holders' rights under this
Section 2.2. Upon the written request of any such Holder made within ten (10)
days after the receipt of any such notice (which request shall specify the
Registrable Securities intended to be disposed of by such Holder and the
intended method of disposition thereof), the Company will, subject to the terms
of this Agreement, effect the registration under the Securities Act of the
Registrable Securities, to the extent requisite to permit the disposition (in
accordance with the intended
--------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT - Page 2
methods thereof as aforesaid) of such Registrable Securities so to be
registered, by inclusion of such Registrable Securities in the registration
statement which covers the securities which the Company proposes to register,
provided that if, at any time after giving written notice of its intention to
register any securities and prior to the effective date of the registration
statement filed in connection with such registration, the Company shall
determine for any reason either not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to each Holder and, thereupon, (i) in the case of a determination
not to register, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its obligation to
pay the Registration Expenses in connection therewith), without prejudice,
however, to the rights of any holder or holders of Registrable Securities
entitled to do so to request that such registration be effected as a
registration under Section 2.1, and (ii) in the case of a determination to delay
registering, shall be permitted to delay registering any Registrable Securities,
for the same period as the delay in registering such other securities. No
registration effected under this Section 2.2 shall relieve the Company of its
obligation to effect any registration upon a Registration Request under Section
2.1, nor shall any such registration hereunder be deemed to have been effected
pursuant to Section 2.1. The Company will pay all Registration Expenses in
connection with each registration of Registrable Securities requested pursuant
to this Section 2.2. The right provided the holders of the Registrable
Securities pursuant to this Section shall be exercisable at their sole
discretion.
(b) Priority in Incidental Registrations. If the managing
underwriter of the underwritten offering contemplated by this Section 2.2 shall
inform the Company and holders of the Registrable Securities requesting such
registration by letter of its belief that the number of securities requested to
be included in such registration exceeds the number which can be sold in such
offering, then the Company will include in such registration, to the extent of
the number which the Company is so advised can be sold in such offering, (i)
first securities proposed by the Company to be sold for its own account, and
(ii) second Registrable Securities and securities of other selling security
holders requested to be included in such registration pro rata on the basis of
the number of shares of such securities so proposed to be sold and so requested
to be included; provided, however, the holders of Registrable Securities shall
have priority to all shares sought to be included by officers and directors of
the Company as well as holders of ten percent (10%) or more of the Company's
Common Stock unless the holders of such shares are exercising their own
registration rights.
2.3 Registration Procedures. If and whenever the Company is required
to effect the registration of any Registrable Securities under the Securities
Act as provided in Section 2.1 and, as applicable, 2.2, the Company shall, as
expeditiously as possible:
(a) prepare and file with the Commission the Registration Statement to
effect such registration (including such audited financial statements
as may be required by the Securities Act or the rules and regulations
promulgated thereunder) and thereafter use its best efforts to cause
such registration statement to be declared effective by the
Commission, as soon as practicable, but in any event no later than the
Required Effectiveness Date (with respect to a registration pursuant
to Section 2.1); provided, however, that before filing such
registration statement or any amendments thereto, the Company will
furnish to the counsel selected by the holders of Registrable
Securities which are to be included in such registration, copies of
all such documents proposed to be filed;
(b) with respect to any Registration Statement pursuant to Section 2.1,
prepare and file with the Commission such amendments and supplements
to such registration statement and the
--------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT - Page 3
prospectus used in connection therewith as may be necessary to keep
such registration statement effective and to comply with the
provisions of the Securities Act in order to permit the disposition of
all Registrable Securities covered by such registration statement,
until the earlier to occur of five (5) years after the date of this
Agreement (subject to the right of the Company to suspend the
effectiveness thereof for not more than 30 consecutive days or an
aggregate of 90 days in such five (5) year period) or such time as all
of the Securities which are the subject of such registration statement
cease to be Registrable Securities (such period, in each case, the
"Registration Maintenance Period");
(c) furnish to each holder of Registrable Securities covered by such
registration statement such number of conformed copies of such
registration statement and of each such amendment and supplement
thereto (in each case including all exhibits), such number of copies
of the prospectus contained in such registration statement (including
each preliminary prospectus and any summary prospectus) and any other
prospectus filed under Rule 424 under the Securities Act, in
conformity with the requirements of the Securities Act, and such other
documents, as such holder and underwriter, if any, may reasonably
request in order to facilitate the public sale or other disposition of
the Registrable Securities owned by such holder;
(d) use its reasonable efforts to register or qualify all Registrable
Securities and other securities covered by such registration statement
under such other securities laws or blue sky laws as any holder
thereof shall reasonably request, to keep such registrations or
qualifications in effect for so long as such registration statement
remains in effect, and take any other action which may be reasonably
necessary to enable such holder to consummate the disposition in such
jurisdictions of the securities owned by such holder, except that the
Company shall not for any such purpose be required to qualify
generally to do business as a foreign corporation in any jurisdiction
wherein it would not but for the requirements of this subdivision (d)
be obligated to be so qualified or to consent to general service of
process in any such jurisdiction;
(e) use its best efforts to cause all Registrable Securities covered by
such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to
enable the holder or holders thereof to consummate the disposition of
such Registrable Securities;
(f) in connection with an underwritten offering, furnish to each holder of
Registrable Securities a signed counterpart, addressed to such holder,
and the underwriters of:
(i) an opinion of counsel for the Company, dated the effective
date of such registration statement (or, if such registration
includes an underwritten public offering, an opinion dated
the date of the closing under the underwriting agreement),
reasonably satisfactory in form and substance to such holder)
including that the prospectus and any prospectus supplement
forming a part of the Registration Statement does not contain
an untrue statement of a material fact or omits a material
fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances
under which they were made, not misleading, and
--------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT - Page 4
(ii) a "comfort" letter (or, in the case of any such Person which
does not satisfy the conditions for receipt of a "comfort"
letter specified in Statement on Auditing Standards No. 72,
an "agreed upon procedures" letter), dated the effective date
of such registration statement (or, if such registration
includes an underwritten public offering, a "comfort" letter
dated the date of the closing under the underwriting
agreement), signed by the independent public accountants who
have certified the Company's financial statements included in
such registration statement, covering substantially the same
matters with respect to such registration statement (and the
prospectus included therein) and, in the case of the
accountants' letter, with respect to events subsequent to the
date of such financial statements, as are customarily covered
in accountants' letters delivered to the underwriters in
underwritten public offerings of securities (with, in the
case of an "agreed upon procedures" letter, such
modifications or deletions as may be required under Statement
on Auditing Standards No. 35) and, in the case of the
accountants' letter, such other financial matters, and, in
the case of the legal opinion, such other legal matters, as
such holder (or the underwriters) may reasonably request;
(g) notify holders of the Registrable Securities and their respective
counsel promptly and confirm such advice in writing promptly after the Company
has knowledge thereof:
(i) when the Registration Statement, the prospectus or any
prospectus supplement related thereto or post-effective
amendment to the Registration Statement has been filed, and,
with respect to the Registration Statement or any post-
effective amendment thereto, when the same has become
effective;
(ii) of any request by the Commission for amendments or
supplements to the Registration Statement or the prospectus
or for additional information;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or
the initiation of any proceedings by any Person for that
purpose; and
(iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification of any
Registrable Securities for sale under the securities or blue
sky laws of any jurisdiction or the initiation or threat of
any proceeding for such purpose;
(h) notify each holder of Registrable Securities covered by such
registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, upon
discovery that, or upon the happening of any event as a result of
which, the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in the light
of the circumstances then existing, and at the request of any such
holder promptly prepare and furnish to such holder a reasonable
number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to
the purchasers of such securities, such prospectus shall not include
an untrue statement of a material fact or omit to state a material
--------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT - Page 5
fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances
then existing;
(i) use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of the Registration Statement at the
earliest possible moment;
(j) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, an earnings
statement covering the period of at least twelve months, but not
more than eighteen months, beginning with the first full calendar
month after the effective date of such registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of
the Securities Act and Rule 158 thereunder;
(k) enter into such agreements and take such other actions as the
Security Holder shall reasonably request in writing in order to
expedite or facilitate the disposition of such Registrable
Securities; and
(l) use its best efforts to list all Registrable Securities covered by
such registration statement on any securities exchange on which any
of the Registrable Securities are then listed.
The Company may require each holder of Registrable Securities as to
which any registration is being effected to furnish the Company such information
regarding such holder and the distribution of such securities as the Company may
from time to time reasonably request in writing.
The Company will not file any registration statement pursuant to Section
2.1, or amendment thereto or any prospectus or any supplement thereto (including
such documents incorporated by reference and proposed to be filed after the
initial filing of the Registration Statement) to which the Security Holder shall
reasonably object, provided that the Company may file such document in a form
required by law or upon the advice of its counsel.
The Company represents and warrants to each holder of Registrable
Securities that it has obtained all necessary waivers, consents and
authorizations necessary to execute this Agreement and consummate the
transactions contemplated hereby other than such waivers, consents and/or
authorizations specifically contemplated by the Securities Purchase Agreement.
The Security Holder agrees that, upon receipt of any notice from the
Company of the occurrence of any event of the kind described in subdivision (h)
of this Section 2.3, the Security Holder will forthwith discontinue its
disposition of Registrable Securities pursuant to the Registration Statement
relating to such Registrable Securities until its receipt of the copies of the
supplemented or amended prospectus contemplated by subdivision (h) of this
Section 2.3 and, if so directed by the Company, will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies, then in its
possession of the prospectus relating to such Registrable Securities current at
the time of receipt of such notice.
2.4 Underwritten Offerings.
(a) Incidental Underwritten Offerings. If the Company at any time
proposes to register any of its securities under the Securities Act as
contemplated by Section 2.2 and such securities
--------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT - Page 6
are to be distributed by or through one or more underwriters, the Company will,
if requested by the Security Holder as provided in Section 2.2 and subject to
the provisions of Section 2.2(a), use its reasonable efforts to arrange for such
underwriters to include all the Registrable Securities to be offered and sold by
such holder among the securities to be distributed by such underwriters.
(b) Holdback Agreements. Subject to such other reasonable
requirements as may be imposed by the underwriter as a condition of inclusion of
a holder's Registrable Securities in the registration statement, each such
holder agrees by acquisition of Registrable Securities, if so required by the
managing underwriter, not to sell, make any short sale of, loan, grant any
option for the purchase of, effect any public sale or distribution of or
otherwise dispose of, except as part of such underwritten registration, any
equity securities of the Company, during such reasonable period of time
requested by the underwriter; provided however, such period shall not exceed the
120 day period commencing 30 days prior to the commencement of such underwritten
offering and ending 90 days following the completion of such underwritten
offering.
(c) Participation in Underwritten Offerings. No holder of Registrable
Securities may participate in any underwritten offering under Section 2.2 unless
such holder of Registrable Securities (i) agrees to sell such Person's
securities on the basis provided in any underwriting arrangements approved,
subject to the terms and conditions hereof, by the holders of a majority of
Registrable Securities to be included in such underwritten offering and (ii)
completes and executes all questionnaires, indemnities, underwriting agreements
and other documents (other than powers of attorney) required under the terms of
such underwriting arrangements. Notwithstanding the foregoing, no underwriting
agreement (or other agreement in connection with such offering) shall require
any holder of Registrable Securities to make any representations or warranties
to or agreements with the Company or the underwriters other than representations
and warranties contained in a writing furnished by such holder expressly for use
in the related registration statement or representations, warranties or
agreements regarding such holder, such holder's Registrable Securities and such
holder's intended method of distribution and any other representation required
by law.
2.5 Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company will give the holders of Registrable
Securities registered under such registration statement, and their respective
counsel and accountants, the opportunity to participate in the preparation of
such registration statement, each prospectus included therein or filed with the
Commission, and each amendment thereof or supplement thereto, and will give each
of them such access to its books and records and such opportunities to discuss
the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be necessary,
in the reasonable opinion of such holders' and such underwriters' respective
counsel, to conduct a reasonable investigation within the meaning of the
Securities Act.
2.6 Indemnification. (a) Indemnification by the Company. In the event of
any registration of any securities of the Company under the Securities Act, the
Company will, and hereby does agree to, indemnify and hold harmless the holder
of any Registrable Securities covered by such registration statement, its
directors and officers, each other Person who participates as an underwriter in
the offering or sale of such securities and each other Person, if any, who
controls such holder or any such underwriter within the meaning of the
Securities Act against any losses, claims, damages or liabilities, joint or
several, to which such holder or any such director or officer or underwriter or
controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or
--------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT - Page 7
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered under the Securities Act, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and the Company will
reimburse such holder and each such director, officer, underwriter and
controlling person for any legal or any other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
liability, action or proceeding, provided that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expense arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, any such preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by such
holder or underwriter stating that it is for use in the preparation thereof and,
provided further that the Company shall not be liable to any Person who
participates as an underwriter in the offering or sale of Registrable Securities
or to any other Person, if any, who controls such underwriter within the meaning
of the Securities Act, in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense arises
out of such Person's failure to send or give a copy of the final prospectus, as
the same may be then supplemented or amended, within the time required by the
Securities Act to the Person asserting the existence of an untrue statement or
alleged untrue statement or omission or alleged omission at or prior to the
written confirmation of the sale of Registrable Securities to such Person if
such statement or omission was corrected in such final prospectus or an
amendment or supplement thereto. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such holder or
any such director, officer, underwriter or controlling person and shall survive
the transfer of such securities by such holder.
(b) Indemnification by the Holders. The Company may require, as a
condition to including any Registrable Securities in any registration statement
filed pursuant to this Agreement, that the Company shall have received an
undertaking satisfactory to it from the holder of such Registrable Securities,
to indemnify and hold harmless (in the same manner and to the same extent as set
forth in subdivision (a) of this Section 2.6) the Company, each director of the
Company, each officer of the Company and each other Person, if any, who controls
the Company within the meaning of the Securities Act, with respect to any
statement or alleged statement in or omission or alleged omission from such
registration statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, if such
statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with written information furnished to the
Company through an instrument duly executed by such holder specifically stating
that it is for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement. Any such indemnity shall remain in full force and effect, regardless
of any investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of such securities
by such holder.
(c) Notices of Claims, etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this Section 2.6, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter of the commencement of
such action, provided that the failure of any indemnified party to give notice
as provided herein shall not relieve the
--------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT - Page 8
indemnifying party of its obligations under the preceding subdivisions of this
Section 2.6, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such action is brought
against an indemnified party, unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist in respect of such claim, the indemnifying party shall be
entitled to participate in and to assume the defense thereof, jointly with any
other indemnifying party similarly notified, to the extent that the indemnifying
party may wish, with counsel reasonably satisfactory to such indemnified party,
and after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without the
consent of the indemnified party, consent to entry of any judgment or enter into
any settlement of any such action which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability, or a covenant not to xxx, in respect to such
claim or litigation. No indemnified party shall consent to entry of any judgment
or enter into any settlement of any such action the defense of which has been
assumed by an indemnifying party without the consent of such indemnifying party.
(d) Other Indemnification. Indemnification similar to that specified
in the preceding subdivisions of this Section 2.6 (with appropriate
modifications) shall be given by the Company and each holder of Registrable
Securities (but only if and to the extent required pursuant to the terms of
2.6(b)) with respect to any required registration or other qualification of
securities under any Federal or state law or regulation of any governmental
authority, other than the Securities Act.
(e) Indemnification Payments. The indemnification required by this
Section 2.6 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.
(f) Contribution. If the indemnification provided for in the
preceding subdivisions of this Section 2.6 is unavailable to an indemnified
party in respect of any expense, loss, claim, damage or liability referred to
therein, then each indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such expense, loss, claim, damage or liability (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the holder or underwriter, as the case may be, on
the other from the distribution of the Registrable Securities or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company on
the one hand and of the holder or underwriter, as the case may be, on the other
in connection with the statements or omissions which resulted in such expense,
loss, damage or liability, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the holder or underwriter, as the case may be, on the other in connection
with the distribution of the Registrable Securities shall be deemed to be in the
same proportion as the total net proceeds received by the Company from the
initial sale of the Registrable Securities by the Company to the purchasers bear
to the total net proceeds received by all selling holders participating in such
offering or the underwriting discounts and commissions received by the
underwriter, as the case may be. The relative fault of the Company on the one
hand and of the Holder or underwriter, as the case may be, on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission to state a material fact relates
to information supplied by the Company, by the Holder or by the underwriter and
the parties' relative intent, knowledge, access to information and
-----------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT - Page 9
opportunity to correct or prevent such statement or omission, provided that the
foregoing contribution agreement shall not inure to the benefit of any
indemnified party if indemnification would be unavailable to such indemnified
party by reason of the provisions contained in the first sentence of subdivision
(a) of this Section 2.6, and in no event shall the obligation of any
indemnifying party to contribute under this subdivision (f) exceed the amount
that such indemnifying party would have been obligated to pay by way of
indemnification if the indemnification provided for under subdivisions (b) of
this Section 2.6 had been available under the circumstances.
The Company and the holders of Registrable Securities agree that it would
not be just and equitable if contribution pursuant to this subdivision (f) were
determined by pro rata allocation (even if the holders and any underwriters were
treated as one entity for such purpose) or by any other method of allocation
that does not take account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages and liabilities referred to in
the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth in the preceding sentence and subdivision (c) of this
Section 2.6, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subdivision (f), no holder of
Registrable Securities or underwriter shall be required to contribute any amount
in excess of the amount by which (i) in the case of any such holder, the net
proceeds received by such holder from the sale of Registrable Securities or (ii)
in the case of an underwriter, the total price at which the Registrable
Securities purchased by it and distributed to the public were offered to the
public exceeds, in any such case, the amount of any damages that such holder or
underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission. 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.
3. Definitions. As used herein, unless the context otherwise requires, the
following terms have the following respective meanings:
"Agreement": As defined in Section 1.
"Commission": The Securities and Exchange Commission or any other Federal
agency at the time administering the Securities Act.
"Common Stock": As defined in Section 1.
"Company": As defined in the introductory paragraph of this Agreement.
"Exchange Act": The Securities Exchange Act of 1934, as amended, and the
rules and regulations of the Commission thereunder.
"Holder": As defined in Section 1.
"Initial Shares": As defined in Section 1.
"National Market": As defined in Section 1.
-----------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT - Page 10
"Person": A corporation, association, partnership, organization, business,
individual, governmental or political subdivision thereof or a governmental
agency.
"Registrable Securities": The Securities and any securities issued or
issuable with respect to such Securities by way of stock dividend or stock split
or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or any adjustment otherwise provided for
in the Securities Purchase Agreement or the Warrant Agreement. Once issued such
securities shall cease to be Registrable Securities when (a) a registration
statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been
distributed in accordance with such registration statement, (b) they shall be
have been distributed to the public pursuant to Rule 144 (or any successor
provision) under the Securities Act, (c) they shall have been otherwise
transferred, new certificates for them not bearing a legend restricting further
transfer shall have been delivered by the Company and subsequent disposition of
them shall not require registration or qualification of them under the
Securities Act or any similar state law then in force, (d) they shall have
ceased to be outstanding, (e) on the expiration of the applicable Registration
Maintenance Period or (f) any and all legends restricting transfer thereof have
been removed in accordance with the provisions of Rule 144(k) (or any successor
provision) under the Securities Act. The Securities shall constitute
Registrable Securities while owned by (a) the Purchaser or any Affiliate (as
defined in the Securities Purchase Agreement) or (b) a transferee of at least
100,000 of the Initial Shares or Warrant Shares.
"Registration Expenses": All expenses incident to the Company's
performance of or compliance with this Agreement, including, without limitation,
all registration, filing and NASD fees; all stock exchange and National Market
listing fees; all fees and expenses of complying with securities or blue sky
laws; all word processing, duplicating and printing expenses, messenger and
delivery expenses; the fees and disbursements of counsel for the Company and of
its independent public accountants, including the expenses of any special audits
or "cold comfort" letters required by or incident to such performance and
compliance; in connection with an underwritten offering, the reasonable fees and
disbursements of not more than one law firm (not to exceed $25,000) retained by
the holder or holders of more than 50% of the Registrable Securities; premiums
and other costs of policies of insurance of the Company against liabilities
arising out of the public offering of the Registrable Securities being
registered and any fees and disbursements of underwriters customarily paid by
issuers or sellers of securities, but excluding underwriting discounts and
commissions and transfer taxes, if any; provided that, in any case where
Registration Expenses are not to be borne by the Company, such expenses shall
not include salaries of Company personnel or general overhead expenses of the
Company, auditing fees, premiums or other expenses relating to liability
insurance required by underwriters of the Company or other expenses for the
preparation of financial statements or other data normally prepared by the
Company in the ordinary course of its business or which the Company would have
incurred in any event.
"Registration Maintenance Period": As defined in Section 2.3.
"Registration Request": As defined in Section 2.1
"Required Effectiveness Date": As defined in Section 2.1.
"Securities": As defined in Section 1(b).
"Securities Act": The Securities Act of 1933, as amended, and the rules
and regulations of the Commission thereunder.
-------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT - Page 11
"Securities Purchase Agreement": As defined in Section 1.
"Security Holder": As defined in the Introductory paragraph to this
Agreement.
"Warrant Agreement": As defined in Section 1.
"Warrants": As defined in Section 1.
"Warrant Shares": As defined in Section 1.
4. Rule 144. The Company shall timely file the reports required to be filed
by it under the Securities Act and the Exchange Act (including but not limited
to the reports under Sections 13 and 15(d) of the Exchange Act referred to in
subparagraph (c) of Rule 144 adopted by the Commission under the Securities Act)
and the rules and regulations adopted by the Commission thereunder (or, if the
Company is not required to file such reports, will, upon the request of any
holder of Registrable Securities, make publicly available other information) and
will take such further action as any holder of Registrable Securities may
reasonably request, all to the extent required from time to time to enable such
holder to sell Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by (a) Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or (b) any
similar rule or regulation hereafter adopted by the Commission. Upon the request
of any holder of Registrable Securities, the Company will deliver to such holder
a written statement as to whether it has complied with the requirements of this
Section 4.
5. Amendments and Waivers. This Agreement may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of the holder or
holders of the sum of the 51% or more of the shares of (i) Registrable
Securities issued at such time, plus (ii) Registrable Securities issuable upon
exercise or conversion of the Securities then constituting derivative securities
(if such Securities were not fully exchanged or converted in full as of the date
such consent is sought). Each holder of any Registrable Securities at the time
or thereafter outstanding shall be bound by any consent authorized by this
Section 5, whether or not such Registrable Securities shall have been marked to
indicate such consent.
6. Nominees for Beneficial Owners. In the event that any Registrable
Securities are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election, be treated as the holder of such
Registrable Securities for purposes of any request or other action by any holder
or holders of Registrable Securities pursuant to this Agreement or any
determination of any number or percentage of shares of Registrable Securities
held by any holder or holders of Registrable Securities contemplated by this
Agreement. If the beneficial owner of any Registrable Securities so elects, the
Company may require assurances reasonably satisfactory to it of such owner's
beneficial ownership of such Registrable Securities.
7. Notices. Except as otherwise provided in this Agreement, all notices,
requests and other communications to any Person provided for hereunder shall be
in writing and shall be given to such Person (a) in the case of a party hereto
other than the Company, addressed to such party in the manner set forth in the
Securities Purchase Agreement or at such other address as such party shall have
furnished to the Company in writing, or (b) in the case of any other holder of
Registrable Securities, at the address that such holder shall have furnished to
the Company in writing, or, until any such other holder so
--------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT - Page 12
furnishes to the Company an address, then to and at the address of the last
holder of such Registrable Securities who has furnished an address to the
Company, or (c) in the case of the Company, at the address set forth on the
signature page hereto, to the attention of its Chief Executive Officer, or at
such other address, or to the attention of such other officer, as the Company
shall have furnished to each holder of Registrable Securities at the time
outstanding. Each such notice, request or other communication shall be effective
(i) if given by mail, 72 hours after such communication is deposited in the
mails with first class postage prepaid, addressed as aforesaid or (ii) if given
by any other means (including, without limitation, by fax or air courier), when
delivered at the address specified above, provided that any such notice, request
or communication shall not be effective until received.
8. Assignment. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto. In addition, and whether or
not any express assignment shall have been made, the provisions of this
Agreement which are for the benefit of the parties hereto other than the Company
shall also be for the benefit of and enforceable by any subsequent holder of any
Registrable Securities. Each of the Holders of the Registrable Securities
agrees, by accepting any portion of the Registrable Securities after the date
hereof, to the provisions of this Agreement including, without limitation,
appointment of a representative to act on behalf of such Holder pursuant to the
terms hereof which such actions shall be made in the good faith discretion of
the Holder's representative and be binding on all persons for all purposes.
9. Descriptive Headings. The descriptive headings of the several sections
and paragraphs of this Agreement are inserted for reference only and shall not
limit or otherwise affect the meaning hereof.
10. Texas Law; Submission to Jurisdiction; Waiver of Jury Trial;
Appointment of Agent.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF TEXAS. EACH PARTY HERETO HEREBY SUBMITS TO THE
EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF TEXAS AND OF ANY TEXAS STATE COURT SITTING IN DALLAS FOR PURPOSES OF
ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT
AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
11. Counterparts. This Agreement may be executed by facsimile and may be
signed simultaneously in any number of counterparts, each of which shall be
deemed an original, but all such counterparts shall together constitute one and
the same instrument.
12. Entire Agreement. This Agreement embodies the entire agreement and
understanding between the Company and each other party hereto relating to the
subject matter hereof and supersedes all prior agreements and understandings
relating to such subject matter.
------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT - Page 13
13. Severability. If any provision of this Agreement, or the application of
such provisions to any Person or circumstance, shall be held invalid, the
remainder of this Agreement, or the application of such provision to Persons or
circumstances other than those to which it is held invalid, shall not be
affected thereby.
[Signature Page Follows]
-------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT - Page 14
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
XXXXXXXXXXXXXXX.XXX
By:________________________________
Name:______________________________
Title:_____________________________
Address: 0000 Xxx Xxxxx Xxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Fax: (000)000-0000
Attn: Chief Executive Officer
XXXX CAPITAL GROWTH FUND II, L.P.
By: XXXX CAPITAL GROWTH, L.P.
its general partner
By: XXXX CAPITAL
MANAGEMENT, L.L.C., its
general partner
By:
____________________________
Name: J.R. Holland, Jr.
Title: President
Address: 0000 Xxx Xxxxxx
0000 Xxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Attn.: Xxxxxx X. Xxxxxx, Esq.
----------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT - Page 15
