REGISTRATION RIGHTS AGREEMENT
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This REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated
as of February 24, 1999 is made and entered into between HMG WORLDWIDE
CORPORATION, a Delaware corporation ("the Company"), and _____________, a bank
organized under the laws of _____ (the "Purchaser").
WHEREAS, the Company has issued and sold an aggregate of
$________ aggregate principal amount of its 7% Convertible Notes Due
___________, ____ (the "Notes"), which Notes, together with, in certain
circumstances, accrued interest thereon, are convertible into such number of
shares of Common Stock, $.01 par value per share, of the Company as are
specified in the Notes (the "Convertible Shares");
WHEREAS, the Company and the Purchaser have entered into that
certain Securities Purchase Agreement, dated as of the date hereof (the
"Subscription Agreement"), pursuant to which the Company has issued to the
Purchaser U.S.$________ aggregate principal amount of the Notes;
WHEREAS, pursuant to the terms of, and in partial
consideration for, the Purchaser's agreement to enter into the Subscription
Agreement, the Company has agreed to provide the Purchaser with certain
registration rights with respect to the Conversion Shares (as defined below);
NOW, THEREFORE, in consideration of the premises, the
representations, warranties, covenants and agreements contained herein and in
the Subscription Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, intending to be legally
bound hereby, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. Capitalized terms defined in the Subscription
Agreement shall have the same meanings herein as are ascribed to them therein.
In addition, the following terms shall have the meanings ascribed to them below:
"Purchaser" shall mean the Purchaser referenced in the
preamble, and, unless the context otherwise requires, shall include the
Purchaser for so long as it owns any Registrable Securities and any assignee or
transferee of the Notes or Registrable Securities
to whom the registration rights conferred by this Agreement have been
transferred in compliance with this Agreement.
"Registrable Securities" means all of the Convertible Shares
and any other securities issued or issuable upon conversion of the Notes as
provided therein (together, the "Conversion Shares") until (i) a registration
statement under the Securities Act covering the offer and sale of such
Conversion Shares has been declared effective by the Commission and such
Conversion Shares have been disposed of pursuant to such effective registration
statement, (ii) such Conversion Shares are sold under circumstances in which all
of the applicable conditions of Rule 144 (or any similar provision then in
force) under the Securities Act ("Rule 144") are met, (iii) such Conversion
Shares have been otherwise transferred and the Company has delivered a new
certificate or other evidence of ownership for such securities not bearing a
restrictive legend or (iv) such time as, in the opinion of counsel to the
Company, which counsel shall be acceptable to the Purchaser in its sole
discretion, such Conversion Shares may be sold without any time, volume or
manner limitation pursuant to Rule 144(k) (or any similar provision then in
effect) under the Securities Act.
"Registration Statement" means the Registration Statement
filed by the Company pursuant to Section 2.1(a) and any additional Registration
Statement filed by the Company pursuant to Section 2.1(b).
"Underwriter" means a securities dealer who purchases any
Registrable Securities as principal in an underwritten offering and not as part
of such dealer's market-making activities.
ARTICLE II
REGISTRATION RIGHTS
SECTION 2.1. 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) and
in all states reasonably requested by the Holders. Such best efforts by the
Company shall include the following:
(a) The Company will as expeditiously as possible, and in no
event later than April 9, 1999 (the "Filing Deadline"), prepare and file with
the Commission a registration statement (the "Registration Statement") on Form
S-3 (if use of such form is then available to the Company pursuant to the rules
of the Commission
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and, if not, on such other form promulgated by the Commission for which the
Company then qualifies and which counsel for the Company shall deem appropriate
and which form shall be available for the sale of the Registrable Securities to
be registered thereunder in accordance with the provisions of this Agreement and
in accordance with the intended method of such Registrable Securities), and use
its commercially reasonable efforts to cause such filed Registration Statement
to become effective by the Effectiveness Deadline. The "Effectiveness Deadline"
shall mean one hundred and twenty (120) days from the date hereof; provided that
such date shall be extended for such reasonable additional number of days (not
to exceed ninety (90) days) that the Company (i) delays the timely filing of a
report filed under the Exchange Act containing financial statements (or that the
Company requires in order to restate its financial statements included in a
report filed under the Exchange Act))(ii) requires to amend the disclosure
included in the Registration Statement, in each case solely as a result of its
entering into a transaction (such as a merger or acquisition or disposition of a
business) which transaction is required to be reflected in such financial
statements or which otherwise is required to be reflected in the Registration
Statement (together "Delaying Events"). The Company will as expeditiously as
possible prepare and file with the Commission such amendments and supplements to
the Registration Statement and the prospectus used in connection therewith as
may be necessary to keep such Registration Statement effective, for a period of
not less than: (i) in the case of a non-underwritten offering of Registrable
Securities, until there shall no longer be any Registrable Securities or (ii)
with respect to an underwritten offering of Registrable Securities, ninety (90)
days after the commencement of the distribution of all Registrable Securities
covered by such Registration Statement (but not before the expiration of the
period referred to in Section 4(3) of the Securities Act and Rule 174
thereunder, if applicable) and comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such Registration
Statement during such period in accordance with the intended methods of
disposition by the Purchaser set forth in such Registration Statement.
(b) The number of Registrable Securities covered by the
initial Registration Statement shall equal 2,160,000 shares of Common Stock of
the Company; such Registration Statement shall reflect that such Registrable
Securities shall initially be allocated on a pro rata basis among the holders of
Notes (based upon such holders' relative positions), provided that in the event
a holder converts its entire position of Notes into a number of Registrable
Securities less than such holder's allocated pro rata number of Registrable
Securities (or such Notes otherwise cease to be outstanding) such excess number
of Registrable Securities shall be reallocated on a pro rata basis among the
remaining holders of the Notes.
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In the event that in the future Registrable Securities shall
consist of securities other than or in additional to the shares of Common Stock
referenced in the preceding paragraph, the Company shall as expeditiously as
possible (and in no event more than fifteen (15) days from the date of the event
which results in such change) file a post-effective amendment to the
Registration Statement (or if necessary file a new or additional Registration
Statement to reflect the registration of the offer and sale of such additional
or other securities and use its commercially reasonable efforts to cause such
post-effective amendment or new or additional Registration Statement to become
effective within ninety (90) days from the date of the event which results in
such change. In the event the filing of a new or additional Registration
Statement is required, references herein to the Registration Statement shall
also refer to such new or additional Registration Statement (except that for
purposes of Section 3.1, the Filing Deadline and Effectiveness Deadline shall
refer to the fifteen (15) and ninety (90) day periods referenced above).
(c) The Company will, prior to filing the Registration
Statement or prospectus or any amendment or supplement thereto, furnish to the
Purchaser, and counsel to the Purchaser, and each Underwriter, if any, of the
Registrable Securities covered by such Registration Statement copies of such
Registration Statement as proposed to be filed, together with exhibits thereto,
which documents will be subject to review and approval by the foregoing, and
thereafter furnish to the Purchaser, its counsel and each Underwriter, if any,
for their review and comment such number of copies of such Registration
Statement, each amendment and supplement thereto (in each case including all
exhibits thereto and documents incorporated by reference therein), the
prospectus included in such Registration Statement (including each preliminary
prospectus) and such other documents or information as the Purchaser, counsel or
each Underwriter may reasonably request in order to facilitate the disposition
of the Registrable Securities.
(d) After the filing of the Registration Statement, the
Company will promptly notify the Purchaser of any stop order issued or
threatened by the Commission in connection therewith and take all reasonable
actions required to prevent the entry of such stop order or to remove it if
entered.
(e) The Company will use its reasonable efforts to (i)
register or qualify such Registrable Securities under such other securities or
blue sky laws of such jurisdictions in the United States as the Purchaser may
reasonably (in light of its intended plan of distribution) request, and (ii)
cause such Registrable Securities to be registered with or approved by such
other governmental agencies or authorities in the United States as may be
necessary by virtue of the business and operations of the Company and do any and
all other acts and things that may be reasonably
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necessary or advisable to enable the Purchaser to consummate the disposition of
the Registrable Securities; provided that the Company will not be required to
(A) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this paragraph (e), (B) subject itself
to taxation in any such jurisdiction or (C) consent or subject itself to general
service of process in any such jurisdiction.
(f) The Company will immediately notify the Purchaser upon the
occurrence of any of the following events in respect of a registration statement
or related prospectus in respect of an offering of Registrable Securities; (i)
receipt of any request for additional information by the Commission or any other
federal or state governmental authority during the period of effectiveness of
the Registration Statement for amendments or supplements to such Registration
Statement or related prospectus; (ii) the issuance by the Commission or any
other federal or state governmental authority of any stop order suspending the
effectiveness of such Registration Statement or the initiation of any
proceedings for that purpose; (iii) receipt 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; (iv) the happening of any event
which makes any statement made in such Registration Statement or related
prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or which requires the making of any
changes in such Registration Statement, related prospectus or documents so that,
in the case of such Registration Statement, 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 not misleading, and
that in the case of the related prospectus, 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 the light of the
circumstances under which they were made, not misleading; and (vi) the Company's
reasonable determination that a post-effective amendment to such Registration
Statement would be appropriate; and the Company will promptly make available to
the Purchaser any such supplement or amendment to the related prospectus.
(g) The Company will enter into customary agreements
(including, if applicable, an underwriting agreement in customary form and which
is reasonably satisfactory to the Company) and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of such
Registrable Securities (the Purchaser may, at its option, require that any or
all of the representations, warranties and covenants of the Company or to or for
the benefit of such Underwriters also be made to and for the benefit of the
Purchaser).
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(h) The Company will make available to the Purchaser (and will
deliver to Purchasers's counsel) and each Underwriter, if any, subject to
restrictions imposed by the United States federal government or any agency or
instrumentality thereof, copies of all correspondence between the Commission and
the Company, its counsel or auditors and will also make available for inspection
by the Purchaser, any Underwriter participating in any disposition pursuant to a
Registration Statement and any attorney, accountant or other professional
retained by the Purchaser or such Underwriter (collectively, the "Inspectors"),
all financial and other records, pertinent corporate documents and properties of
the Company (collectively, the "Records") as shall be reasonably necessary to
enable them to exercise their due diligence responsibility, and cause the
Company's officers and employees to supply all information reasonably requested
by any Inspectors in connection with such Registration Statement. Records which
the Company determines, in good faith, to be confidential and which it notifies
the Inspectors are confidential shall not be disclosed by the Inspectors unless
(i) the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in such registration statement or (ii) the disclosure
or release of such Records is requested or required pursuant to oral questions,
interrogatories, requests for information or documents or a subpoena or other
order from a court of competent jurisdiction or other process; provided that
prior to any disclosure or release pursuant to clause (ii), the Inspectors shall
provide the Company with prompt notice of any such request or requirement so
that the Company may seek an appropriate protective order or waive such
Inspectors' obligation not to disclose such Records; and, provided further, that
if failing the entry of a protective order or the waiver by the Company
permitting the disclosure or release of such Records, the Inspectors, upon
advice of counsel, are compelled to disclose such Records, the Inspectors may
disclose that portion of the Records which counsel has advised the Inspectors
that the Inspectors are compelled to disclose. The Purchaser agrees that
information obtained by it solely as a result of such inspections (not including
any information obtained from a third party who, insofar as is known to the
Purchaser after reasonable inquiry, is not prohibited from providing such
information by a contractual, legal or fiduciary obligation to the Company)
shall be deemed confidential and shall not be used by it as the basis for any
market transactions in the securities of the Company or its Affiliates unless
and until such information is made generally available to the public. The
Purchaser further agrees that it will, upon learning that disclosure of such
Records is sought in a court of competent jurisdiction, give notice to the
Company and allow the Company, at its expense, to undertake appropriate action
to prevent disclosure of the Records deemed confidential.
(i) The Company will furnish to the Purchaser and to each
Underwriter, if any, a signed counterpart, addressed to the
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Purchaser or such Underwriter, of (1) an opinion or opinions of counsel to the
Company, and (2) a comfort letter or comfort letters from the Company's
independent public accountants, each in customary form and covering such matters
of the type customarily covered by opinions or comfort letters, as the case may
be, as the Purchaser or the managing Underwriter therefor reasonably requests.
The Company agrees that, (x) upon effectiveness of the Registration statement
and (y) upon each amendment thereto subsequent to effectiveness whether by the
filing of a post-effective amendment thereto or the incorporation by reference
of reports subsequently filed with the Commission, it will cause to be delivered
to the Purchaser (i) a comfort letter in customary form from its independent
public accountants and (ii) an opinion of Xxxxxx Xxxxxx Xxxxxx & Xxxx, counsel
to the Company, covering customary matters, including the absence of any untrue
statement of a material fact or omission to state any material fact required to
be stated therein or necessary to make the statements contained in the Initial
Registration Statement and the related prospectus not misleading.
(j) The Company will otherwise comply with all applicable
rules and regulations of the Commission, including, without limitation,
compliance with applicable reporting requirements under the Exchange Act, and
will make available to its securityholders, as soon as reasonably practicable,
an earnings statement covering a period of twelve (12) months, beginning within
three (3) months after the effective date of the registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act.
(k) The Company will appoint a transfer agent and registrar
for all such Registrable Securities covered by a Registration Statement not
later than the effective date of such Registration Statement.
(l) The Company shall take all steps necessary to enable the
Holders to avail themselves of the prospectus delivery mechanism set forth in
Rule 153 (or successor thereto) under the Securities Act, if available.
(m) In connection with an underwritten offering, the Company
will participate, to the extent reasonably requested by the managing Underwriter
for the offering or the Purchaser, in customary efforts to sell the securities
under the offering, including, without limitation, participating in "road shows"
on a schedule as shall be reasonably satisfactory to, and not unduly burdensome
on, the Company; provided that the Company shall not be obligated be to
participate in more than one such offering in any twelve (12)-month period and
any such participation by the Company shall be at the expense of the managing
Underwriter or the
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Purchaser unless the Company shall also be offering securities in such
underwritten offering.
The Company may require the Purchaser to promptly furnish in
writing to the Company such information regarding the distribution of the
Registrable Securities as the Company may from time to time reasonably request
and such other information as may be legally required in connection with such
registration including, without limitation, all such information as may be
requested by the Commission or the NASD. If the Purchaser fails to provide such
information requested in connection with such registration within ten (10)
business days after receiving such written request, then the Company may cease
pursuit of such registration until such information is provided.
The Purchaser agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3.1(e)
hereof, the Purchaser will forthwith discontinue disposition of Registrable
Securities pursuant to the registration statement covering such Registrable
Securities until the Purchaser's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3.1(e) hereof, and, if so directed by
the Company, the Purchaser will deliver to the Company all copies, other than
permanent file copies then in the Purchaser's possession, of the most recent
prospectus covering such Registrable Securities at the time of receipt of such
notice. In the event the Company shall give such notice, the Company shall
extend the period during which a Registration Statement shall be maintained
effective (including the period referred to in Section 3.1(a) hereof) by the
number of days during the period from and including the date of the giving of
notice pursuant to Section 3.1(e) hereof to the date when the Company shall make
available to the Purchaser a prospectus supplemented or amended to conform with
the requirements of Section 3.1(e) hereof.
SECTION 2.2. Registration Expenses. In connection with registration
hereunder, the Company shall pay the following registration expenses incurred in
connection therewith (the "Registration Expenses"): (i) all registration and
filing fees, (ii) fees and expenses of compliance with securities or blue sky
laws (including reasonable fees and disbursements of a single firm of counsel in
connection with blue sky qualifications of the Registrable Securities), (iii)
printing expenses, (iv) the Company's internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), (v) the fees and expenses incurred in connection
with the listing or quotation of the Registrable Securities, (vi) fees and
disbursements of counsel for the Company and customary fees and expenses for
independent certified public accountants retained by the Company (including the
expenses of any comfort letters or costs associated with the delivery by
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independent certified public accountants of a comfort letter or comfort letters
requested pursuant to Section 3.1(h) hereof), (vii) the fees and expenses of any
special experts retained by the Company in connection with such registration and
(viii) reasonable fees and expenses of a single firm of counsel with respect to
such registration (including without limitation its review of the Registration
Statement and due diligence with respect thereto and related matters through the
period that registration is required hereunder). The Company shall have no
obligation to pay any underwriting fees, discounts or commissions attributable
to the sale of Registrable Securities, or the cost of any special audit required
by the Purchaser, such costs to be borne by the Purchaser.
ARTICLE III
PAYMENTS BY THE COMPANY
SECTION 3.1. Payments by the Company. In the event the Registration
Statement is not filed by the Filing Deadline or declared effective by the
Effectiveness Deadline (or after the Registration Statement has been declared
effective by the Commission, sales of all the Registrable Securities (including
any Registrable Securities required to be registered pursuant to Section 3.2
hereof) cannot be made pursuant to the Registration Statement (by reason of a
stop order, the Company's failure to update such Registration Statement, the
need to file and have declared effective a post-effective amendment or any other
reason outside the control of the Purchaser), then the Company will make
payments to the Purchaser in such amounts and at such times as shall be
determined pursuant to this Section 3.1 as partial relief for the damages to the
Purchaser by reason of any such delay in or reduction of their ability to sell
the Registrable Securities (which remedy shall not be exclusive of any other
remedies available at law or in equity provided that in the event of a Delaying
Event requiring the filing of a post-effective amendment to the Registration
Statement no payment shall be required to the extent sales of Registrable
Securities cannot be made pursuant to the Registration Statement for periods
aggregating no more than ninety (90) days in any 365-day period. The Company
shall pay to the Purchaser an amount equal to (i) (A) .01 times (B) the
aggregate principal amount of the Notes held by the Purchaser (including,
without limitation, Notes that have been converted into Registrable Securities
then held by such Purchaser but excluding any Notes as to which the Notes
received upon conversion or exercise, as the case may be, have been sold) times
(ii) the sum of: (A) the number of months (prorated per day for partial months)
following the Filing Deadline that the Registration Statement is not filed
pursuant to Section 2.1(a) or following the Effectiveness Deadline that the
Registration Statement is not declared effective by the SEC, as the case may be,
plus (B) the number of months (prorated per day for partial months) following
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the Effectiveness Deadline that sales cannot be made pursuant to the
Registration Statement after the Registration Statement has been declared
effective. Such amounts shall be paid in cash or, at the Purchaser's option, may
be convertible (subject to the Maximum Share Issuance, as defined in the Note)
into Common Stock at the applicable Conversion Price (as defined in the Notes).
Any shares of Common Stock issued upon conversion of such amounts shall
constitute Registrable Securities. If the Purchaser desires to convert or
exercise the amounts due hereunder into Registrable Securities it shall so
notify the Company in writing within two (2) business days prior to the date on
which such amounts are first payable in cash and such amounts shall be so
convertible (pursuant to the terms of the Notes), beginning on the last day upon
which the cash amount would otherwise be due in accordance with the following
sentence. Payments of cash pursuant hereto shall be made within three (3)
business days after the end of each period that gives rise to such obligation,
provided that, if any such period extends for more than thirty (30) days,
payments shall be made for each such thirty (30) day period within three (3)
business days after the end of such thirty (30) day period.
ARTICLE IV
INDEMNIFICATION AND CONTRIBUTION
SECTION 4.1. Indemnification by the Company. The Company agrees to
indemnify and hold harmless the Purchaser, its partners, Affiliates, officers,
directors, employees and duly authorized agents, and each Person or entity, if
any, who controls the Purchaser within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, together with the partners,
Affiliates, officers, directors, employees and duly authorized agents of such
controlling Person or entity (collectively, the "Controlling Persons"), from and
against any loss, claim, damage, liability, reasonable attorneys' fees, costs or
expenses and costs and expenses of investigating and defending any such claim
(collectively, "Damages"), joint or several, and any action in respect thereof
to which the Purchaser, its partners, Affiliates, officers, directors, employees
and duly authorized agents, and any such Controlling Person may become subject
under the Securities Act or otherwise, insofar as such Damages (or proceedings
in respect thereof) arise out of, or are based upon, any untrue statement or
alleged untrue statement of a material fact contained in any registration
statement or prospectus relating to the Registrable Securities or any
preliminary prospectus, or arises out of, or are based upon, 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, except insofar as
the same are based upon information furnished in writing to the Company by the
Purchaser or an Underwriter expressly for use therein, and shall reimburse the
Purchaser, its partners, Affiliates, officers, directors, employees and duly
authorized agents, and each such
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Controlling Person for any legal and other expenses reasonably incurred by the
Purchaser, its partners, Affiliates, officers, directors, employees and duly
authorized agents, or any such Controlling Person in investigating or defending
or preparing to defend against any such Damages or proceedings; provided,
however, that the Company shall not be liable to the Purchaser to the extent
that any such Damages arise out of or are based upon an untrue statement or
omission made in any preliminary prospectus if (i) the Purchaser failed to send
or deliver a copy of the final prospectus with or prior to the delivery of
written confirmation of the sale by the Purchaser to the Person asserting the
claim from which such Damages arise, and (ii) the final prospectus would have
corrected such untrue statement or alleged untrue statement or such omission or
alleged omission; provided further, however, that the Company shall not be
liable in any such case to the extent that any such Damages arise out of or are
based upon an untrue statement or alleged untrue statement or omission or
alleged omission in any prospectus if (x) such untrue statement or omission or
alleged omission is corrected in an amendment or supplement to such prospectus,
and (y) having previously been furnished by or on behalf of the Company with
copies of such prospectus as so amended or supplemented, the Purchaser
thereafter fails to deliver such prospectus as so amended or supplemented prior
to or concurrently with the sale of a Registrable Security to the Person
asserting the claim from which such Damages arise. The Company also agrees to
indemnify any Underwriters of the Registrable Securities, their officers and
directors and each Person or entity who controls such Underwriters on customary
terms.
SECTION 4.2. Indemnification by the Purchaser. The Purchaser agrees to
indemnify and hold harmless the Company, its partners, Affiliates, officers,
directors, employees and duly authorized agents and each Person or entity, if
any, who controls the Company within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act, together with the partners, Affiliates,
officers, directors, employees and duly authorized agents of such controlling
Person, to the same extent as the foregoing indemnity from the Company to the
Purchaser, but only with reference to information related to the Purchaser or
its plan of distribution, furnished in writing by the Purchaser or on the
Purchaser's behalf expressly for use in any registration statement or prospectus
relating to the Registrable Securities, or any amendment or supplement thereto,
or any preliminary prospectus. In case any action or proceeding shall be brought
against the Company or its partners, Affiliates, officers, directors, employees
or duly authorized agents or any such controlling Person or its partners,
Affiliates, officers, directors, employees or duly authorized agents, in respect
of which indemnity may be sought against the Purchaser, the Purchaser shall have
the rights and duties given to the Company, and the Company or its partners,
Affiliates, officers, directors, employees or duly authorized agents, or such
controlling
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Person, or its partners, Affiliates, officers, directors, employees or duly
authorized agents, shall have the comparable rights and duties given to the
Purchasers by Section 4.1. The Purchaser also agrees to indemnify and hold
harmless any Underwriters of the Registrable Securities with reference to the
same information as to which it agrees to indemnify the Company referenced
above, their officers and directors and each Person who controls such
Underwriters on customary terms. The Company shall be entitled to receive
indemnities on customary terms from Underwriters, selling brokers, dealer
managers and similar securities industry professionals participating in the
distribution, to the same extent as provided above, with respect to information
so furnished in writing by such persons specifically for inclusion in any
prospectus or registration statement.
SECTION 4.3. Conduct of Indemnification Proceedings. Promptly after
receipt by any person or entity in respect of which indemnity may be sought
pursuant to Section 4.1 or 4.2 (an "Indemnified Party") of notice of any claim
or the commencement of any action, the Indemnified Party shall, if a claim in
respect thereof is to be made against the person or entity against whom such
indemnity may be sought (an "Indemnifying Party"), notify the Indemnifying Party
in writing of the claim or the commencement of such action; in the event an
Indemnified Party shall fail to give such notice as provided in this Section 4.3
and the Indemnifying Party to whom notice was not given was unaware of the
proceeding to which such notice would have related and was materially prejudiced
by the failure to give such notice, the indemnification provided for in Section
4.1 or 4.2 shall be reduced to the extent of any actual prejudice resulting from
such failure to so notify the Indemnifying Party; provided, that the failure to
notify the Indemnifying Party shall not relieve it from any liability which it
may have to an Indemnified Party otherwise than under Section 4.1 or 4.2. If any
such claim or action shall be brought against an Indemnified Party, and it shall
notify the Indemnifying Party thereof, the Indemnifying Party shall be entitled
to participate therein, and, to the extent that it wishes, jointly with any
other similarly notified Indemnifying Party, to assume the defense thereof with
counsel reasonably satisfactory to the Indemnified Party. After notice from the
Indemnifying Party to the Indemnified Party of its election to assume the
defense of such claim or action, the Indemnifying Party shall not be liable to
the Indemnified Party for any legal or other expenses subsequently incurred by
the Indemnified Party in connection with the defense thereof other than
reasonable costs of investigation; provided that the Indemnified Party shall
have the right to employ separate counsel to represent the Indemnified Party and
its controlling persons who may be subject to liability arising out of any claim
in respect of which indemnity may be sought by the Indemnified Party against the
Indemnifying Party, but the fees and expenses of such counsel shall be for the
account of such Indemnified Party unless
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(i) the Indemnifying Party and the Indemnified Party shall have mutually agreed
to the retention of such counsel or (ii) in the reasonable judgment of the
Company and such Indemnified Party, representation of both parties by the same
counsel would be inappropriate due to actual or potential conflicts of interest
between them, it being understood, however, that the Indemnifying Party shall
not, in connection with any one such claim or action or separate but
substantially similar or related claims or actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
fees and expenses of more than one separate firm of attorneys (together with
appropriate local counsel) at any time for all Indemnified Parties, or for fees
and expenses that are not reasonable. No Indemnifying Party shall, without the
prior written consent of the Indemnified Party, effect any settlement of any
claim or pending or threatened proceeding in respect of which the Indemnified
Party is or could have been a party and indemnity could have been sought
hereunder by such Indemnified Party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability arising out
of such claim or proceeding. Whether or not the defense of any claim or action
is assumed by the Indemnifying Party, such Indemnifying Party will not be
subject to any liability for any settlement made without its consent, which
consent will not be unreasonably withheld.
SECTION 4.4. Contribution. If the indemnification provided for in this
Article IV is unavailable to the Indemnified Parties in respect of any Damages
referred to herein, 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 Damages (i) as between the Company and the
Purchaser on the one hand and the Underwriters on the other, in such proportion
as is appropriate to reflect the relative benefits received by the Company and
the Purchaser on the one hand and the Underwriters on the other from the
offering of the Registrable Securities, or if such allocation is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits but also the relative fault of the Company and the Purchaser
on the one hand and of the Underwriters on the other in connection with the
statements or omissions which resulted in such Damages, as well as any other
relevant equitable considerations, and (ii) as between the Company on the one
hand and the Purchaser on the other, in such proportion as is appropriate to
reflect the relative fault of the Company and of the Purchaser in connection
with such statements or omissions, as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Purchaser
on the one hand and the Underwriters on the other shall be deemed to be in the
same proportion as the total proceeds from the offering (net of underwriting
discounts and commissions but before deducting expenses) received by the Company
and the Purchaser bear to the
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total underwriting discounts and commissions received by the Underwriters, in
each case as set forth in the table on the cover page of the prospectus. The
relative fault of the Company and the Purchaser on the one hand and of the
Underwriters on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company and the Purchaser or by the Underwriters. The relative
fault of the Company on the one hand and of the Purchaser on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by such party, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Company and the Purchaser agree that it would not be just
and equitable if contribution pursuant to this Section 4.4 were determined by
pro rata allocation (even if 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
paragraph. The amount paid or payable by an Indemnified Party as a result of the
Damages referred to in the immediately preceding paragraph 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 4.4, no Underwriter shall be required to contribute any amount in excess
of the amount by which the total price at which the Registrable Securities
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission, and the Purchaser shall in no event be required to
contribute any amount in excess of the amount by which the total price at which
the Registrable Securities of the Purchaser were offered to the public (less
underwriting discounts and commissions) exceeds the amount of any damages which
the Purchaser 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.
ARTICLE V
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MISCELLANEOUS
SECTION 5.1. Term. The registration rights provided to the holders of
Registrable Securities hereunder shall terminate on such date as there shall be
no Registrable Securities; provided, however, that the provisions of Article IV
hereof shall survive any termination of this Agreement.
SECTION 5.2. Rule 144. The Company covenants that it will file all
reports required to be filed by it under the Securities Act and the Exchange Act
and that it will take such further action as holders of Registrable Securities
may reasonably request, all to the extent required from time to time to enable
the Purchaser to sell Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by (a) Rule 144,
as such Rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Commission.
If at any time the Company is not required to file such reports, it will, upon
the request of any holder of Registrable Securities, make publicly available
other information so long as necessary to permit sales pursuant to Rule 144.
Upon the request of the Purchaser, the Company will deliver to the Purchaser a
written statement as to whether it has complied with such requirements.
SECTION 5.3. Restrictions on Sale by the Company and Others. If, and to
the extent, reasonably requested by the managing Underwriter or Underwriters in
the case of an underwritten public offering, which includes Registrable
Securities as contemplated by Section 2.1, the Company agrees and it shall use
its best efforts to cause its affiliates to agree not to effect any public sale
or distribution of any securities similar to those being registered in
accordance with Section 2.1 hereof, or any securities convertible into or
exchangeable or exercisable for such securities, during the thirty (30) days
prior to, and during the period beginning on the effective date of any
registration statement (except as part of such registration statement) until all
of the Registrable Securities offered thereunder have been sold pursuant to such
underwritten public offering, provided, however, that such period shall not
exceed ninety (90) days.
SECTION 5.4. Amendment and Modification. Any provision of this
Agreement may be waived, provided that such waiver is set forth in a writing
executed by the party against whom the enforcement of such waiver is sought. 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 Company has obtained the
written consent of the holders of a majority of the then outstanding Registrable
Securities. Notwithstanding the foregoing, the waiver of any provision hereof
with respect to a matter that relates exclusively to the rights of
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holders of Registrable Securities whose securities are being sold pursuant to a
registration statement and does not directly or indirectly affect the rights of
other holders of Registrable Securities may be given by holders of at least a
majority of the Registrable Securities being sold by such holders; provided that
the provisions of this sentence may not be amended, modified or supplemented
except in accordance with the provisions of the immediately preceding sentence.
No course of dealing between or among any Person having any interest in this
Agreement will be deemed effective to modify, amend or discharge any part of
this Agreement or any rights or obligations of any person under or by reason of
this Agreement.
SECTION 5.5. Successors and Assigns; Entire Agreement. This Agreement
and all of the provisions hereof shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns. The Purchaser
may assign its rights under this Agreement to any subsequent holder of Notes or
Conversion Shares, provided that the Company shall have the right to require any
holder of Notes or Registrable Securities to execute a counterpart of this
Agreement as a condition to such holder's claim to any rights hereunder. This
Agreement, together with the Subscription Agreement and the Notes sets forth the
entire agreement and understanding between the parties as to the subject matter
hereof and merges and supersedes all prior discussions, agreements and
understandings of any and every nature among them.
SECTION 5.6. Separability. In the event that any provision of this
Agreement or the application of any provision hereof is declared to be illegal,
invalid or otherwise unenforceable by a court of competent jurisdiction, the
remainder of this Agreement shall not be affected except to the extent necessary
to delete such illegal, invalid or unenforceable provision unless that provision
held invalid shall substantially impair the benefits of the remaining portions
of this Agreement.
SECTION 5.7. Notices. All notices, demands, requests, consents,
approvals or other communications required or permitted to be given hereunder or
which are given with respect to this Agreement shall be in writing and shall be
personally served or deposited in the mail, registered or certified, return
receipt requested, postage prepaid, or delivered by reputable air courier
service with charges prepaid, or transmitted by hand delivery, telegram, telex
or facsimile, addressed as set forth below, or to such other address as such
party shall have specified most recently by written notice: (i) if to the
Company, to: HMG Worldwide Corporation, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000-0000, Attention: Chief Financial Officer, Facsimile No.: (000) 000-0000;
with copies (which shall not constitute notice) to: Xxxxxx Xxxxxx Xxxxxx & Xxxx,
000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxxx Xxxxxx, Esq.,
Facsimile No.: (000) 000-0000;
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and (ii) if to the Purchaser: [address] Attention: [name of signatory] Facsimile
No.: [fax #], with copies (which shall not constitute notice) to: [address,
Att:, & Fax # of legal representatives] Notice shall be deemed given on the date
of service or transmission if personally served or transmitted by telegram,
telex or facsimile. Notice otherwise sent as provided herein shall be deemed
given on the third business day following the date mailed or on the second
business day following delivery of such notice by a reputable air courier
service.
SECTION 5.8. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAW OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
SECTION 5.9. Headings. The headings in this Agreement are for
convenience of reference only and shall not constitute a part of this Agreement,
nor shall they affect their meaning, construction or effect.
SECTION 5.10. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original instrument and all
of which together shall constitute one and the same instrument.
SECTION 5.11. Further Assurances. Each party shall cooperate and take
such action as may be reasonably requested by another party in order to carry
out the provisions and purposes of this Agreement and the transactions
contemplated hereby.
SECTION 5.12. Remedies. In the event of a breach or a threatened breach
by any party to this Agreement of its obligations under this Agreement, any
party injured or to be injured by such breach will be entitled to specific
performance of its rights under this Agreement or to injunctive relief, in
addition to being entitled to exercise all rights provided in this Agreement and
granted by law. The parties agree that the provisions of this Agreement shall be
specifically enforceable, it being agreed by the parties that the remedy at law,
including monetary damages, for breach of any such provision will be inadequate
compensation for any loss and that any defense or objection in any action for
specific performance or injunctive relief that a remedy at law would be adequate
is waived.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by the undersigned, thereunto duly authorized, as of
the date first set forth above.
HMG WORLDWIDE CORPORATION
By:----------------------------------
Name: Xxxxxx X. Xxxxxxx, Xx.
Title: Chief Operating Officer
and Chief
Financial Officer
[-------------------]
By:---------------------------------
Name:
Title:
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