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EXHIBIT 2.13
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("AGREEMENT") is entered into as of
June 5, 2000 between AppliedTheory Corporation, a Delaware corporation with
offices at 0000 Xxxxxxxx, 0xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000 (the "COMPANY")
and each of the entities listed under "INVESTORS" on the signature page hereto
(each an "INVESTOR" and collectively the "INVESTORS"), each with offices at the
address listed under such Investor's name on Schedule I hereto.
W I T N E S S E T H:
WHEREAS, pursuant to that certain Convertible Debenture Purchase
Agreement by and between the Company and the Investors (the "PURCHASE
AGREEMENT"), the Company has agreed to sell and issue to the Investors, and the
Investors have agreed to purchase from the Company, an aggregate of $30 million
principal amount of the Company's 5% Convertible Debentures Due June 5, 2003
(the "DEBENTURES") on the terms and conditions set forth therein;
WHEREAS, the Purchase Agreement contemplates that the Debentures will
be convertible into shares (the "COMMON SHARES") of common stock, par value
$.01, of the Company ("COMMON STOCK"), and/or may be convertible into warrants
(the "FORCED CONVERSION WARRANTS") which are exercisable for Common Shares,
pursuant to the terms and conditions set forth in the Debentures;
WHEREAS, pursuant to the Purchase Agreement, the Investors shall have
the option to compel the Company to sell, and the Company shall have the option
to compel the Investors to purchase (collectively, with respect to the Investors
and the Company, the "OPTIONS") warrants (collectively, the "OPTION WARRANTS")
exercisable for, shares of Common Stock (the "OPTION SHARES"), for a purchase
price per share equal to the Initial Conversion Price (as defined in, and as may
be adjusted pursuant to the Debentures, but which shall not be subject to any
Reset as provided in the Debentures), up to an aggregate purchase price of
$20,000,000;
WHEREAS, pursuant to the terms of, and in partial consideration for,
the Investors' agreement to enter into the Purchase Agreement, the Company has
agreed to issue warrants exercisable for a number of shares of Common Stock (the
"WARRANT SHARES") equal to $10,000,000 divided by the Closing Price (the
"INITIAL WARRANTS" and, collectively with the Forced Conversion Warrants and the
Option Warrants, the "WARRANTS") in connection with the issuance of the
Debentures;
WHEREAS, pursuant to the terms of, and in partial consideration for,
the Investors' agreement to enter into the Purchase Agreement, the Company has
agreed to provide the Investors with certain registration rights with respect to
the Common Shares, Option Shares and Warrant Shares and certain other rights and
remedies with respect to the Debentures as set forth in this Agreement;
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NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in the Purchase
Agreement and this Agreement, the Company and the Investors agree as follows:
1. Certain Definitions. Capitalized terms used herein and not otherwise
defined shall have the meaning ascribed thereto in the Purchase Agreement, the
Warrants or the Debentures. As used in this Agreement, the following terms shall
have the following respective meanings:
"CLOSING" and "CLOSING DATE" shall have the meanings ascribed to such
terms in the Purchase Agreement.
"CONVERSION PRICE" shall have meaning ascribed to such term in Section
5(c) of the Debenture.
"CONVERSION VALUE" shall mean the value that a Holder would be entitled
to receive upon (i) conversion of the Debenture at the Conversion Price then in
existence, without reference to Section 13 thereof, followed by (ii) the
subsequent sale of the Common Shares received thereby at the greater of the
Market Price for Shares of Common Stock in existence at the time (A) of the
closing of a redemption of a Debenture or (B) of the event triggering the right
to redemption.
"COMMISSION" or "SEC" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act.
"DEFAULT PAYMENT" shall mean a payment equal to 1.5% of the Debenture
Amount held by the relevant Holder.
"DEFAULT RATE" shall mean the following:
(a) for the first thirty-day period (or portion thereof) that
the Interfering Event exists, 2.0%; and
(b) for each thirty-day period (or portion thereof)
thereafter, an additional 1.5%.
"DEBENTURE AMOUNT" shall mean the Outstanding Principal Amount of, the
accrued but unpaid interest on, and the accrued but unpaid Default Payments on,
the Debentures.
"HOLDER" and "HOLDERS" shall mean the Investor or the Investors,
respectively, and any transferee of the Debentures, Warrants, Warrant Shares,
Option Shares or Common Shares or Registrable Securities which have not been
sold to the public to whom the registration rights conferred by this Agreement
have been transferred in compliance with this Agreement.
"INTERFERING EVENTS" shall have the meaning set forth in Section 2(b).
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"MARKET PRICE FOR SHARES OF COMMON STOCK" shall have the meaning
ascribed to such term in the Debentures.
"OUTSTANDING PRINCIPAL AMOUNT" shall have the meaning ascribed to such
term in the Debentures.
"PREMIUM REDEMPTION PRICE" shall mean the following:
(a) as to the Debentures, the greater of (i) 120% of the
Debenture Amount and (ii) the Conversion Value;
(b) as to the Option Shares and/or Warrant Shares, 120% of the
dollar amount which is the product of (i) the number of shares to be redeemed,
and (ii) the Market Price for Shares of Common Stock in existence at the time
(x) of the closing of a redemption of the Option Shares and/or Warrant Shares or
(y) of the event triggering the right to redemption, whichever results in a
greater Premium Redemption Price.
(c) as to the Investor Call Option (as defined in the Purchase
Agreement) and the Warrants, 120% of the dollar amount which is the product of
(i) the number of Option Shares, Common Shares and/or Warrant Shares to be
issued to the Holder upon exercise of such Investor Call Option and/or Warrants
multiplied by (ii) the Market Price for Shares of Common Stock in existence at
the time (x) of the closing of the redemption of the Call Option and/or Warrants
or (y) of the event triggering the right to redemption, whichever results in a
greater Premium Redemption Price.
"PUT NOTICE" shall have the meaning set forth in Section 2(b)(i)(B).
"REGISTRABLE SECURITIES" shall mean: (a) the Common Shares, the Option
Shares and Warrant Shares issued or issuable to each Holder or its permitted
transferee or designee upon conversion of the Debentures or exercise of the
Warrants or Options, as applicable, or upon any stock split, stock dividend,
recapitalization or similar event with respect to such Common Shares, Option
Shares or Warrant Shares; (b) any securities issued or issuable to each Holder
upon the conversion, exercise or exchange of any Debentures, Warrants, Options,
Warrant Shares, Option Shares or Common Shares; and (c) any other security of
the Company issued as a dividend or other distribution with respect to,
conversion or exchange of, or in replacement of, Registrable Securities.
The terms "REGISTER", "REGISTERED" and "REGISTRATION" 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" shall mean all expenses to be incurred by the
Company in connection with each Holder's registration rights under this
Agreement, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel for the Company, "BLUE SKY"
fees and expenses, reasonable fees and disbursements of counsel to Holders
(using a single counsel selected by a
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majority in interest of the Holders) for a "due diligence" examination of the
Company and review of the Registration Statement and related documents, and the
expense of any special audits incident to or required by any such registration
(but excluding the compensation of regular employees of the Company, which shall
be paid in any event by the Company).
"REGISTRATION STATEMENT" shall have the meaning set forth in Section
2(a) herein.
"REGULATION D" shall mean Regulation D as promulgated pursuant to the
Securities Act, and as subsequently amended.
"SECURITIES ACT" or "ACT" shall mean the Securities Act of 1933, as
amended.
"SELLING EXPENSES" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities, all fees and
disbursements of counsel for Holders not included within "Registration Expenses"
and if the Holders engage a third party as an underwriter for the purpose of
distributing Registrable Securities on an underwritten basis, the fees and
expenses of such underwriting and any additional expenses of an accountant
incurred in order to obtain a "Comfort Letter."
2. Registration Requirements. The Company shall use its best efforts to
effect the registration of the Registrable Securities (including without
limitation the execution of an undertaking to file post-effective amendments,
appropriate qualification under applicable "Blue Sky" or other state securities
laws and appropriate compliance with applicable regulations issued under the
Securities Act) as would permit or facilitate the sale or distribution of all
the Registrable Securities in the manner (including manner of sale) reasonably
requested by the Holder and in all U.S. jurisdictions. Such best efforts by the
Company shall include the following:
(a) The Company shall, as expeditiously as reasonably possible
after the Closing Date:
(i) But in any event within 30 days thereafter,
prepare and file a registration statement with the Commission
on Form S-3 under the Securities Act (or in the event that the
Company is ineligible to use such form, such other form as the
Company is eligible to use under the Securities Act) covering
the Registrable Securities (such registration statement,
including any amendments or supplements thereto and
prospectuses contained therein, is referred to herein as the
"REGISTRATION STATEMENT"), which Registration Statement, to
the extent allowable under the Securities Act and the rules
promulgated thereunder (including Rule 416), shall state that
such Registration Statement also covers such number of
additional shares of Common Stock as may become issuable to
prevent dilution resulting from stock splits, stock dividends
or similar events. The number of shares of Common Stock
initially included in such Registration Statement shall be no
less than the sum of (A) two times the sum of the number of
Common Shares that are as of the date of this Agreement
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issuable upon conversion of the Debentures plus (B) two times
the number of Option Shares and Warrant Shares issuable upon
exercise of the Options and Warrants in each case without
regard to any limitation on the Investor's ability to convert
the Debentures or Warrants. Thereafter, the Company shall use
its best efforts to cause such Registration Statement to be
declared effective as soon as practicable, and in any event
prior to 120 days following the Closing Date. The Company
shall provide Holders and their legal counsel reasonable
opportunity to review any such Registration Statement or
amendment or supplement thereto prior to filing.
(ii) Prepare and file with the SEC such amendments
and supplements to such Registration Statement and the
prospectus used in connection with such Registration Statement
as may be necessary to comply with the provisions of the Act
with respect to the disposition of all securities covered by
such Registration Statement in accordance with the intended
methods of disposition by the seller thereof as set forth in
the Registration Statement and notify the Holders of the
filing and effectiveness of such Registration Statement and
any amendments or supplements.
(iii) After the registration, furnish to each Holder
such numbers of copies of a current prospectus conforming with
the requirements of the Act, copies of the Registration
Statement, any amendment or supplement thereto and any
documents incorporated by reference therein and such other
documents as such Holder may reasonably require in order to
facilitate the disposition of Registrable Securities owned by
such Holder.
(iv) Use its best efforts to register and qualify the
securities covered by such Registration Statement under such
other securities or "Blue Sky" laws of all U.S. jurisdictions;
provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business
or to file a general consent to service of process in any such
states or jurisdictions.
(v) Notify each Holder immediately of the happening
of any event as a result of which the prospectus (including
any supplements thereto or thereof and any information
incorporated or deemed to be incorporated by reference
therein) included in such Registration Statement, as then in
effect, includes an untrue statement of material fact or omits
to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in
light of the circumstances then existing, and, pursuant to
Section 2(f), use its best efforts to promptly update and/or
correct such prospectus.
(vi) Notify each Holder immediately of the issuance
by the Commission or any state securities commission or agency
of any stop
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order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that
purpose. The Company shall use its best efforts to prevent the
issuance of any stop order and, if any stop order is issued,
to obtain the lifting thereof at the earliest possible time.
(vii) Permit a single firm of counsel, designated as
Holders' counsel by the Holders of a majority of the
Registrable Securities included in the Registration Statement,
to review the Registration Statement and all amendments and
supplements thereto within a reasonable period of time prior
to each filing, and shall not file any document in a form to
which such counsel reasonably objects.
(viii) Use its best efforts to list the Registrable
Securities covered by such Registration Statement with all
securities exchange(s) and/or markets on which the Common
Stock is then listed and prepare and file any required filings
with the National Association of Securities Dealers, Inc. or
any exchange or market where the Common Stock is then traded.
(ix) If applicable, take all steps necessary to
enable Holders to avail themselves of the prospectus delivery
mechanism set forth in Rule 153 (or successor thereto) under
the Act.
(b) Set forth below in this Section 2(b) are (I) events that may arise
that the Investors consider will interfere with the full enjoyment of their
rights under the Debentures, the Purchase Agreement and this Agreement (the
"INTERFERING EVENTS"), and (II) certain remedies applicable in each of these
events.
Paragraphs (i) through (iv) of this Section 2(b) describe the
Interfering Events, provide a remedy to the Investors if an
Interfering Event occurs and provide that the Investors may
require that the Company redeem outstanding Debentures at a
specified price if certain Interfering Events are not timely
cured.
Paragraph (v) provides, inter alia, that each Holder shall
have the option as to whether it would like to receive any
payment required as a remedy in the case of certain of the
Interfering Events in cash or shares of Common Stock.
Paragraph (vi) provides, inter alia, that if payments required
as the remedy in the case of certain of the Interfering Events
are not paid when due, the Company may be required by the
Investors to redeem outstanding Debentures at a specified
price.
Paragraph (viii) provides, inter alia, that the Investors have
the right to specific performance.
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The preceding paragraphs in this Section 2(b) are meant to serve only
as an introduction to this Section 2(b), are for convenience only, and are not
to be considered in applying, construing or interpreting this Section 2(b).
(i) Delay in Effectiveness of Registration Statement.
(A) In the event that the Registration
Statement has not been declared effective within 120 days from
the Closing Date, then the Conversion Price shall be reduced
by the Default Rate during and after the 120th day following
the Closing Date during any part of which such Registration
Statement is not effective. For example, if the Registration
Statement does not become effective until 150 days from the
Closing Date, the Conversion Price from and after day 121 from
the Closing Date shall be multiplied by 98%. If the
Registration Statement is not effective until the 180th day
after the Closing Date, the Conversion Price from and after
day 151 from the Closing Date shall be multiplied by 96.5%. In
each case, the Conversion Price shall be subject to further
adjustment as set forth in the Debentures and the Purchase
Agreement; provided, that once the Registration Statement
first becomes effective, there can be no further adjustment to
the Conversion Price under this Section 2(b)(i).
(B) If the Registration Statement has not
been declared effective within 150 days after the Closing
Date, then each Holder shall have the right to require the
Company to redeem the Debentures, Warrants, Common Shares,
Option Shares and/or Warrant Shares in whole or in part at the
Premium Redemption Price set forth in clauses (a)(i), (b)
and/or (c) (only) of the definition thereof. Each Holder shall
exercise such right by providing the Company with written
notice thereof (the "PUT NOTICE"), which such Put Notice shall
include the type and amount of each security that the Holder
seeks to redeem and a date at least five (5) business days
from the date thereof on which the Holder seeks the redemption
to occur (the "REDEMPTION DATE"). Nothing herein shall be
construed as precluding the Holder from exercising its
conversion rights under the Debenture unless the Company
redeems the Debenture and pays the Premium Redemption Price
set forth above in full pursuant to Section 2(b)(i)(B).
Default Payments shall no longer accrue on Debentures after
such Debentures have been redeemed by the Company pursuant
hereto.
(ii) No Listing; Premium Price Redemption for
Delisting of Class of Shares.
(A) In the event that the Company fails,
refuses or is unable to cause the Registrable Securities
covered by the Registration Statement to be listed with the
Approved Market and each other securities exchange and market
on which the Common Stock is then traded at all times during
the period ("LISTING PERIOD") commencing the earlier of the
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effective date of the Registration Statement or the 120th day
following the Closing Date, and continuing thereafter for so
long as the Debentures are outstanding, then the Company shall
pay in cash or Common Stock, as provided in Section 5(b)(v),
to each Holder a Default Payment for each 30-day period (or
portion thereof) during the Listing Period from and after such
failure, refusal or inability to so list the Registrable
Securities until the Registrable Securities are so listed,
which Default Payments shall not in the aggregate exceed the
maximum percentage permitted by law.
(B) In the event that shares of Common Stock
of the Company are delisted from the Approved Market at any
time following the Closing Date and remain delisted for 5
consecutive business days, then at the option of each Holder
and to the extent such Holder so elects, the Company shall on
2 business days notice either (1) pay in cash or Common Stock
(as provided in Section 2(b)(v)) to such Holder a Default
Payment for each 30-day period that the shares are delisted or
(2) redeem the Debentures and/or Warrants and/or Common Shares
and/or Option Shares and/or Warrant Shares held by such
Holder, in whole or in part, at a redemption price equal to
the Premium Redemption Price (as defined above); provided,
however, that such Holder may revoke such request at any time
prior to receipt of payment of such Default Payments or
Premium Redemption Price, as the case may be. Default payments
shall no longer accrue on Debentures after such Debentures
have been redeemed by the Company pursuant to the foregoing
provision.
(iii) Blackout Periods. In the event any Holder is
unable to sell Registrable Securities under the Registration
Statement for more than (A) five (5) consecutive days or (B)
an aggregate of twenty (20) days in any 12 month period
("SUSPENSION GRACE PERIOD"), including without limitation by
reason of a suspension of trading of the Common Stock on the
Approved Market, any suspension or stop order with respect to
the Registration Statement or the fact that an event has
occurred as a result of which the prospectus (including any
supplements thereto) included in such Registration Statement
then in effect includes an untrue statement of material fact
or omits to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading in light of the circumstances then existing, or the
number of shares of Common Stock covered by the Registration
Statement is insufficient at such time to make such sales (a
"BLACKOUT"), then the Company shall pay in cash or Common
Stock (as provided in Section 2(b)(v)) to each Holder a
Default Payment for each 30-day period (or portion thereof)
from and after the expiration of the Suspension Grace Period,
which Default Payment shall not exceed the maximum percentage
permitted by law. In lieu of receiving the Default Payment as
provided above, a Holder shall have the right but not the
obligation to elect to have the Company redeem its Debentures
and
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Common Shares, Option Shares and Warrant Shares at the price
equal to the Premium Redemption Price.
(iv) Conversion Deficiency; Premium Price Redemption
for Conversion Deficiency. In the event that the Company does
not have a sufficient number of Common Shares available to
satisfy the Company's obligations to any Holder upon receipt
of a Conversion Notice (as defined in the Debenture) or is
otherwise unable or unwilling to issue such Common Shares
(including without limitation by reason of the limit described
in Section 10 below) in accordance with the terms of the
Debenture for any reason after receipt of a Conversion Notice,
then:
(A) The Company shall pay in cash or Common
Stock (as provided in Section 2(b)(v)) to each Holder a
Default Payment for each 30-day period (or portion thereof)
that the Company fails or refuses to issue Common Shares in
accordance with the Debenture terms, which Default Payment
shall not exceed the maximum percentage permitted by law;
provided, however, that if such failure is the result of there
being insufficient shares authorized to make such issuance,
such amount shall not be payable if the Company promptly (but
in any event within ten (10) calendar days) authorizes and
issues such shares, and
(B) At any time five days after the
commencement of the running of the first 30-day period
described above in clause (A) of this paragraph (iv), at the
request of any Holder pursuant to a redemption notice, the
Company promptly (1) shall purchase from such Holder, at a
purchase price equal to the Premium Redemption Price, the
Debenture Amount of Debentures equal to such Holder's pro rata
share of the Deficiency (as such term is defined below), if
the failure to issue Common Shares results from the lack of a
sufficient number thereof and (2) shall purchase all (or such
portion as such Holder may elect) of such Holder's Debentures
at such Premium Redemption Price if the failure to issue
Common Shares results from any other cause. The "DEFICIENCY"
shall be equal to the Debenture Amount of Debentures that
would not be able to be converted for Common Shares, due to an
insufficient number of Common Shares available, if all the
outstanding Debentures were submitted for conversion at the
Conversion Price set forth in the Debentures as of the date
such Deficiency is determined. Any request by a Holder
pursuant to this paragraph (iv)(B) shall be revocable by that
Holder at any time prior to its receipt of the Premium
Redemption Price.
(v) Default Payment Terms; Status of Unpaid Default
Payments. All Default Payments (which payments shall be pro
rata on a per diem basis for any period of less than 30 days)
required to be made in connection with the above provisions
shall be paid at any time upon demand, and whether or not a
demand is made, by the tenth (10th) day of
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each calendar month for the partial or full calendar month
occurring prior to that date. Such Default Payments shall be
payable in cash or Common Stock, as determined by each Holder
in its sole discretion. If the Holder elects to be paid in
Common Stock, the Holder shall be entitled to that number of
shares of Common Stock as shall equal to the amount of such
Default Payment multiplied by a fraction, the numerator of
which is one and the denominator of which is equal to the
average of the Market Price for Shares of Common Stock for the
three (3) business days prior to, but not including, the date
upon which such payments are due. Unless the Company shall
receive written notice to the contrary from the respective
Holder, the Default Payments shall be paid in cash. Until paid
as required in this Agreement, Default Payments shall be
deemed added to, and a part of, the Outstanding Principal
Amount of a Holder's Debentures.
(vi) Premium Price Redemption for Default Payment
Defaults. In the event that the Company fails or refuses to
pay any Default Payment provided for in the foregoing
paragraphs (i) through (iv) when due, at any Holder's request
and option, the Company shall purchase all or a portion of the
Debentures, Warrants, Call Options, Option Shares, Common
Shares and/or Warrant Shares held by such Holder (with Default
Payments accruing through the date of such purchase), within
five (5) days of such request, at a purchase price equal to
the Premium Redemption Price (as defined above); provided that
such Holder may revoke such request at any time prior to
receipt of such payment of such purchase price. Until such
time as the Company purchases such Debentures at the request
of such Holder pursuant to the preceding sentence, at any
Holder's request and option the Company shall as to such
Holder pay such amount by adding and including the amount of
such Default Payment to the Outstanding Principal Amount of a
Holder's Debentures.
(vii) Cumulative Remedies. Each Default Payment
triggered by an Interfering Event provided for in the
foregoing paragraphs (ii) through (iv) shall be in addition to
each other Default Payment triggered by another Interfering
Event; provided, however, that in no event shall the Company
be obligated to pay to any Holder Default Payments in an
aggregate amount greater than the Default Rate for any 30-day
period (or portion thereof). The Default Payments and
mandatory redemptions provided for above are in addition to
and not in lieu or limitation of any other rights the Holders
may have at law, in equity or under the terms of the
Debentures, the Purchase Agreement, the Warrants or this
Agreement, including without limitation the right to specific
performance. Each Holder shall be entitled to specific
performance of any and all obligations of the Company in
connection with the registration rights of the Holders
hereunder.
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(viii) Certain Acknowledgments. The Company
acknowledges that any failure, refusal or inability by the
Company described in the foregoing paragraphs (i) through (iv)
and paragraph (vi) will cause the Holders to suffer damages in
an amount that will be difficult to ascertain, including
without limitation damages resulting from the loss of
liquidity in the Registrable Securities and the additional
investment risk in holding the Registrable Securities.
Accordingly, the parties agree that it is appropriate to
include in this Agreement the foregoing provisions for Default
Payments and mandatory redemptions in order to compensate the
Holders for such damages. The parties acknowledge and agree
that the Default Payments and mandatory redemptions set forth
above represent the parties' good faith effort to quantify
such damages and, as such, agree that the form and amount of
such Default Payments and mandatory redemptions are reasonable
and will not constitute a penalty. The parties agree that the
provisions of this clause (viii) consist of certain
acknowledgments and agreements concerning the remedies of the
Holders set forth in clauses (i) through (iv) and paragraph
(vi) of this paragraph; nothing in this clause (viii) imposes
any additional default payments and mandatory redemptions for
violations under this Agreement.
(c) If the Holder(s) intend to distribute the Registrable Securities by
means of an underwriting, the Holder(s) shall so advise the Company. Any such
underwriting may only be administered by investment bankers reasonably
satisfactory to the Company.
(d) The Company shall enter into such customary agreements for
secondary offerings (including a customary underwriting agreement with the
underwriter or underwriters, if any) and take all such other reasonable actions
reasonably requested by the Holders in connection therewith in order to expedite
or facilitate the disposition of such Registrable Securities. In the event that
the offering in which the Registrable Securities are to be sold is deemed to be
an underwritten offering or an Investor selling Registrable Securities is deemed
to be an underwriter, the Company shall:
(i) make such representations and warranties to the Holders
and the underwriter or underwriters, if any, in form, substance and
scope as are customarily made by issuers to underwriters in secondary
offerings;
(ii) cause to be delivered to the sellers of Registrable
Securities and the underwriter or underwriters, if any, opinions of
independent counsel to the Company, on and dated as of the effective
day (or in the case of an underwritten offering, dated the date of
delivery of any Registrable Securities sold pursuant thereto) of the
Registration Statement, and within ninety (90) days following the end
of each fiscal year thereafter, which counsel and opinions (in form,
scope and substance) shall be reasonably satisfactory to the Holders
and the underwriter(s), if any, and their counsel and covering, without
limitation, such matters as the
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due authorization and issuance of the securities being registered and
compliance with securities laws by the Company in connection with the
authorization, issuance and registration thereof and other matters that
are customarily given to underwriters in underwritten offerings,
addressed to the Holders and each underwriter, if any.
(iii) cause to be delivered, immediately prior to the
effectiveness of the Registration Statement (and, in the case of an
underwritten offering, at the time of delivery of any Registrable
Securities sold pursuant thereto), and at the beginning of each fiscal
year following a year during which the Company's independent certified
public accountants shall have reviewed any of the Company's books or
records, a "comfort" letter from the Company's independent certified
public accountants addressed to the Holders and each underwriter, if
any, stating that such accountants are independent public accountants
within the meaning of the Securities Act and the applicable published
rules and regulations thereunder, and otherwise in customary form and
covering such financial and accounting matters as are customarily
covered by letters of the independent certified public accountants
delivered in connection with secondary offerings; such accountants
shall have undertaken in each such letter to update the same during
each such fiscal year in which such books or records are being reviewed
so that each such letter shall remain current, correct and complete
throughout such fiscal year; and each such letter and update thereof,
if any, shall be reasonably satisfactory to the Holders.
(iv) if an underwriting agreement is entered into, the same
shall include customary indemnification and contribution provisions to
and from the underwriters and procedures for secondary underwritten
offerings;
(v) deliver such documents and certificates as may be
reasonably requested by the Holders of the Registrable Securities being
sold or the managing underwriter or underwriters, if any, to evidence
compliance with clause (i) above and with any customary conditions
contained in the underwriting agreement, if any; and
(vi) deliver to the Holders on the effective day (or in the
case of an underwritten offering, dated the date of delivery of any
Registrable Securities sold pursuant thereto) of the Registration
Statement, and at the beginning of each fiscal quarter thereafter, a
certificate in form and substance as shall be reasonably satisfactory
to the Holders, executed by an executive officer of the Company and to
the effect that all the representations and warranties of the Company
contained in the Purchase Agreement are still true and correct except
as disclosed in such certificate; the Company shall, as to each such
certificate delivered at the beginning of each fiscal quarter, update
or cause to be updated each such certificate
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during such quarter so that it shall remain current, complete and
correct throughout such quarter; and such updates received by the
Holders during such quarter, if any, shall have been reasonably
satisfactory to the Holders.
(e) The Company shall make available for inspection by the Holders,
representative(s) of all the Holders together, any underwriter participating in
any disposition pursuant to a Registration Statement, and any attorney or
accountant retained by any Holder or underwriter, all financial and other
records customary for purposes of the Holders' due diligence examination of the
Company and review of any Registration Statement, all SEC Documents (as defined
in the Purchase Agreement) filed subsequent to the Closing, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors and employees to supply all information reasonably requested by any
such representative, underwriter, attorney or accountant in connection with such
Registration Statement, provided that such parties agree to keep such
information confidential.
(f) The Company shall file a Registration Statement with respect to any
newly authorized and/or reserved shares within ten (10) business days of any
shareholders meeting authorizing or reserving same and shall use its best
efforts to cause such Registration Statement to become effective within
seventy-five (75) days of such shareholders meeting. If the Holders become
entitled, pursuant to an event described in clause (iii) of the definition of
Registrable Securities, to receive any securities in respect of Registrable
Securities that were already included in a Registration Statement, subsequent to
the date such Registration Statement is declared effective, and the Company is
unable under the securities laws to add such securities to the then effective
Registration Statement, the Company shall promptly file, in accordance with the
procedures set forth herein, an additional Registration Statement with respect
to such newly Registrable Securities. The Company shall use its best efforts to
(i) cause any such additional Registration Statement, when filed, to become
effective under the Securities Act, and (ii) keep such additional Registration
Statement effective during the period described in Section 5 below. All of the
registration rights and remedies under this Agreement shall apply to the
registration of such newly reserved shares and such new Registrable Securities,
including without limitation the provisions providing for Default Payments
contained herein.
3. Expenses of Registration. All Registration Expenses incurred in
connection with any registration, qualification or compliance with registration
pursuant to this Agreement shall be borne by the Company, and all Selling
Expenses of a Holder shall be borne by such Holder.
4. Registration on Form S-3; Other Forms. The Company shall use its best
efforts to qualify for registration on Form S-3 or any comparable or successor
form or forms, or in the event that the Company is ineligible to use such form,
such form as the Company is eligible to use under the Securities Act.
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5. Registration Period. In the case of the registration effected by the
Company pursuant to this Agreement, the Company will use its best efforts to
keep such registration effective until the later to occur of (i) sales are
permitted of all Registrable Securities without registration under Rule 144(k)
or (ii) such time as there are no longer any Warrants outstanding.
6. Indemnification.
(a) The Company Indemnity. The Company will indemnify each Holder, each
of its officers, directors and partners, and each person controlling each
Holder, within the meaning of Section 15 of the Securities Act and the rules and
regulations thereunder with respect to which registration, qualification or
compliance has been effected pursuant to this Agreement, and each underwriter,
if any, and each person who controls, within the meaning of Section 15 of the
Securities Act and the rules and regulations thereunder, any underwriter,
against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus, offering circular or
other document (including any related registration statement, notification or
the like) incident to any such registration, qualification or compliance, or
based on 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, or any violation by the Company of the Securities Act or any state
securities law or in either case, any rule or regulation thereunder applicable
to the Company and relating to action or inaction required of the Company in
connection with any such registration, qualification or compliance, and will
reimburse each Holder, each of its officers, directors and partners, and each
person controlling such Holder, each such underwriter and each person who
controls any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating and defending any such claim, loss,
damage, liability or action, provided that the Company will not be liable in any
such case to a Holder to the extent that any such claim, loss, damage, liability
or expense arises out of or is based on any untrue statement or omission based
upon written information furnished to the Company by such Holder or the
underwriter (if any) therefor and stated to be specifically for use therein. The
indemnity agreement contained in this Section 6(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent will
not be unreasonably withheld).
(b) Holder Indemnity. Each Holder will, severally and not jointly, if
Registrable Securities held by it are included in the securities as to which
such registration, qualification or compliance is being effected, indemnify the
Company, each of its directors, officers, partners, and each underwriter, if
any, of the Company's securities covered by such a registration statement, each
person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act and the rules and regulations thereunder, each
other Holder (if any), and each of their officers, directors and partners, and
each person controlling such other Holder(s), against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or
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based on any untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement, prospectus, offering circular or
other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statement
therein not misleading, and will reimburse the Company and such other Holder(s)
and their directors, officers and partners, underwriters or control persons for
any legal or any other expenses reasonably incurred in connection with
investigating and defending any such claim, loss, damage, liability or action,
in each case to the extent, but only to the extent, that such untrue statement
(or alleged untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular or other document in
reliance upon and in conformity with written information furnished to the
Company by such Holder and stated to be specifically for use therein, and
provided that the maximum amount for which such Holder shall be liable under
this indemnity shall not exceed the net proceeds received by such Holder from
the sale of the Registrable Securities. The indemnity agreement contained in
this Section 6(b) shall not apply to amounts paid in settlement of any such
claims, losses, damages or liabilities if such settlement is effected without
the consent of such Holder (which consent shall not be unreasonably withheld).
(c) Procedure. Each party entitled to indemnification under this
Section 6 (the "INDEMNIFIED PARTY") shall give notice to the party required to
provide indemnification (the "INDEMNIFYING PARTY") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim in any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not be unreasonably withheld), and the Indemnified Party
may participate in such defense at such party's expense, and provided further
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this Article
except to the extent that the Indemnifying Party is materially and adversely
affected by such failure to provide notice. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
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
in respect to such claim or litigation. Each Indemnified Party shall furnish
such information regarding itself or the claim in question as an Indemnifying
Party may reasonably request in writing and as shall be reasonably required in
connection with the defense of such claim and litigation resulting therefrom.
7. Contribution. If the indemnification provided for in Section 6 herein is
unavailable to the Indemnified Parties in respect of any losses, claims, damages
or liabilities referred to herein (other than by reason of the exceptions
provided therein), then each such Indemnifying Party, in lieu of indemnifying
each of such Indemnified Parties, shall contribute to the amount paid or payable
by each such Indemnified Party as a result of such losses, claims, damages or
liabilities as between the Company on the one hand and any Holder on the other,
in such proportion as is appropriate to reflect the
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relative fault of the Company and of such Holder in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative fault of the Company on the one hand and of any Holder 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 or alleged omission to
state a material fact relates to information supplied by the Company or by such
Holder.
In no event shall the obligation of any Indemnifying Party to contribute
under this Section 7 exceed the amount that such Indemnifying Party would have
been obligated to pay by way of indemnification if the indemnification provided
for under Section 6(a) or 6(b) hereof had been available under the
circumstances.
The Company and the Holders agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
(even if the Holders or the underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraphs.
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
paragraphs shall be deemed to include, subject to the limitations set forth
above, 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 section, no Holder or underwriter shall
be required to contribute any amount in excess of the amount by which (i) in the
case of any 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.
8. Survival. The indemnity and contribution agreements contained in Sections
6 and 7 and the representations and warranties of the Company referred to in
Section 2(d)(i) shall remain operative and in full force and effect regardless
of (i) any termination of this Agreement or the Purchase Agreement or any
underwriting agreement, (ii) any investigation made by or on behalf of any
Indemnified Party or by or on behalf of the Company, and (iii) the consummation
of the sale or successive resales of the Registrable Securities.
9. Information by Holders. Each Holder shall reasonably promptly furnish to
the Company such information regarding such Holder and the distribution and/or
sale proposed by such Holder as the Company may reasonably request in writing
and as shall be reasonably required in connection with any registration,
qualification or compliance referred to in this Agreement. The intended method
or methods of disposition and/or sale
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(Plan of Distribution) of such securities as so provided by such Investor shall
be included without alteration in the Registration Statement covering the
Registrable Securities and shall not be changed without written consent of such
Holder, except that such Holder may not require an intended method of
disposition which violates applicable securities law.
10. NASDAQ Limit on Stock Issuances. Section 3.14 of the Purchase Agreement
shall govern limits imposed by NASDAQ National Market System rules on the
conversion of Debentures.
11. Replacement Certificates. The certificate(s) representing the Common
Shares, Option Shares or Warrant Shares held by the Investor (or then Holder)
may be exchanged by the Investor (or such Holder) at any time and from time to
time for certificates with different denominations representing an equal
aggregate number of Common Shares, Option Shares or Warrant Shares, as
reasonably requested by the Investor (or such Holder) upon surrendering the
same. No service charge will be made for such registration or transfer or
exchange.
12. Transfer or Assignment. Except as otherwise provided herein, this
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The rights granted to the Investors by
the Company under this Agreement to cause the Company to register Registrable
Securities may be transferred or assigned (in whole or in part) to a transferee
or assignee of Debentures or Warrants, and all other rights granted to the
Investors by the Company hereunder may be transferred or assigned to any
transferee or assignee of any Debentures or Warrants; provided in each case that
the Company must be given written notice by the such Investor at the time of or
within a reasonable time after said transfer or assignment, stating the name and
address of said transferee or assignee and identifying the securities with
respect to which such registration rights are being transferred or assigned;
provided that the transferee or assignee of such rights agrees in writing to be
bound by the provisions of this Agreement.
13. Miscellaneous.
(a) Remedies. The Company and the Investors acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Agreement and to enforce specifically the terms and provisions hereof, this
being in addition to any other remedy to which any of them may be entitled by
law or equity.
(b) Jurisdiction. THE COMPANY AND EACH OF THE INVESTORS (I) HEREBY
IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT
COURT, THE NEW YORK XXXXX XXXXXX XXX XXXXX XXXXXX XX XXX XXXXXX XXXXXX SITTING
IN
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NEW YORK COUNTY, NEW YORK FOR THE PURPOSES OF ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT AND (II) HEREBY WAIVES, AND AGREES
NOT TO ASSERT IN ANY SUCH SUIT ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT
PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURT, THAT THE SUIT, ACTION OR
PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE OF THE SUIT,
ACTION OR PROCEEDING IS IMPROPER. THE COMPANY AND EACH OF THE INVESTORS CONSENTS
TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY
THEREOF 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 IN THIS PARAGRAPH SHALL AFFECT OR
LIMIT ANY RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
(c) Notices. Any notice or other communication required or permitted to
be given hereunder shall be in writing by facsimile, mail or personal delivery
and shall be effective upon actual receipt of such notice. The addresses for
such communications shall be:
to the Company:
0000 Xxxxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Chief Financial Officer
with copies to:
000 Xxxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxx, XX 00000
Attn: General Counsel
to the Investors:
To each Investor at the address and/or fax number set
forth on Schedule I of this Agreement
with copies to:
Kleinberg, Kaplan, Xxxxx & Xxxxx, P.C.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx
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Any party hereto may from time to time change its address for notices by
giving at least 10 days' written notice of such changed address to the other
parties hereto.
(d) Indemnity. Each party shall indemnify each other party against any
loss, cost or damages (including reasonable attorney's fees) incurred as a
result of such parties' breach of any representation, warranty, covenant or
agreement in this Agreement.
(e) Waivers. No waiver by any party of any default with respect to any
provision, condition or requirement of this Agreement shall be deemed to be a
continuing waiver in the future or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of any party to exercise any
right hereunder in any manner impair the exercise of any such right accruing to
it thereafter. The representations and warranties and the agreements and
covenants of the Company and each Investor contained herein shall survive the
Closing.
(f) Execution. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement, it
being understood that all parties need not sign the same counterpart.
(g) Publicity. The Company agrees that it will not disclose, and will
not include in any public announcement, the name of any Investor without its
express written approval, unless and until such disclosure is required by law or
applicable regulation, and then only to the extent of such requirement. The
Company agrees to deliver a copy of any public announcement regarding the
matters covered by this Agreement or any agreement or document executed herewith
to each Investor and any public announcement including the name of an Investor
to such Investor, prior to the publication of such announcements.
(h) Entire Agreement. This Agreement, together with the Purchase
Agreement, the Debentures, the Warrants and the agreements and documents
contemplated hereby and thereby, contains the entire understanding and agreement
of the parties, and may not be modified or terminated except by a written
agreement signed by both parties.
(i) Governing Law. This Agreement and the validity and performance of
the terms hereof shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York applicable to contracts executed
and to be performed entirely in such State.
(j) Severability. The parties acknowledge and agree that the Investors
are not agents, affiliates or partners of each other, that all representations,
warranties, covenants and agreements of the Investors hereunder are several and
not joint, that no Investor shall have any responsibility or liability for the
representations, warrants, agreements, acts or omissions of any other Investor,
and that any rights granted to "INVESTORS" hereunder shall be enforceable by
each Investor hereunder.
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(k) Jury Trial. EACH PARTY HERETO WAIVES THE RIGHT TO A TRIAL BY JURY.
(l) Titles. The titles used in this Agreement are used for convenience
only and are not to be considered in construing or interpreting this Agreement.
Signature page follows
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
APPLIEDTHEORY CORPORATION
By: /s/ Xxxxx X. Xxxxxx
--------------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Sr. VP/CFO
HALIFAX FUND, L.P.
By: THE PALLADIN GROUP, L.P.
Attorney-in-Fact
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Managing Director
PALLADIN PARTNERS I, L.P.
By: THE PALLADIN GROUP, L.P.
Attorney-in-Fact
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Managing Director
PALLADIN OVERSEAS FUND LTD.
By: THE PALLADIN GROUP, L.P.
Attorney-in-Fact
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Managing Director
SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT
22
THE GLENEAGLES FUND COMPANY
By: THE PALLADIN GROUP, L.P.
Attorney-in-Fact
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Managing Director
LANCER SECURITIES (CAYMAN) LTD.
By: THE PALLADIN GROUP, L.P.
Attorney-in-Fact
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Managing Director
XXXXXXX ASSOCIATES, L.P.
By: /s/ Xxxx X. Xxxxxx
--------------------------------------------
Name: Xxxx X. Xxxxxx
Title: General Partner
WESTGATE INTERNATIONAL, L.P.
By: XXXXXXX INTERNATIONAL CAPITAL
ADVISORS INC.
Attorney-in-Fact
By: /s/ Xxxx X. Xxxxxx
--------------------------------------------
Name: Xxxx X. Xxxxxx
Title: General Partner
SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT
23
SCHEDULE I
HALIFAX FUND, L.P.
c/o The Palladin Group, L.P.
Investment Manager
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Attn: Xxxxxx Xxxxxxx
Tax I.D. No.: __________
Facsimile: (000) 000-0000
PALLADIN PARTNERS I, L.P.
c/o The Palladin Group L.P.
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Attn: Xxxxxx Xxxxxxx
Tax I.D. No.: __________
Facsimile: (000) 000-0000
PALLADIN OVERSEAS FUND LTD.
x/x Xxxxx Xxxx Xxxxxxxx (Xxxxxx
Xxxxxxx) Ltd.
Xxxxxxxxx Xxxxxx, Xxxx Xxx Xxxx
X.X. Xxx 00000 SMB
Grand Cayman, Cayman Islands
Tax I.D. No.: ____________________________________
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
THE GLENEAGLES FUND COMPANY
c/o Citco Fund Services (Cayman
Islands) Ltd.
Xxxxxxxxx Xxxxxx, Xxxx Xxx Xxxx
X.X. Xxx 00000 SMB
Grand Cayman, Cayman Islands
Tax I.D. No.: __________
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
LANCER SECURITIES
(CAYMAN) LTD.
24
XXXXXXX ASSOCIATES, L.P.
c/o Stonington Management Corporation
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Tax I.D. No.: __________
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention:
WESTGATE INTERNATIONAL, L.P.
c/o Stonington Management Corporation
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Tax I.D. No.: __________
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention:
24
