EXHIBIT 5
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into as
of November 14, 2000, by and between Fortune Financial, Inc., a Florida
corporation (the "Company"), and the persons listed on Schedule I hereto(the
"Investors").
INTRODUCTION
The Company and the Investors are parties to the Securities Purchase
Agreement dated the date hereof (the "Sale Agreement"), pursuant to which the
Investors have acquired and may acquire certain 9% Convertible Notes of the
Company, convertible into the Company's Series A Preferred Stock (the "Preferred
Stock"), and certain warrants to purchase Common Stock (the "Warrants"), from
the Company and pursuant to which this Agreement has been executed and
delivered.
1. DEFINITIONS. As used herein, unless the context otherwise
requires, the following terms have the following respective meanings:
COMMISSION: The Securities and Exchange Commission or any other
Federal agency at the time administering the Securities Act.
COMMON STOCK: The shares of Common Stock, par value $0.025 per
share, of the Company as existing on the date hereof.
COMPANY: As defined in the first paragraph of this Agreement.
EXCHANGE ACT: The Securities Exchange Act of 1934, or any similar
Federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time. Reference to a particular section of
the Exchange Act shall include a reference to the comparable section, if any, of
any such similar Federal statute.
FORM S-3: Form S-3 or any comparable or successor form or forms adopted
under the Securities Act.
HOLDER: Any Investor who holds Registrable Securities and any holder of
Registrable Securities to whom the registration rights conferred by this
Agreement have been transferred in compliance with Section 9 hereof.
INITIATING HOLDERS: Any holder or holders of Registrable Securities
holding greater than or equal to 25% of the Registrable Securities (by number of
shares at the time issued and outstanding) and initiating a request pursuant to
Section 2.1 hereof for the registration of all or part of such holder's or
holders' Registrable Securities.
Other Stockholders: Persons other than Holders who, by virtue of
agreements with the Company, are entitled or permitted to include their
securities in certain registrations hereunder.
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PERSON: A corporation, an association, a partnership, an
organization, business, an individual, a governmental or political
subdivision thereof or a governmental agency.
REGISTRABLE SECURITIES: (a) any shares of Common Stock issued or
issuable pursuant to the Sale Agreement (including without limitation shares
issued or issuable upon conversion of the Preferred Stock or upon exercise of
the Warrants whether issued on the date hereof or hereafter pursuant to a
right in the Sale Agreement) and (b) securities issued or issuable with
respect to any Common Stock referred to in the foregoing subdivision (a) by
way of stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization or
otherwise. As to any particular Registrable Securities, such securities shall
cease to be Registrable Securities when (i) 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 disposed of in accordance
with such registration statement, (ii) they shall have been distributed to
the public pursuant to Rule 144 (or any successor provision) under the
Securities Act, (iii) 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, or (iv) they shall have ceased to be
outstanding.
REGISTER, REGISTERED and REGISTRATION: These terms shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
REGISTRATION EXPENSES: All expenses incident to the Company's
performance of or compliance with Section 2 hereof, including, without
limitation, all registration, filing and NASD 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, the reasonable fees and
disbursements of not more than one counsel retained collectively by the holder
or holders of more than 50% 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
the 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.
SECURITIES ACT: The Securities Act of 1933, or any similar Federal
statute, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time. References to a particular section of the
Securities Act shall include a reference to the comparable section, if any, of
any such similar Federal statute.
2. REGISTRATION UNDER SECURITIES ACT, ETC.
2.1 DEMAND REGISTRATION.
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(a) REQUEST. Upon the written request of one or more Initiating Holders
at any time or times not earlier than 90 days after the date hereof requesting
that the Company effect the registration under the Securities Act of all or part
of such Initiating Holders' Registrable Securities and specifying the intended
method of disposition thereof, the Company will promptly give written notice of
such requested registration to all registered holders of Registrable Securities,
and thereupon the Company will use its best efforts to effect the registration
under the Securities Act of:
(i) the Registrable Securities which the Company has been so
requested to register by such Initiating Holders for disposition in
accordance with the intended method of disposition stated in such
request;
(ii) all other Registrable Securities the holders of which
shall have made a written request to the Company for registration
thereof within 30 days after the giving of such written notice by the
Company (which request shall specify the intended method of disposition
of such Registrable Securities); and
(iii) all shares of Common Stock which the Company and any
Other Stockholders may elect to register in connection with the
offering of Registrable Securities pursuant to this Section 2.1, all to
the extent requisite to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities
and the additional shares of Common Stock, if any, so to be registered;
PROVIDED that the Company shall not be required to effect (i) more than two
registrations pursuant to this Section 2.1, (ii) any registration of Registrable
Securities pursuant to this Section 2.1 unless the aggregate number of shares of
Registrable Securities requested to be registered by all holders of Registrable
Securities is equal to or greater than 25% of the Registrable Securities
originally issuable under the Sale Agreement or have a market value (based upon
the closing price of such Registrable Securities quoted on the securities
exchange or over-the-counter quotation system on which such Registrable
Securities are listed or quoted, as the case may be, on the trading day
immediately preceding any request pursuant to this Section 2.1) of at least $5
million at the close of the last trading day prior to such request., (iii)
during the period starting with the date thirty (30) days prior to the Company's
good faith estimate of the date of filing of, and ending on a date ninety (90)
days after the effective date of, a Company-initiated registration (provided
that the Company is actively employing in good faith all reasonable efforts to
cause such registration statement to become effective), and (iv) if (x) in the
good faith judgment of the board of directors of the Company, such registration
would be seriously detrimental to the Company and the board of directors of the
Company concludes, as a result, that it is essential to defer the filing of such
registration statement at such time, and (y) the Company shall furnish to such
Holders a certificate signed by the president of the Company stating that in the
good faith judgment of the board of directors of the Company, it would be
seriously detrimental to the Company for such registration statement to be filed
in the near future and that it is, therefore, essential to defer the filing of
such registration statement, then the Company shall have the right to defer such
filing for the period during which such registration would be seriously
detrimental (provided that the Company may not defer the filing for a period of
more than one hundred eighty (180) days after receipt of the request of
Initiating Holders, and, provided further, that the
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Company shall not defer its obligation in this manner more than once in any
twelve-month period.
(b) EXPENSES. The Company will pay all Registration Expenses in
connection with each registration of Registrable Securities requested pursuant
to this Section 2.1.
(c) 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, 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 the Initiating Holders (other than a refusal to proceed based upon
the advice of counsel relating to a matter with respect to the Company) shall be
deemed to have been effected by the Company at the request of such Initiating
Holders unless the Initiating Holders shall have elected to pay all Registration
Expenses in connection with such registration, (ii) if, after it has become
effective, such registration is interfered with by any stop order, injunction or
other order or requirement of the Commission or other governmental agency or
court for any reason, or (iii) the conditions to closing specified in the
purchase agreement or underwriting agreement entered into in connection with
such registration are not satisfied, other than by reason of some act or
omission by such Initiating Holders.
(d) UNDERWRITTEN OFFERING. If any offering of Registrable Shares
pursuant to a this Section 2.1 involves an underwritten offering the Holders of
a majority of the Initiating Holders shall select the investment banking firm or
firms to manage the underwritten offering; PROVIDED, that such selection shall
be subject to the consent of the Company, which consent shall not be
unreasonably withheld.
The right of any Holder to registration pursuant to this Section 2.1
shall be conditioned upon such Holder's participation in such underwriting and
the inclusion of such Holder's Registrable Securities in the underwriting
(unless otherwise mutually agreed by a majority in interest of Initiating
Holders and such Holder with respect to such participation and inclusion) to the
extent provided herein. A Holder may elect to include in such underwriting all
or a part of the Registrable Securities he holds.
If the Company shall request inclusion in any registration pursuant to
this Section 2.1 of securities being sold for its own account, or if an Other
Stockholder shall request inclusion in any registration pursuant to this Section
2.1, the Initiating Holders shall, on behalf of all Holders, offer to include
such securities in the underwriting and may condition such offer on their
acceptance of the further applicable provisions of Agreement (including without
limitation Section 2.6 hereof. In such event, the Company shall (together with
all Holders and other persons proposing to distribute their securities through
such underwriting) enter into an underwriting agreement in customary form with
the representative of the underwriter or underwriters selected for such
underwriting by the Initiating Holders. If a person who has requested inclusion
in such registration as provided above does not agree to the terms of any such
underwriting, such person shall be excluded therefrom by written notice from
Company, the underwriter or Initiating Holders. The securities so excluded shall
also be withdrawn from registration. Any Registrable Securities or other
securities excluded shall also be withdrawn from such registration.
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(e) PRIORITY IN DEMAND REGISTRATIONS. Notwithstanding any other
provision of this Section 2.1, if any financial advisor retained by the
Initiating Holders shall advise the Company in writing that, in its opinion, the
number of securities requested to be included in such registration (including
securities of the Company which are not Registrable Securities) exceeds the
number which can be sold in the contemplated offering within a price range
acceptable to the holders of a majority of the Registrable Securities requested
to be included in such registration, 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, Registrable Securities requested to be
included in such registration by the holder or holders of Registrable
Securities, pro rata among such holders on the basis of the number of such
securities requested to be included by such holders; and (ii) second, securities
the Company proposes to sell and other securities of the Company included in
such registration by the holders thereof.
2.2 PIGGYBACK REGISTRATION.
(a) RIGHT TO INCLUDE REGISTRABLE SECURITIES. If the Company at any time
proposes to register any of its securities under the Securities Act (other than
by a registration on Form X-0, X-0, X-00 or S-15 or any successor or similar
forms and other than pursuant to Section 2.1 or 2.3 hereof), whether or not for
sale for its own account, it will each such time give prompt written notice to
all holders of Registrable Securities 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 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 use its
best efforts to effect the registration under the Securities Act of all
Registrable Securities which the Company has been so requested to register by
the holders thereof, to the extent requisite to permit the disposition (in
accordance with the intended methods thereof as aforesaid) of the 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 of Registrable Securities 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 hereof, 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
request under Section 2.1 hereof.
(b) EXPENSES. The Company will pay all Registration Expenses in
connection with each registration of Registrable Securities requested pursuant
to this Section 2.2.
(c) PIGGYBACK UNDERWRITTEN OFFERINGS. If the Company at any time
proposes to register any of its securities under the Securities Act as
contemplated by this Section 2.2 and such securities are to be distributed by or
through one or more underwriters, the Company will, if
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requested by any holder of Registrable Securities as provided in this Section
2.2 and subject to the provisions of Section 2.2(d) hereof, use its
reasonable best 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.
The holders of Registrable Securities to be distributed by such
underwriters shall be parties to the underwriting agreement between the Company
and such underwriters and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such holders of Registrable Securities and that any or all of
the conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of such
holders of Registrable Securities. Any such holder of Registrable Securities
shall not be required to make any representations or warranties to or agreements
with the Company or the underwriters other than 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.
(d) PRIORITY IN PIGGYBACK REGISTRATIONS. If (i) a registration pursuant
to this Section 2.2 involves an underwritten offering of the securities so being
registered, whether or not for sale for the account of the Company, to be
distributed (on a firm commitment basis) by or through one or more underwriters
of recognized standing under underwriting terms appropriate for such a
transaction and (ii) the managing underwriter of such underwritten offering
shall inform the Company and holders of the Registrable Securities requesting
inclusion of their Registrable Securities in such registration by letter of its
belief that the distribution of all or a specified number of the securities
requested to be included in such registration concurrently with the securities
being distributed by such underwriters would interfere with the successful
marketing of the securities being distributed by such underwriters (such writing
to state the basis of such belief and the approximate number of such securities
which may be distributed without such effect), then the Company will be
obligated to include in such registration statement the Registrable Shares of
the Holders in sequence, in accordance with the following:
(x) in the case of an offering by the Company for its own
account, (A) first, any and all securities for sale by the Company, (B)
second, Registrable Shares requested to be included in such
registration by the Holders, pro rata based on the number of such
securities requested to be included by such Holders, and (C) third,
securities requested to be included in such registration statement by
other Persons pursuant to any other registration rights that may have
been, or may hereafter be, granted by the Company;
(y) in the case of an offering by the Company for the account
of any of its securityholders (other than the Holders), (A) first,
securities requested to be registered by any such securityholder
pursuant to the exercise of demand registration rights, (B) second,
Registrable Shares requested to be registered by the Holders, pro rata
based on the ratio which such requested Registrable Shares bears to the
total number of Registrable Shares requested to be registered by the
Holders, and (C) third, securities for the account of the Company and
securities requested to be included in such registration statement by
other Persons pursuant to any other registration rights that may have
been, or may hereafter be, granted by the Company.
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2.3 REGISTRATION ON FORM S-3.
(a) The Company shall use its best efforts to qualify for
registration on Form S-3. If the Company has qualified for the use of Form S-3,
in addition to the rights contained in Sections 2.1 and 2.2 hereof, Holders of
Registrable Securities shall have the right to request registrations on Form S-3
(such requests shall be in writing and shall state the number of shares of
Registrable Securities to be disposed of and the intended methods of
dispositions of such shares by such Holder or Holders); PROVIDED, HOWEVER, that
the Company shall not be obligated to effect any such registration if (i)
Holders, together with the holders of any other securities of the Company
entitled to inclusion in such registration, propose to sell Registrable
Securities and such other securities (if any) on Form S-3 at an aggregate price
to the public of less than $1,000,000.
(b) If a request complying with the requirements of Section
2.3(a) hereof is delivered to the Company, the provisions of Sections
2.1(a)(ii), 2.1(b), 2.1(c), 2.1(d) and 2.1(e) hereof shall apply to such
registration.
2.4 REGISTRATION PROCEDURES. If and whenever the Company is required to
use its best efforts to effect the registration of any Registrable Securities
under the Securities Act as provided in Sections 2.1, 2.2 and 2.3 hereof, the
Company shall, as expeditiously as possible:
(i) prepare and (within 90 days after the end of the period
within which requests for registration may be given to the Company, or
in any event as soon thereafter as possible, and in the case of a
registration pursuant to Section 2.1 hereof such filing to be made
within 90 days after the initial request of one or more Initiating
Holders of Registrable Securities or in any event as soon thereafter as
possible) file with the Commission the requisite 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 become and remain effective,
PROVIDED, HOWEVER, that the Company may discontinue any registration of
its securities which are not Registrable Securities (and, under the
circumstances specified in Section 2.2(a), its securities which are
Registrable Securities) at any time prior to the effective date of the
registration statement relating thereto, and FURTHER PROVIDED 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, which documents will
be subject to the review of such counsel;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary and to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement, and use best efforts
to keep such registration statement effective until the earlier of such
time as all of such securities have been disposed of in accordance with
the intended methods of disposition by the seller or sellers thereof
set forth in such registration statement or (A) in the case of a
registration
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pursuant to Section 2.1 or 2.2 hereof, the expiration of 180 days
after such registration statement becomes effective (provided,
however, that such 180-day period shall be extended for a period of
time equal to the period Holder refrains from selling any securities
included in such registration at the request of an underwriter of
common stock (or other securities) of Company) or (B) in the case of
a registration pursuant to Section 2.3 hereof which are intended to
be offered on a continuous or delayed basis, such 120-day period
shall be extended, if necessary, to keep the registration statement
effective until all such Registrable Securities are sold, provided
that Rule 145, or any successor rule under the Securities Act,
permits an offering on a continuous or delayed basis, and provided
further that applicable rules under the Securities Act governing the
obligation to file a post-effective amendment permit, in lieu of
filing a post-effective amendment that (I) includes any prospectus
required by Section 10(a)(3) of the Securities Act or (II) reflects
facts or events representing a material or fundamental change in the
information set forth in the registration statement, the
incorporation by reference of information required to be included in
(I) and (II) above to be contained in periodic reports filed
pursuant to Section 13 or 15(d) of the Exchange Act in the
registration statement;
(iii) furnish to each seller of Registrable Securities covered
by such registration statement and each underwriter, if any, of the
securities being sold by such seller 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 seller may reasonably request in order to facilitate the public
sale or other disposition of the Registrable Securities owned by such
Seller;
(iv) use its best efforts (A) to register or qualify all
Registrable Securities and other securities covered by such
registration statement under such other securities laws or blue sky
laws of such jurisdictions as shall reasonably be requested by such
seller, (B) to keep such registrations or qualifications in effect for
so long as such registration statement remains in effect, and (C) take
any other action which may be reasonably necessary or advisable to
enable each seller to consummate the disposition in such jurisdictions
of the securities owned by such seller, 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 (iv), be obligated to
be so qualified, to subject itself to taxation in any such jurisdiction
or to consent to general service of process in any such jurisdiction;
(v) 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 seller or sellers thereof to consummate the
disposition of such Registrable Securities;
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(vi) cause the Registrable Shares included in any registration
statement to be (i) listed on each securities exchange, if any, on
which similar securities issued by the Company are then listed, or (ii)
authorized to be quoted and/or listed (to the extent applicable) on the
National Association of Securities Dealers, Inc. Automated Quotation
("NASDAQ") or the National Market System of NASDAQ if the Registrable
Shares so qualify;
(vii) provide a CUSIP number for the Registrable Shares
included in any registration statement not later than the effective
date of such registration statement;
(viii) furnish to each Holder selling securities in such
registration and underwriter a signed counterpart of (i) an opinion or
opinions of counsel to the Company, and (ii) a comfort letter or
comfort letters from the Company's independent public accountants, each
in customary form and covering such matters of the type customarily
covered by opinions or comfort letters, as the case may be, as the
Holders selling securities in such registration or managing underwriter
reasonably requests;
(ix) notify each seller 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 the
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 under which they were made, and at the request of any
such seller promptly prepare and furnish to such seller (and each
underwriter, if any) 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 fact required to be stated therein or
necessary to make the statements therein not misleading in the light of
the circumstances under which they were made;
(x) 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 day of the full calendar
month after the effective date of such registration statement, if such
earnings statement is necessary to satisfy the provisions of Section
11(a) of the Securities Act, and will furnish to each such seller at
least five business days (or such shorter reasonable time period as
given circumstances shall dictate) prior to the filing thereof a copy
of any amendment or supplement to such registration statement or
prospectus and shall not file any thereof to which any such seller
shall have reasonably objected on the grounds that such amendment or
supplement does not comply in all material respects with the
requirements of the Securities Act or of the rules or regulations
thereunder; and
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(xi) enter into such agreements and take such other actions as
sellers of such Registrable Securities holding more than 50% of the
shares so to be sold shall reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities.
The Company may require each seller of Registrable Securities as to
which any registration is being effected to furnish the Company such information
regarding such seller and the distribution of such securities as the Company may
from time to time reasonably request in writing and as shall be required by
applicable law or the Commission in connection therewith. Each holder of
Registrable Securities agrees by acquisition of such Registrable Securities
that, upon receipt of any notice from the Company of the occurrence of any event
of the kind described in subdivision (ix) of this Section 2.4, such holder will
forthwith discontinue such holder's disposition of Registrable Securities
pursuant to the registration statement relating to such Registrable Securities
until such holder's receipt of the copies of the supplemented or amended
prospectus contemplated by subdivision (ix) of this Section 2.4 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 such holder's possession
of the prospectus relating to such Registrable Securities current at the time of
receipt of such notice.
2.5 PREPARATION; REASONABLE INVESTIGATION. (a) 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, their underwriters, if
any, 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 opinion of such holders' and such
underwriters' respective counsel, to conduct a reasonable investigation within
the meaning of the Securities Act.
(b) CERTAIN INFORMATION. The Company agrees to include in any
registration statement that includes Registrable Securities filed under Section
2.1, 2.2 or 2.3 hereof, all information which holders of Registrable Securities
being registered shall reasonably request (after giving due regard to the
confidentiality of such information).
2.6 HOLDBACK AGREEMENTS.
(a) So long as the Holder and its affiliates beneficially own more than
five percent of the outstanding Common Stock or the Holder has the right to
designate one or more members of the Company's board of directors, if requested
by the Company and an underwriter of common stock (or other securities) of the
Company, an Investor shall not effect any public sales or distributions of
Common Stock held by such Investor (other than those included in the
registration) during the seven days prior to and the ninety (90) day period
following the effective date of a registration statement of the Company filed
under the Securities Act, provided that all Holders and officers and directors
of the Company and beneficial owners of more than five percent of the Company's
outstanding Common Stock enter into and remain bound by similar agreements.
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The obligations described in this Section 2.6(a) shall not apply to a
registration relating solely to employee benefit plans on Form S-8 or similar
forms that may be promulgated in the future, or a registration relating solely
to a Commission Rule 145 transaction on Form S-4 or similar forms that may be
promulgated in the future.
(b) The Company agrees (x), if so required by the managing underwriter,
not to effect any public sale or distribution of its equity securities or
securities convertible into or exchangeable or exercisable for any of such
securities during the seven days prior to and the 90 days after any underwritten
registration pursuant to Section 2.1 or 2.3 hereof has become effective, except
as part of such underwritten registration and except pursuant to registrations
on Form X-0, X-0, X-00 or S-15 or any successor or similar forms thereto, and
(y) use its best efforts to cause each holder of its securities or any
securities convertible into or exchangeable or exercisable for any of such
securities, in each case purchased directly from the Company at any time after
the date of this Agreement (other than in a public offering) to agree not to
effect any such public sale or distribution of such securities during such
period.
2.7 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, indemnify and hold harmless (i) in the case of any
registration statement filed pursuant to Section 2.1 or 2.2 hereof, 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, and (ii) in the case of any registration statement of
the Company, its directors and officers and each other Person, if any who
controls such Person 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 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 through an
instrument duly executed by such holder, as the case may be, specifically
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
13
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, to the Person
asserting 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. 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 SELLERS. The Company may require, as a
condition to including any Registrable Securities in any registration statement
filed pursuant to Section 2.4 hereof, that the Company shall have received an
undertaking satisfactory to it from the prospective seller 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 2.7) 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 seller specifically stating
that it is for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement. Such indemnity shall be limited to the extent allowable by
applicable law and 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
seller.
(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 2.7, 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 indemnifying party of its obligations
under the preceding subdivisions of this Section 2.7, 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.
14
(d) OTHER INDEMNIFICATION. Indemnification similar to that specified in
the preceding subdivisions of this Section 2.7 (with appropriate modifications)
shall be given by the Company and each seller of Registrable Securities 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 2.7 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 2.7 is unavailable to an indemnified party in
respect of any expense, loss, 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, 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
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 opportunity to correct or prevent such
statement or omission; PROVIDED, that the foregoing contribution agreement shall
not inure to the benefit of any indemnified Person if indemnification would be
unavailable to such indemnified Person by reason of the proviso contained in the
first sentence of subdivision (a) of this Section 2.7, 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
(a) or (b) of this Section 2.7 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 subdivisions
(c) of this Section 2.7, 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
15
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 or alleged 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. 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)(1) 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 such requirements.
4. LIMITATIONS ON REGISTRATION OF ISSUES OF SECURITIES. From and after
the date of this Agreement, the Company shall not, without the prior written
consent of a majority in interest of the Holders, enter into any agreement with
any holder or prospective holder of any securities of the Company giving such
holder or prospective holder any registration rights the terms of which are more
favorable than the registration rights granted to the Holders hereunder.
5. [INTENTIONALLY OMITTED]
6. 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 more than 50% of the shares of Registrable Securities. Each holder of
any Registrable Securities at the time or thereafter outstanding shall be bound
by any consent authorized by this Section 4, whether or not such Registrable
Securities shall have been marked to indicate such consent; PROVIDED, HOWEVER,
that no amendment shall be made to Section 2.7 hereof without the written
consent of the Company and the holder or holders of 100% of the shares of
Registrable Securities.
7. 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.
16
8. NOTICES. Except as otherwise provided in this Agreement, all
communications provided for hereunder shall be in writing and either hand
delivered or sent by prepaid commercial courier, telecopy or first-class
registered or certified mail, postage prepaid, and addressed
if to the Investors: To their addresses shown on Schedule A hereto/
if to the Company: Fortune Financial, Inc.
00000 Xxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxxxxxx, Xxxxxxx 00000
Attention: J. Xxxx Xxxxxxx, President
Facsimile: (000) 000-0000
with a copy to: Akerman, Senterfitt & Xxxxxx, P.A.
00 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxxx
Facsimile: (000) 000-0000
or at such other address the Investor or the Company shall have given notice to
other. Notices sent by commercial courier services for next day delivery shall
be deemed given and received the day after they are sent, notices sent by
telecopy shall be deemed given and received the day they are sent, and notices
sent by mail shall be deemed given and received five (5) days after being mailed
as aforesaid.
9. ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their respective
successors and permitted assigns. 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, PROVIDED, that the transferee or assignee of such rights assumes the
obligations of such Holder under this Agreement by a written agreement
reasonably acceptable to the Company.
10. 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.
11. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of Florida without reference to the principles of conflicts of laws.
17
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the day and year set forth above.
FORTUNE FINANCIAL, INC.
By: /s/ J. XXXX XXXXXXX
--------------------------------------
THE INVESTORS:
Hawkeye, Inc.
By: /s/ XXXXXX X. XXXXXX
--------------------------------------
Xxxxxx X. Xxxxxx, President
MID-OHIO SECURITIES CORP., FBO R. XXX
XXXXX (ACCT. 15051)
By: /s/ R. XXX XXXXX
--------------------------------------
R. Xxx Xxxxx
18
Schedule A
To Registration Rights Agreement
The Investors
Hawkeye, Inc.
c/o Xxxxxx X. Xxxxxx
0000 Xxxxxxxxxx Xxxx., Xxxxx 000
Xxxxxxxxxxxx, Xxxxxxx 00000
Facsimile: (000) 000-0000
Mid-Ohio Securities Corp., FBO
R. Xxx Xxxxx (Acct. 15051)
c/o R. Xxx Xxxxx
0000 Xxxxxxxxxx Xxxx., Xxxxx 000
Xxxxxxxxxxxx, Xxxxxxx 00000
Facsimile: (000) 000-0000
19
