EXHIBIT 10.2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and
entered into as of November 12, 2004, among Interactive Systems Worldwide Inc.,
a Delaware corporation (the "Company"), and the purchasers signatory hereto
(each such purchaser is a "Purchaser" and all such purchasers are, collectively,
the "Purchasers").
This Agreement is made pursuant to the Securities Purchase Agreement,
dated as of the date hereof among the Company and the Purchasers (the "Purchase
Agreement").
The Company and the Purchasers hereby agree as follows:
1. Definitions
CAPITALIZED TERMS USED AND NOT OTHERWISE DEFINED HEREIN THAT ARE
DEFINED IN THE PURCHASE AGREEMENT SHALL HAVE THE MEANINGS GIVEN SUCH TERMS IN
THE PURCHASE AGREEMENT. As used in this Agreement, the following terms shall
have the following meanings:
"Effectiveness Date" means, with respect to the initial Registration
Statement required to be filed hereunder, the 105th calendar day following the
Closing Date (135th calendar day following the Closing Date in the event of a
review of the Registration Statement by the Commission, including a review of
any SEC Reports incorporated therein by reference) and, with respect to any
additional Registration Statements which may be required pursuant to Section
3(c), the 90th calendar day following the date on which the Company first knows,
or reasonably should have known pursuant to Section 3(c), that such additional
Registration Statement is required hereunder; provided, however, in the event
the Company is notified by the Commission that one of the above Registration
Statements will not be reviewed or is no longer subject to further review and
comments, the Effectiveness Date as to such Registration Statement shall be the
fifth Trading Day following the date on which the Company is so notified if such
date precedes the dates required above.
"Effectiveness Period" shall have the meaning set forth in Section
2(a).
"Filing Date" means, with respect to the initial Registration Statement
required hereunder, the later of (i) January 7, 2005 and (ii) the 30th calendar
day following the Closing Date, and, with respect to any additional Registration
Statements which may be required pursuant to Section 3(c), the 15th Trading Day
following the date on which the Company first knows, or reasonably should have
known pursuant to Section 3(c), that such additional Registration Statement is
required hereunder.
"Holder" or "Holders" means the holder or holders, as the case may be,
from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in Section 5(c)
hereof.
"Indemnifying Party" shall have the meaning set forth in Section 5(c)
hereof.
"Losses" means any and all losses, claims, damages, liabilities,
settlement costs and expenses, including costs of preparation and reasonable
attorneys' fees.
"Proceeding" means an action, claim, suit, investigation or proceeding
(including an investigation or partial proceeding, such as a deposition),
whether commenced or threatened.
"Prospectus" means the prospectus included in a Registration Statement
(including a prospectus that includes any information previously omitted from a
prospectus filed as part of an effective registration statement in reliance upon
Rule 430A promulgated under the Securities Act), as amended or supplemented by
any prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Securities covered by a Registration Statement, and
all other amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
"Registrable Securities" means (i) all of the shares of Common Stock
issuable upon conversion in full of the shares of Preferred Stock, assuming for
such purposes that all of the Preferred Stock outstanding on the date of
determination are convertible at the lowest possible conversion price in effect
since the Closing Date, (ii) all shares issuable as dividends on the Preferred
Stock assuming all dividend payments are made in shares of Common Stock and the
Preferred Stock is held for at least 3 years, (iii) all Warrant Shares, (iv) any
securities issued or issuable upon any stock split, dividend or other
distribution recapitalization or similar event with respect to the foregoing and
(v) any additional shares issuable in connection with any anti-dilution
provisions in the Preferred Stock.
"Registration Statement" means the registration statements required to
be filed hereunder and any additional registration statements contemplated by
Section 3(c) (including registration statements filed pursuant to Rule 462(b),
as promulgated under the Securities Act), including (in each case) the
Prospectus, amendments and supplements to such registration statement or
Prospectus, including pre- and post-effective amendments, all exhibits thereto,
and all material incorporated by reference or deemed to be incorporated by
reference in such registration statement.
"Rule 415" means Rule 415 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same purpose and effect as such Rule.
"Rule 424" means Rule 424 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same purpose and effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
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"Underlying Shares" means the shares of Common Stock issuable upon
conversion of the Preferred Stock and upon exercise of the Warrants and issued
and issuable in lieu of cash payment of dividends on the Preferred Stock.
"Warrants" means the Common Stock purchase warrants issued to the
Purchasers pursuant to the Purchase Agreement.
"Warrant Shares" means the shares of Common Stock issuable upon
exercise of the Warrants.
Unless the context otherwise requires, the terms defined in this
Article 1 shall have the meanings herein specified for all purposes of this
Agreement, applicable to both the singular and plural forms of any of the terms
defined herein. When a reference is made in this Agreement to a Section, such
reference shall be to a Section of this Agreement unless otherwise indicated.
Whenever the words "include," "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation." The use of any gender herein shall be deemed to include the neuter,
masculine and feminine genders wherever necessary or appropriate. When any
matter is disclosed (a) in any Transaction Document (including any exhibit or
schedule thereto), (b) any place in the Disclosure Schedule, or (c) except with
respect to Sections 3.1(g), 3.1(s), 3.1(u), 3.1(v), 3.1(w), 3.1(dd), 3.1(ee),
and 3.1(ff) of the Purchase Agreement and with respect to Section 6(b) and
Section 6(c) of this Agreement, in the Company's Form 10-KSB for the year ended
September 30, 2003, the Proxy Statement for the 2004 Annual Meeting of
Shareholders, the Forms 10-QSB for the quarters ended December 31, 2003, March
31, 2004 or June 30, 2004, or all press releases issued after the filing of the
Form 10-QSB for the quarter ended June 30, 2004 and prior to the Closing Date,
such matter shall be deemed to have been disclosed to all of the Holders for all
purposes pursuant to all of the Transaction Documents. If any period of time for
the performance under the Transaction Documents ends on a day that is not a
Trading Day, such period of time shall be automatically extended to end at the
end of the next succeeding Trading Day.
2. Shelf Registration
(a) On or prior to each Filing Date, the Company shall prepare and file
with the Commission a "Shelf" Registration Statement for an offering to be made
on a continuous basis pursuant to Rule 415 and covering the resale of 150% of
the Registrable Securities on the date of such filing. The Registration
Statement shall be on Form S-3 (unless the Company is not then eligible to
register the Registrable Securities for resale on Form S-3, in which case such
registration shall be on another appropriate form in accordance herewith) and
shall contain (unless otherwise directed by the Holders) substantially the "Plan
of Distribution" attached hereto as Annex A. Subject to the terms of this
Agreement, the Company shall use commercially reasonable efforts to cause the
Registration Statement to be declared effective under the Securities Act as
promptly as possible after the filing thereof, but in any event prior to the
applicable Effectiveness Date, and shall use commercially reasonable efforts to
keep such Registration Statement continuously effective under the Securities Act
until all Registrable Securities covered by such Registration Statement have
been sold or may be sold without volume restrictions pursuant to Rule 144(k) as
determined by the counsel to the Company pursuant to a written opinion letter
(or a letter of direction or authorization from the counsel to the Company) to
such effect, addressed and acceptable to the Company's transfer agent (the
"Effectiveness Period"). The Company shall immediately notify the Holders via
facsimile that the Company has received notification of the effectiveness of the
Registration Statement from the Commission.
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(b) If: (i) a Registration Statement is not filed on or prior to its
Filing Date (if the Company files a Registration Statement without affording the
Holders the opportunity to review and comment on the same as required by Section
3(a), the Company shall not be deemed to have satisfied clause (i)), or (ii) the
Company fails to file with the Commission a request for acceleration in
accordance with Rule 461 promulgated under the Securities Act promptly after
(but in any event within 5 Trading Days) the date that the Company is notified
(orally or in writing, whichever is earlier) by the Commission that a
Registration Statement will not be "reviewed" (including a review of any SEC
Report incorporated therein by reference ) or not subject to further review, or
(iii) prior to its Effectiveness Date, the Company fails to file a pre-effective
amendment and otherwise respond in writing to comments made by the Commission in
respect of such Registration Statement within 15 Trading Days after the receipt
of comments by or notice from the Commission that such amendment is required in
order for a Registration Statement to be declared effective, or (iv) a
Registration Statement filed or required to be filed hereunder is not declared
effective by the Commission by its Effectiveness Date, or (v) after the
Effectiveness Date, a Registration Statement ceases for any reason to remain
continuously effective as to all Registrable Securities for which it is required
to be effective, or the Holders are not permitted to utilize the Prospectus
therein to resell such Registrable Securities for more than 15 consecutive
Trading Days or an aggregate of 25 Trading Days during any 12-month period
(which need not be consecutive Trading Days) (any such failure or breach being
referred to as an "Event", and for purposes of clause (i) or (iv) the date on
which such Event occurs, or for purposes of clause (ii) the date on which such
five Trading Day period is exceeded, or for purposes of clause (iii) the date
which such 15 Trading Day period is exceeded, or for purposes of clause (v) the
date on which such 15 or 25 Trading Day period, as applicable, is exceeded being
referred to as "Event Date"), then, on every monthly anniversary of an Event
Date until the applicable Event is cured, the Company shall pay to each Holder
an amount in cash, as liquidated damages and not as a penalty, equal to 1.5% per
month, pro rata on a daily basis, of the Subscription Amount paid by such Holder
pursuant to the Purchase Agreement. If the Company fails to pay any liquidated
damages pursuant to this Section in full within seven days after the date
payable, the Company will pay interest thereon at a rate of 12% per annum (or
such lesser maximum amount that is permitted to be paid by applicable law) to
the Holder, accruing daily from the date such liquidated damages are due until
such amounts, plus all such interest thereon, are paid in full. The liquidated
damages pursuant to the terms hereof shall apply on a pro-rata basis for any
portion of a month prior to the cure of an Event. Notwithstanding anything to
the contrary contained herein, as to a Holder, no liquidated damages shall
accrue or be payable by the Company and no Event shall be deemed to have
occurred during any period when the failure by the Company to meet any deadline
or perform any act is caused solely as a result of such Holder's material breach
of a representation or warranty made by the Holder in the Transaction Documents
or such Holder's failure to materially comply with any of the covenants or
agreements under the Transaction Documents; provided, however, the Company's
obligations to use commercially reasonable efforts to register for resale such
Holder's Registrable Securities hereunder shall continue in full force and
effect during such periods notwithstanding such Holder's breach.
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3. Registration Procedures
In connection with the Company's registration obligations hereunder,
the Company shall:
(a) Not less than five Trading Days prior to the filing of each
Registration Statement or any related Prospectus or any amendment or supplement
thereto (including any document that would be incorporated or deemed to be
incorporated therein by reference), (i) furnish to each Holder copies of all
such documents proposed to be filed, which documents (other than those
incorporated or deemed to be incorporated by reference) will be subject to the
review of such Holders, and (ii) cause its officers and directors, counsel and
independent certified public accountants to be available to respond to such
inquiries as shall be necessary, in the reasonable opinion of respective counsel
to conduct a reasonable investigation within the meaning of the Securities Act.
The Company shall not file the Registration Statement or any such Prospectus or
any amendments or supplements thereto to which the Holders of a majority of the
Registrable Securities shall reasonably and in good faith object, provided, the
Company is notified of such objection in writing no later than 3 Trading Days
after the Holders have been so furnished copies of such documents.
Notwithstanding the foregoing, in the event the Company does not agree with any
objection raised by any of the Holders, the Company and the applicable Holder
shall discuss the objection, after which the Company shall be entitled to file
any such Registration Statement, Prospectus, amendment or supplement in the
manner it deems appropriate. Failure of any Holder to respond to any notice
within the time period required shall be deemed to be consent by such Holder.
Each Holder agrees to furnish to the Company a completed Questionnaire in the
form attached to this Agreement as Annex B not less than two Trading Days prior
to the Filing Date or by 5:30 p.m. New York time on the fourth Trading Day
following the date on which such Holder receives draft materials in accordance
with this Section.
(b) (i) Prepare and file with the Commission such amendments, including
post-effective amendments, to a Registration Statement and the Prospectus used
in connection therewith as may be necessary to keep a Registration Statement
continuously effective as to the applicable Registrable Securities for the
Effectiveness Period and prepare and file with the Commission such additional
Registration Statements in order to register for resale under the Securities Act
all of the Registrable Securities; (ii) cause the related Prospectus to be
amended or supplemented by any required Prospectus supplement (subject to the
terms of this Agreement), and as so supplemented or amended to be filed pursuant
to Rule 424; (iii) respond as promptly as reasonably possible to any comments
received from the Commission with respect to a Registration Statement or any
amendment thereto and as promptly as reasonably possible provide the Holders
true and complete copies of all correspondence from and to the Commission
relating to a Registration Statement; and (iv) comply in all material respects
with the provisions of the Securities Act and the Exchange Act with respect to
the disposition of all Registrable Securities covered by a Registration
Statement during the applicable period in accordance (subject to the terms of
this Agreement) with the intended methods of disposition by the Holders thereof
set forth in such Registration Statement as so amended or in such Prospectus as
so supplemented.
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(c) During the Effectiveness Period, if the number of Registrable
Securities at any time exceeds 75% of the number of shares of Common Stock then
registered in a Registration Statement, file as soon as reasonably practicable
but in any case prior to the applicable Filing Date, an additional Registration
Statement covering the resale by the Holders of not less than 150% of the number
of such Registrable Securities.
(d) Notify the Holders of Registrable Securities to be sold (which
notice, pursuant to clauses (ii) through (vi) hereof, shall be accompanied by an
instruction to suspend the use of the Prospectus until the requisite changes
have been made) as promptly as reasonably possible and (if requested by any such
Person) confirm such notice in writing promptly (i)(A) when a Prospectus or any
Prospectus supplement or post-effective amendment to a Registration Statement is
proposed to be filed; (B) when the Commission notifies the Company whether there
will be a "review" of such Registration Statement and whenever the Commission
comments in writing on such Registration Statement (the Company shall provide
true and complete copies thereof and all written responses thereto to each of
the Holders); and (C) with respect to a Registration Statement or any
post-effective amendment, when the same has become effective; (ii) of any
request by the Commission or any other Federal or state governmental authority
for amendments or supplements to a Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of a Registration Statement covering any or
all of the Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) of the receipt by the Company of any notification with respect to
the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction, or the initiation or
threatening of any Proceeding for such purpose; (v) of the occurrence of any
event or passage of time that makes the financial statements included in a
Registration Statement ineligible for inclusion therein or any statement made in
a Registration Statement or Prospectus or any document incorporated or deemed to
be incorporated therein by reference untrue in any material respect or that
requires any revisions to a Registration Statement, Prospectus or other
documents so that, in the case of a Registration Statement or the Prospectus, as
the case may be, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading; and (vi) the occurrence or existence of any pending
corporate development with respect to the Company that the Company believes may
be material and that, in the determination of the Company, makes it not in the
best interest of the Company to allow continued availability of the Registration
Statement or Prospectus; provided that any and all of such information shall
remain confidential to each Holder until such information otherwise becomes
public, unless disclosure by a Holder is required by law; provided, further,
that notwithstanding each Holder's agreement to keep such information
confidential, the Holders make no acknowledgement that any such information is
material, non-public information.
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(e) Promptly deliver to each Holder, without charge, as many copies of
the Prospectus or Prospectuses (including each form of prospectus) and each
amendment or supplement thereto as such Persons may reasonably request. Subject
to the terms of this Agreement, the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement thereto.
(f) Use commercially reasonable efforts to register or qualify the
resale of such Registrable Securities as required under applicable securities or
Blue Sky laws of each State within the United States as any Holder reasonably
requests in writing, to keep each such registration or qualification (or
exemption therefrom) effective during the Effectiveness Period; provided, that
the Company shall not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or subject the Company to any tax
in any such jurisdiction where it is not then so subject.
(g) Cooperate with the Holders to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be delivered to
a transferee pursuant to a Registration Statement, which certificates shall be
free, to the extent permitted by the Purchase Agreement, of all restrictive
legends, and to enable such Registrable Securities to be in such denominations
and registered in such names as any such Holders may request.
(h) Upon the occurrence of any event contemplated by Section 3(d), as
promptly as reasonably possible under the circumstances taking into account the
Company's good faith assessment of any adverse consequences to the Company and
its stockholders of the premature disclosure of such event, prepare a supplement
or amendment, including a post-effective amendment, to a Registration Statement
or a supplement to the related Prospectus or any document incorporated or deemed
to be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, neither a Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. If the Company notifies the Holders in accordance with clauses
(ii) through (vi) of Section 3(d) above to suspend the use of any Prospectus
until the requisite changes to such Prospectus have been made, then the Holders
shall suspend use of such Prospectus. The Company will use commercially
reasonable efforts to ensure that the use of the Prospectus may be resumed as
promptly as is practicable. The Company shall be entitled to exercise its right
under this Section 3(h) to suspend the availability of a Registration Statement
and Prospectus, subject to the payment of liquidated damages pursuant to Section
2(b), if any, for a period not to exceed 90 days (which need not be consecutive
days) in any 12 month period.
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(i) Comply in all material respects with all applicable rules and
regulations of the Commission.
(j) Use commercially reasonable efforts to avoid the issuance of, or,
if issued, obtain the withdrawal of (i) any order suspending the effectiveness
of a Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.
(k) The Company may require, at any time prior to the third Trading Day
prior to the Filing Date, each Holder to furnish to the Company a statement as
to the number of shares of Common Stock beneficially owned by such Holder and,
if requested by the Commission, the controlling person thereof, within three
Trading days of the Company's request. During any periods that the Company is
unable to meet its obligations under this Agreement with respect to the
registration of the Registrable Securities solely because any Holder fails to
furnish any such information requested by the Company within three Trading Days
of the Company's request, any liquidated damages that are accruing at such time
shall be tolled and any Event that may otherwise occur solely because of such
delay shall be suspended for up to 10 Trading Days as to all Holders until such
information is delivered to the Company and, as to such Holder, until such
information is delivered to the Company.
4. Registration Expenses.
All fees and expenses incident to the performance of or compliance with
this Agreement by the Company shall be borne by the Company whether or not any
Registrable Securities are sold pursuant to the Registration Statement. The fees
and expenses referred to in the foregoing sentence shall include (i) all
registration and filing fees (including, fees and expenses (A) with respect to
filings required to be made with the Principal Market on which the Common Stock
is then listed for trading, and (B) in compliance with applicable state
securities or Blue Sky laws reasonably agreed to by the Company in writing
(including fees and disbursements of counsel for the Company in connection with
Blue Sky qualifications or exemptions of the Registrable Securities and
determination of the eligibility of the Registrable Securities for investment
under the laws of such jurisdictions as requested by the Holders), (ii) printing
expenses (including expenses of printing certificates for Registrable Securities
and of printing prospectuses requested by the Holders), (iii) messenger,
telephone and delivery expenses, (iv) fees and disbursements of counsel for the
Company, and (v) fees and expenses of all other Persons retained by the Company
in connection with the consummation of the transactions contemplated by this
Agreement. In addition, the Company shall be responsible for all of its internal
expenses incurred in connection with the consummation of the transactions
contemplated by this Agreement (including all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit and the fees and expenses incurred in connection with the
listing of the Registrable Securities on any securities exchange as required
hereunder. In no event shall the Company be responsible for any broker or
similar commissions or, except to the extent provided for in the Transaction
Documents, any legal fees or other costs of the Holders.
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5. Indemnification
(a) Indemnification by the Company. The Company shall, notwithstanding
any termination of this Agreement, indemnify and hold harmless each Holder, the
officers, directors, agents, brokers (including brokers who offer and sell
Registrable Securities as principal as a result of a pledge or any failure to
perform under a margin call of Common Stock), investment advisors and employees
of each of them, each Person who controls any such Holder (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act) and the
officers, directors, agents and employees of each such controlling Person, to
the fullest extent permitted by applicable law, from and against any and Losses
as incurred, arising out of or relating to any untrue or alleged untrue
statement of a material fact contained in a Registration Statement, any
Prospectus or any form of prospectus, or in any amendment or supplement thereto
or in any preliminary prospectus, or arising out of or relating to any omission
or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any Prospectus or form
of prospectus or supplement thereto, in light of the circumstances under which
they were made) not misleading, except to the extent, but only to the extent,
that (1) such untrue statements or omissions or alleged untrue statements or
omissions are based upon information regarding such Holder furnished in writing
to the Company by such Holder expressly for use therein, or to the extent that
such information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in a Registration Statement, such
Prospectus or such form of Prospectus or in any amendment or supplement thereto
or (2) in the case of an occurrence of an event of the type specified in Section
3(d)(ii)-(vi), the use by such Holder of an outdated or defective Prospectus
after the Company has notified such Holder in writing that the Prospectus is
outdated or defective and prior to the receipt by such Holder of the Advice
contemplated in Section 6(e). The Company shall notify the Holders promptly of
the institution, threat or assertion of any Proceeding arising from or in
connection with the transactions contemplated by this Agreement of which the
Company is aware.
(b) Indemnification by Holders. Each Holder shall, severally and not
jointly, and notwithstanding any termination of this Agreement, indemnify and
hold harmless the Company, its directors, officers, agents and employees, each
Person who controls the Company (within the meaning of Section 15 of the
Securities Act and Section 20 of the Exchange Act), and the directors, officers,
agents and employees of each such controlling Persons, to the fullest extent
permitted by applicable law, from and against all Losses, as incurred, arising
out of or relating to any untrue or alleged untrue statement of a material fact
contained in any Registration Statement, any Prospectus, or any form of
prospectus, or in any amendment or supplement thereto or in any preliminary
prospectus, or arising solely out of or relating to: (i) such Holder's failure
to comply with the prospectus delivery requirements of the Securities Act or
(ii) any omission or alleged omission of a material fact required to be stated
therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading to the extent, but only
to the extent, such untrue statement or omission is contained in any information
so furnished in writing or required to be furnished by such Holder to the
Company specifically for inclusion in such Registration Statement or such
Prospectus or to the extent that (1) such untrue statements or omissions or
alleged untrue statements or omissions are based upon information regarding such
Holder furnished in writing to the Company by such Holder expressly for use
therein, or to the extent such information relates to such Holder or such
Holder's proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly for use in a
Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto or (2) in the case of an occurrence of an event
of the type specified in Section 3(d)(ii)-(vi), the use by such Holder of an
outdated or defective Prospectus after the Company has notified such Holder in
writing that the Prospectus is outdated or defective and prior to the receipt by
such Holder of the Advice contemplated in Section 6(e). In no event shall the
liability of any selling Holder hereunder be greater in amount than the dollar
amount of the net proceeds received by such Holder upon the sale of the
Registrable Securities giving rise to such indemnification obligation. Each of
the Holders shall notify the Company promptly of the institution, threat or
assertion of any Proceeding arising from or in connection with the transactions
contemplated by this Agreement of which such Holder is aware.
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(c) Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party shall promptly notify the Person
from whom indemnity is sought (the "Indemnifying Party") in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel, selected by the Indemnifying Party and reasonably satisfactory to the
Indemnified Party and the payment of all fees and expenses incurred in
connection with defense thereof; provided, that the failure of any Indemnified
Party to give such notice shall not relieve the Indemnifying Party of its
obligations or liabilities pursuant to this Agreement, except (and only) to the
extent that such failure shall have prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel in
any such Proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party or
Parties unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; or (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel that a material conflict of interest is
likely to exist if the same counsel were to represent such Indemnified Party and
the Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and the expense of one such counsel for each
Holder shall be at the expense of the Indemnifying Party). The Indemnifying
Party shall not be liable for any settlement of any such Proceeding effected
without its written consent, which consent shall not be unreasonably withheld.
No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending Proceeding in respect of
which any Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such Proceeding.
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Subject to the terms of this Agreement, all fees and expenses of the
Indemnified Party (including reasonable fees and expenses to the extent incurred
in connection with investigating or preparing to defend such Proceeding in a
manner not inconsistent with this Section) shall be paid to the Indemnified
Party, as incurred, promptly after written notice thereof to the Indemnifying
Party (regardless of whether it is ultimately determined that an Indemnified
Party is not entitled to indemnification hereunder; provided, that the
Indemnifying Party may require such Indemnified Party to undertake to reimburse
all such fees and expenses to the extent it is finally judicially determined
that such Indemnified Party is not entitled to indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section 5(a) or
5(b) is unavailable to an Indemnified Party (by reason of public policy or
otherwise), 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 Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 5(c), any reasonable attorneys' or other
reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 5(d), no Holder shall be required
to contribute, in the aggregate, any amount in excess of the amount by which the
proceeds actually received by such Holder from the sale of the Registrable
Securities subject to the Proceeding exceeds the amount of any damages that such
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission.
The indemnity and contribution agreements contained in this Section are
in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
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6. Miscellaneous
(a) Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given, unless the same shall be in writing and signed by the Company and Holders
of at least 66.66% of the Registrable Securities. Notwithstanding the foregoing,
a waiver or consent to depart from the provisions hereof with respect to a
matter that relates exclusively to the rights of specific Holders and that does
not directly or indirectly affect the rights of other Holders may be given by
the specific Holders of all of the Registrable Securities to which such waiver
or consent relates; provided, however, that the provisions of this sentence may
not be amended, modified, or supplemented except in accordance with the
provisions of the immediately preceding sentence.
(b) No Inconsistent Agreements. Neither the Company nor any of its
subsidiaries has entered, as of the date hereof, nor shall the Company or any of
its subsidiaries, on or after the date of this Agreement, enter into any
agreement with respect to its securities, that would materially and adversely
affect the rights granted to the Holders in this Agreement or otherwise
conflicts with the provisions hereof. Except as set forth on Schedule 6(b),
neither the Company nor any of its subsidiaries has previously entered into any
agreement granting any registration rights with respect to any of its securities
to any Person that have not been satisfied in full.
(c) No Piggyback on Registrations. Except as set forth on Schedule 6(c)
attached hereto, neither the Company nor any of its security holders (other than
the Holders in such capacity pursuant hereto) may include securities of the
Company in the Registration Statement other than the Registrable Securities. The
Company shall not file any other registration statements until the initial
Registration Statement required hereunder is declared effective by the
Commission, provided that this Section 6(c) shall not prohibit the Company from
filing amendments to registration statements already filed.
(d) Compliance. Each Holder covenants and agrees that it will comply
with the prospectus delivery requirements of the Securities Act as applicable to
it in connection with sales of Registrable Securities pursuant to the
Registration Statement.
(e) Discontinued Disposition. Each Holder agrees by its acquisition of
such Registrable Securities that, upon receipt of a notice from the Company of
the occurrence of any event of the kind described in Sections 3(d)(ii) - (vi),
such Holder will forthwith discontinue disposition of such Registrable
Securities under a Registration Statement until such Holder's receipt of the
copies of the supplemented Prospectus and/or amended Registration Statement
contemplated by Section 3(h), or until it is advised in writing (the "Advice")
by the Company that the use of the applicable Prospectus may be resumed, and, in
either case, has received copies of any additional or supplemental filings that
are incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement. The Company may provide appropriate stop orders to
enforce the provisions of this paragraph. The Company agrees and acknowledges
that any period during which the Holder is required to discontinue the
disposition of the Registrable Securities hereunder shall be subject to the
provisions of Section 2(b).
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(f) Piggy-Back Registrations. If at any time during the Effectiveness
Period there is not an effective Registration Statement covering all of the
Registrable Securities (other than pursuant to Section 3(d)) and the Company
shall determine to prepare and file with the Commission a registration statement
relating to an offering for its own account or the account of others under the
Securities Act of any of its equity securities, other than on Form S-4 or Form
S-8 (each as promulgated under the Securities Act) or their then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, then the Company
shall send to each Holder written notice of such determination and, if within
five Trading Days after receipt of such notice, any such Holder shall so request
in writing, the Company shall include in such registration statement all or any
part of such Registrable Securities such holder requests to be registered;
provided, that, the Company shall not be required to register any Registrable
Securities pursuant to this Section 6(f) that are eligible for resale pursuant
to Rule 144(k) promulgated under the Securities Act or that are the subject of a
then effective Registration Statement.
(g) Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be delivered as set forth
in the Purchase Agreement.
(h) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of all of the Holders of Registrable
Securities. Any Holder may assign its rights under this Agreement to any Person
to whom such Holder assigns or transfers any Securities; provided, however, that
no Holder may assign its rights to a competitor or potential competitor of the
Company.
(i) Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
(j) Governing Law; Venue; Waiver of Jury Trial. All questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by and construed and enforced in accordance with the
internal laws of the State of New York, without regard to the principles of
conflicts of law thereof. Each party agrees that all legal proceedings
concerning the interpretations, enforcement and defense of the transactions
contemplated by this Agreement (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, employees or agents)
shall be commenced exclusively in the state and federal courts sitting in the
City of New York, borough of Manhattan (the "New York Courts"). Each party
hereby irrevocably submits to the exclusive jurisdiction of the New York Courts
for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein (including with respect
to the enforcement of any of this Agreement), and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, or that the New York
Courts are an improper or inconvenient venue for such proceeding. Each party
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof
via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
The parties hereto hereby irrevocably waive, to the fullest extent permitted by
applicable law, 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. If either party shall commence an action or proceeding to enforce any
provisions of this Agreement, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its attorneys' fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such action or proceeding.
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(k) Cumulative Remedies. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.
(l) Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
(m) Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
(n) Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Holders and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
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(o) Independent Nature of Holders' Obligations and Rights. The
obligations of each Holder under this Agreement are several and not joint with
the obligations of any other Holder, and no Holder shall be responsible in any
way for the performance of the obligations of any other Holder under this
Agreement. Nothing contained herein or in any Transaction Document, and no
action taken by any Holder pursuant thereto, shall be deemed to constitute the
Holders as a partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Holders are in any way acting in
concert or as a group with respect to such obligations or the transactions
contemplated by this Agreement. Each Holder shall be entitled to independently
protect and enforce its rights, including the rights arising out of this
Agreement, and it shall not be necessary for any other Holder to be joined as an
additional party in any proceeding for such purpose.
********************
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IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
INTERACTIVE SYSTEMS WORLDWIDE INC.
By: /s/ Xxxxxxx Xxxxxxxx
Name: Xxxxxxx Xxxxxxxx
Title: President
[SIGNATURE PAGE OF HOLDERS FOLLOWS]
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[PURCHASER'S SIGNATURE PAGE TO ISWI RRA]
Name of Investing Entity: Omicron Master Trust
Signature of Authorized Signatory of Investing Entity: /s/ Xxxxx Xxxxxxxxx
Name of Authorized Signatory: Xxxxx Xxxxxxxxx
Title of Authorized Signatory: Managing Partner
[SIGNATURE PAGES CONTINUE]
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[PURCHASER'S SIGNATURE PAGE TO ISWI RRA]
Name of Investing Entity: Midsummer Investment, Ltd.
Signature of Authorized Signatory of Investing Entity: /s/ Xxxxx X. Xxxxxxx
Name of Authorized Signatory: Xxxxx X. Xxxxxxx
Title of Authorized Signatory: Managing Director, Midsummer Capital as
investment advisor to Midsummer Investment, Ltd.
18
